Oil is weird. Honestly, most people think they understand the price of crude oil because they see the numbers change at the gas station on Tuesday morning, but the reality is way messier. It’s a mix of high-stakes geopolitics, invisible shipping lanes, and a bunch of traders in Chicago or London screaming into headsets. Or, more accurately these days, algorithms executing trades in milliseconds based on a single word in a press release.
Prices move. They crash. They spike.
✨ Don't miss: Writing a resume high school student managers actually want to read
One day everything is fine, and the next, a drone strike or a central bank decision sends the Brent crude benchmark soaring by five dollars. It’s volatile because it has to be. We are talking about the lifeblood of global trade. If the price of crude oil stays too high for too long, the economy chokes. If it drops too low, entire countries like Venezuela or Libya face absolute fiscal collapse. There is no "perfect" price, only a constant tug-of-war between people who want to sell it for a fortune and people who need it to keep the lights on.
The Two Big Names You Keep Hearing
You’ve probably noticed two different prices on the news: WTI and Brent. It’s not just industry jargon. West Texas Intermediate (WTI) is the U.S. benchmark. It’s light, it’s sweet—meaning it has low sulfur—and it’s mostly settled in Cushing, Oklahoma. Cushing is basically a giant field of tanks. If those tanks get too full, like they did during the weird negative-price spike of 2020, the price falls through the floor because there’s nowhere to put the stuff.
Brent Crude is the international standard. It comes from the North Sea, but it’s used to price about two-thirds of the world’s traded oil. Usually, Brent trades at a premium to WTI. Why? Because it’s waterborne. You can put it on a tanker and send it anywhere. WTI is often landlocked, which makes it harder to move when pipelines get clogged.
Why the Price of Crude Oil Refuses to Stay Still
Supply and demand is the boring answer. The real answer is fear.
💡 You might also like: Getting Department of Defense Grants: What Most People Get Wrong About Military Funding
Markets are forward-looking. Traders aren't just buying the oil that exists today; they are betting on what might happen in six months. If OPEC+ decides to extend production cuts, the market reacts instantly. OPEC+, which includes the original Middle Eastern heavyweights plus Russia, controls a massive chunk of the world's spare capacity. When Saudi Arabia decides to play "swing producer" and trims a million barrels a day off the top, they are essentially forcing the price of crude oil upward by tightening the physical market.
But it isn’t just the Saudis anymore. The U.S. shale revolution changed everything.
American drillers in the Permian Basin can turn the taps on and off much faster than traditional deep-water wells. This creates a ceiling. If the price gets too high, American companies start drilling like crazy, the market gets flooded, and the price levels off. It's a constant game of chicken between Riyadh and Midland, Texas.
The Role of the US Dollar
Here is a detail that trips people up: oil is priced in Dollars.
When the Greenback is strong, oil usually gets more expensive for everyone else. If you’re in Japan or Europe and your currency is weakening against the Dollar, you’re paying a double tax. You're paying for the oil price hike and the currency conversion. This is why the Federal Reserve has as much influence on the price of crude oil as an oil minister does. Higher interest rates usually strengthen the Dollar and dampen demand because borrowing money for big industrial projects gets expensive.
Geopolitical Risk and the "Fear Premium"
Ships get stuck. Pipelines get sabotaged.
Take the Strait of Hormuz. About a fifth of the world's total oil consumption passes through that narrow waterway. If a conflict breaks out there, the "fear premium" adds $10 or $20 to the price of crude oil overnight. It doesn't even matter if the oil keeps flowing; the risk that it might stop is enough to freak out the markets. We saw this clearly during the initial stages of the Russia-Ukraine conflict. The uncertainty regarding Russian Urals grade oil led to massive volatility, not because the oil disappeared, but because the logistics of moving it became a legal and ethical minefield.
Then you have China.
🔗 Read more: What Companies Report Earnings This Week: The Ones Actually Moving the Market
For two decades, China was the engine of oil demand. If China's manufacturing sector grew, the price went up. Lately, that’s been changing. As China’s economy shifts and they lead the world in EV adoption, that guaranteed demand growth is starting to wobble. You can’t talk about the price of crude oil in 2026 without looking at how many people in Beijing are buying BYD electric cars instead of internal combustion engines.
The Myth of the "Cheap" Barrel
People love to say that it only costs a few dollars to get oil out of the ground in Saudi Arabia. That’s true for the physical extraction. But it’s not the whole story.
Countries have "fiscal breakeven" prices.
Saudi Arabia needs the price of crude oil to be at a certain level—often estimated between $70 and $85—to fund their national budget, build their "Neom" megaprojects, and keep their population happy. If the price stays at $50, they start burning through their cash reserves. So, while they can produce it for cheap, they won't sell it for cheap if they can help it. They will cut production to squeeze the market.
What Happens Next?
If you're trying to track where this is going, stop looking at just the headlines. Watch the inventory reports. The EIA (Energy Information Administration) releases weekly data on U.S. stockpiles every Wednesday. If those inventories are dropping faster than expected, it means demand is high or supply is tight.
Also, watch the "crack spread." That’s the difference between the price of crude oil and the price of the products made from it, like gasoline and diesel. If refineries are making a killing, they’ll buy more crude, which pushes the price up. If nobody is buying diesel, refineries slow down, and crude starts backing up in the tanks.
Actionable Steps for Monitoring the Market
- Follow the Inventory Data: Check the Weekly Petroleum Status Report from the EIA. It’s the most transparent look at the world’s largest consumer's habits.
- Monitor the Dollar Index (DXY): If the Dollar is on a tear, expect downward pressure on oil. If the Dollar tanks, oil usually finds a floor.
- Watch the Spare Capacity: This is the amount of oil OPEC can bring to market within 30 days. When spare capacity is low, the market is "tight," and any small disruption will cause a massive price spike.
- Ignore the "Peak Oil" Hype: People have been predicting the end of oil demand for 40 years. While the energy transition is real, petrochemicals, aviation, and heavy shipping still rely almost entirely on the heavy stuff. Demand isn't falling off a cliff; it's just changing shape.
Keep an eye on the refining margins in Asia. That’s where the marginal barrel is consumed. If the refineries in India and China are busy, the price of crude oil isn't going to stay down for long. It’s a messy, complicated, often frustrating market, but it’s the most important one on the planet.