Crude Oil Prices: Trends and Impact on the Economy and You

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Definition: Crude oil prices measure the spot price of various barrels of oil, most commonly either the West Texas Intermediate or the Brent Blend. The OPEC basket price and the NMEX futures price are also sometimes quoted.

West Texas Intermediate (WTI) crude oil is of very high quality because it is light-weight and has low sulphur content. For these reasons, it is often referred to as “light, sweet” crude oil.

These properties make it excellent for making gasoline. That's why it is the major benchmark of crude oil in the Americas.

 WTI has historically sold at a $4 per barrel discount to Brent. In December 2015, that price differential disappeared. The U.S. Congress removed the ban on oil exports. It responded to demands from U.S. shale oil producers. For more, see U.S. Shale Oil Boom and Bust.

Brent Blend is a combination of crude oil from 15 different oil fields in the North Sea. It is less “light” and “sweet” than WTI, but still excellent for making gasoline. It is refined in Northwest Europe and is the primary benchmark for crude oils in Europe or Africa. For example, prices for other crude oils in these two continents are often priced as a differential to Brent, i.e., Brent minus $0.50. 

The OPEC Basket Price is an average of the prices of oil from Algeria, Indonesia, Nigeria, Saudi Arabia, Dubai, Venezuela, and Mexico.

OPEC uses the price of this basket to monitor world oil market conditions. OPEC prices are lower because the oil from some of the countries has higher sulfur content That makes it more “sour” and less useful for making gasoline.

The NYMEX futures price for crude oil is reported in almost every major U.S. newspaper.

 It is the value of a1,000 barrels of oil, usually WTI, at some agreed-upon time in the future. In this way, the NYMEX gives a forecast of what oil traders think the WTI spot price will be in the future. However, the futures price usually follows the spot price pretty closely, since the oil traders can’t know about sudden disruptions to the oil supply, etc.

Impact on Economy and You

Higher crude oil prices directly affect the cost of gasoline, home heating oil, manufacturing and electric power generation. How much? According to the EIA, 96% of transportation relies on oil, 43% of industrial product, 21% of residential and commercial, and only 3% of electric power. However, if oil prices rise, then so does the price of natural gas, which is used to fuel 14% of electric power generation, 73% of residential and commercial, and 39% of industrial production. (Source: EIA, U.S. Primary Energy Consumption by Source and Sector, 2004)

For this reason, higher oil prices increase the cost of everything you buy, especially food. That's because a lot of food costs depends on transportation. High oil prices will ultimately increase inflation.

Crude oil prices most directly affect you in higher gasoline prices and higher home heating oil prices (primarily for those of you who live in the Northeast U.S.) Crude oil accounts for 55% of the price of gasoline.

Distribution and taxes influence the remaining 45%.


Oil prices usually rise in the summer, driven by high demand for gas during vacation driving times. It then drops in the winter, if there is lower-than-expected demand for home heating oil, due to warmer weather. 

Until 2015, oil prices seem to be rising earlier and earlier each spring. In 2013, prices started rising in January, reaching a peak of $118.90 in February. In 2012, oil prices began rising in February. The price for a barrel of WTI crude broke above $100 a barrel on February 13, 2012. In 2011, prices didn't break $100 a barrel until March 2 and didn't peak until May at $113 a barrel.

Fortunately, none of these peaks were as high as the June 2008 all-time high, when the price of WTI crude oil hit $143.68 per barrel. Investors were afraid that China's economic growth would create so much demand that it would overtake supply, driving up prices.

However, most analysts now realize that the sudden increase in oil prices was due to increased investment by hedge fund and futures traders. By December, it plummeted to a low of $43.70 per barrel.

The U.S. average retail price for regular gasoline also hit a peak in July 2008 of $4.17, rising as high as $5 a gallon in some areas. By December, it had also dropped to $1.87 a gallon. For more, see Gas Prices in 2008. (Source: EIA Oil Price Trends).

To see average, high and low oil prices, and concurrent events, since 1974, see Oil Price History. Or you may need the Forecast of Crude Oil Prices