The average price of gasoline in the United States is currently around $3.68 per gallon – the highest price for this time of year since 2008, when gasoline hit its all-time high. The struggle for control in Iraq is one of the factors potentially responsible for the increase. Oil markets and global oil prices have risen about 5 percent since reports of the violence there began. The outcome of the Iraqi crisis is hard to predict, but considering Iraq is OPEC’s second-largest exporter, there’s likely more price volatility to come.
This is only the latest conflict – or world news of any kind — to significantly impact the price of oil. We know from history that political tension or war in major oil-producing countries affects the price we pay for gasoline closer to home. But why exactly is that the case? And what other factors are influencing the price we pay at the pump? There are logistical costs (and debates), refining capacity, weather, alternative fuel mandates, and perhaps most significant, increased demand for oil and gasoline during the heavy summer driving season. There are even different prices for a barrel of oil depending on which part of the world you’re in. It’s a lot to calculate.
Futures Fundamentals, CME Group’s education site, demystifies the topic in the just released “Story of Oil,” a video that takes viewers through the complex oil production process from extraction to the gas pump to provide a clearer picture of all the factors impacting the price of gas and the business of oil.
Read and watch more examples of how futures markets impact everyday life at FuturesFundamentals.