As of 5:20 a.m. Eastern Time on August 4, 2026, oil is trading at $89.81 per barrel, based on the Brent crude benchmark. The price represents a $2.43 increase from the previous morning's level and sits approximately $20.50 higher than a year ago.

Market Forces Behind Oil Prices

Oil prices are driven by a wide range of variables, but the fundamental dynamic remains supply and demand. Geopolitical risks—including the possibility of recession or armed conflict—can cause prices to shift rapidly. Among the most influential supply-side actors is OPEC+, a coalition of OPEC member countries and allied producers such as Russia that coordinates production targets capable of tightening or loosening global supply. Because global oil futures are predominantly traded in US dollars, fluctuations in currency markets can also affect the purchasing power of international buyers, adding another dimension to price movements. No definitive forecast for future price movements can be made with certainty.

From Crude Oil to Gas Pump Prices

The cost of gasoline at the pump reflects more than just the price of crude oil. Consumers also pay for refining, wholesale distribution, taxes, and retail markups added by local gas stations. Nevertheless, crude oil remains the single largest component, frequently accounting for more than half the cost per gallon.

When oil prices rise, gasoline prices tend to follow upward. However, when oil prices decline, gas prices often fall at a much slower pace—a well-documented phenomenon sometimes referred to as "rockets and feathers."

The U.S. Strategic Petroleum Reserve

The United States maintains an emergency stockpile of crude oil known as the Strategic Petroleum Reserve (SPR). The SPR is designed to safeguard energy security during crises such as sanctions, catastrophic storms, or war. It can also help mitigate price spikes caused by sudden supply disruptions.

The reserve is not intended to address long-term structural issues. Rather, it offers short-term relief for consumers and helps sustain critical economic functions, including essential industries, emergency services, and public transit.

The Link Between Oil and Natural Gas Prices

Oil and natural gas are two of the world's primary energy sources, and significant shifts in oil prices can influence natural gas markets. For instance, when oil prices climb, some industries may substitute natural gas for certain operational segments where feasible, thereby increasing demand for natural gas.

Key Oil Benchmarks

Two principal benchmarks are used to assess oil market performance:

• Brent crude oil serves as the main global benchmark.
• West Texas Intermediate (WTI) is the primary benchmark for North America.

Brent is generally regarded as providing a more comprehensive picture of global oil performance, as it prices a substantial share of the world's traded crude. It is also the standard reference for tracking oil's historical trends. The U.S. Energy Information Administration now uses Brent as its primary reference point in its Annual Energy Outlook.

Historical Performance of Oil

Over several decades, the Brent benchmark reveals that oil prices have been highly volatile. Sharp increases have been tied to wars and supply cuts, while steep declines have followed global recessions and oversupply conditions, commonly referred to as a "glut." Notable historical episodes include:

• Early 1970s: The first major oil shock occurred when Middle Eastern producers slashed exports and imposed an embargo on the United States and other nations during the Yom Kippur War.
• Mid-1980s: Prices fell due to reduced demand and an influx of non-OPEC oil producers entering the market.
• 2008: Prices surged as global demand expanded, then crashed in tandem with the global financial crisis.
• 2020: During the COVID-19 lockdown, oil demand plummeted to unprecedented levels, pushing prices below $20 per barrel.

Overall, oil's historical performance has been anything but stable, shaped heavily by wars, recessions, OPEC decisions, shifting energy policies, and other factors.

Factors Influencing Current Oil Prices

The price of oil per barrel depends primarily on supply and demand dynamics, including expectations about future supply and demand shaped by geopolitical developments and OPEC+ decisions. In the United States, prices are also sensitive to administration policies on drilling, which can affect future supply. For example, in 2025, the Trump administration moved to reopen more than 1.5 million acres in the Coastal Plain of the Arctic National Wildlife Refuge for oil and gas leasing, reversing the Biden administration's policy of restricting Arctic oil drilling.

Oil prices update continuously while futures markets are open. A futures market functions as an auction in which participants agree to buy or sell oil at a future date. As long as trading activity continues, the price of oil fluctuates in real time.

Shale Oil's Role in Supply

Shale is a type of sedimentary rock that contains oil and natural gas. Greater access to shale resources expands available energy supply, which can help moderate price spikes by increasing overall production capacity. The growth of US shale production over the past decade has been a major structural shift in global oil markets, reducing American dependence on imports and giving the United States more influence over global supply.

Broader Economic Impact of Oil Prices

When oil becomes expensive, the cost of everyday goods tends to rise. This effect extends beyond direct energy costs such as heating and gas utilities. Logistics and transportation costs also increase, affecting the price of consumer goods at grocery stores and other retail outlets, as it becomes more expensive to transport products from warehouses and farms to store shelves. Because of this pervasive passthrough effect, central banks including the US Federal Reserve and the European Central Bank closely monitor energy prices as a key input when assessing inflation trends.

This story was originally featured on Fortune.com.