Oil prices aren’t set by some shadowy cabal in a smoky backroom — though some days it feels that way.
The reality is messier, shaped by geopolitics, futures traders, OPEC meetings, refinery disruptions, and good old-fashioned supply and demand.
Predictive markets like Kalshi suspect gas prices alone will hit at least $3.10 (85%) before the end of the month.
So, if you’ve ever wondered why prices spike when a pipeline hiccups in Canada or a prince frowns in Riyadh, here’s the breakdown.
It Starts With the Benchmark
The price you hear on the news — like Brent Crude or West Texas Intermediate (WTI) — isn’t the price of all oil. These are benchmarks, like reference grades. Traders peg contracts to them. WTI is the U.S. flavor; Brent is the global standard.
Futures Markets, Not Gas Pumps
Most oil is bought and sold via futures contracts — bets on the future price of oil. That’s why today’s oil price reflects what people think it’ll be worth next month, not what’s in your tank right now.
OPEC’s Heavy Hand
The Organization of the Petroleum Exporting Countries (OPEC) and its allies — especially Saudi Arabia and Russia — control a big chunk of global supply. When they cut output, prices usually jump. When they flood the market, prices crash. Simple cartel economics.
Supply vs. Demand (Duh, But Wait)
Basic economics still apply: High demand and low supply mean high prices. But global oil demand depends on everything from travel season in the U.S. to factory output in China. Supply can get torched by hurricanes, war, or pipeline leaks.
Geopolitical Wild Cards
A coup in Nigeria. Sanctions on Iran. Drone strikes in Saudi Arabia. Oil is a global game of dominoes — conflict in one corner of the world can send prices soaring everywhere. Risk equals cost.
The Dollar Factor
Oil is, for us, priced in U.S. dollars. So when the dollar gets stronger, oil gets more expensive for everyone else. That can chill demand — and push prices down. Currency traders have more influence on oil than you’d think.
Refinery Bottlenecks
Even if we’ve got oil, we still have to refine it. When refineries shut down — say, due to a Gulf Coast hurricane — supply of gasoline drops, prices spike, and futures traders panic. It’s not just crude, it’s capacity.
Speculators and Hedge Funds
Big money isn’t buying oil to use it — they’re betting on it. Wall Street speculators can drive prices up or down just by moving money. Sometimes oil spikes not because of scarcity, but because of sentiment.
U.S. Shale’s New Role
The U.S. became the world’s top producer thanks to shale. But shale producers respond slower to price changes than OPEC. That lag means they can’t always swing production fast enough to stop wild price swings.
Why It Hits You at the Pump Late (or Never)
Retail gas prices don’t always track crude perfectly. Taxes, transportation, refining margins, and good oil’ corporate pricing mean what you pay at the pump might lag — or ignore — global price trends entirely.
