HOW CURRENT OIL PRICES AFFECT THE US ECONOMY

The Current Oil Price. The price of crude oil directly affect the cost of gasoline, home heating oil, manufacturing and electric power generation. If it goes higher then so do these other prices, although it never does seem to fall as fast does it? The Crude oil price makes up around 55% of the price of a gallon of gasoline, while distribution and taxes influence the remaining 45% of this cost.

What are the numbers? The EIA states that 96% of transportation relies on oil, 43% of industrial product, 21% of residential and commercial, and only 3% of electric power. The price of crude carries through to everything you purchase and food is really affected. Higher crude oil prices are a driver on higher inflation.

If crude oil prices rise the price of natural gas also rises, and LNG is used to power 14% of electric power generation, 73% of residential and commercial, and 39% of industrial production.

ABOUT THE CURRENT OIL PRICE TODAY

You all remember it well. In June 2008, the price of WTI crude oil hit an all-time high price of $145 per barrel. By December, the price had plummeted to a low of $30 per barrel.

The U.S. average retail price for regular gasoline also reached a peak in July of $4.10 a gallon. It rose as high as $5 a gallon in some areas of the USA, causing major economic shock. By December, the price had also plummeted to around $1.68 a gallon.

The fact is that oil prices rise in the summer, and this is driven by the much high demand for gasoline during vacation driving times. In winter it will fall and if there is lower than expected demand for home heating oil, due unseasonably warm weather it may fall further still. People tend to stay home and keep warm rather than drive around a lot.

During the rapid rises in crude oil prices in 2008, the general fear was that the amazingly rapid economic growth from China and the demand in the U.S. would create such a high demand for crude oil that it would simply overtake the supply. This drove up prices to spectacular levels as traders speculated. Many financial analysts attribute this meteoric rise in prices to hedge fund investments and the futures traders.

ABOUT THE CURRENT OIL PRICE TODAY

The price of a barrel of oil depends on the grade of oil, which is related to its specific gravity and sulphur content and its location

The spot price or spot rate of oil is the price quoted for immediate (spot) settlement (payment and delivery). This spot settlement is normally one or two business days from trade date.

In futures prices the forward price is established in a forward contract or futures contract where the contract terms (price) are set now, but delivery and payment will occur at a future date. The Current Oil Price

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