As of 5:20 a.m. Eastern Time on August 7, 2026, oil was priced at $86.04 per barrel, using Brent crude as the benchmark. That marks a gain of $2.40 compared to the previous morning and approximately $19 above the price one year earlier. The year-over-year increase of roughly 28% underscores how significantly energy costs have risen in twelve months, with ripple effects across transportation, manufacturing, and consumer goods.

Oil Price Drivers: Supply, Demand, and Disruption

Forecasting oil prices with precision is not possible. The market is shaped by many intersecting factors, but the fundamental driver remains supply and demand. When concerns about economic recession, armed conflict, or other large-scale disruptions intensify, oil prices can shift rapidly.

On the supply side, OPEC+—the coalition of OPEC members and allied producers including Russia—plays a central role through its production targets, which can tighten or loosen global supply. Decisions at OPEC+ meetings are closely watched by traders and analysts as potential inflection points for price direction.

In the United States, prices also respond to administration policies on drilling, which can influence future supply. In 2025, for example, 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 limiting oil drilling in the Arctic.

From Crude Oil to Gas Pump Prices

Retail gasoline prices do not move solely with crude oil. The per-gallon cost also reflects refining expenses, transportation, taxes, and the markup added by local stations. Since crude oil generally accounts for the majority of each gallon's cost, fluctuations in oil prices carry an outsized influence.

When oil prices surge, gasoline prices typically follow upward. However, when oil retreats, pump prices often decline more slowly—a pattern sometimes called the "rockets and feathers" effect.

Beyond the pump, expensive oil tends to raise the cost of everyday goods. Higher oil prices affect not only direct energy costs such as heating and gas utilities but also logistics and shipping expenses, which can drive up prices at the grocery store and elsewhere. Central banks, including the U.S. Federal Reserve, monitor oil prices closely because energy is a significant input to inflation, and sustained increases can complicate decisions about interest rates.

The U.S. Strategic Petroleum Reserve

The United States maintains an emergency stockpile of crude oil known as the Strategic Petroleum Reserve (SPR). Its primary purpose is to safeguard energy security during disasters, including sanctions, severe storm damage, or war. The SPR can also help mitigate sharp price increases during supply shocks.

The reserve is not intended as a long-term solution. Rather, it provides temporary relief, supporting consumers and helping critical economic sectors—such as key industries, emergency services, and public transportation—continue operating during disruptions.

The Link Between Oil and Natural Gas Prices

Oil and natural gas are both major everyday energy sources, and significant shifts in oil prices can influence natural gas markets. When oil becomes more expensive, some industries may substitute natural gas for certain operations, thereby increasing demand for natural gas.

How Oil Prices Update: Futures Markets

The price of oil changes constantly while futures markets are open. A futures market functions essentially as an auction in which participants agree to buy or sell oil at a set price for future delivery. As long as trading activity continues, the oil price is continuously updating.

Shale's Role in Supply

Shale is sedimentary rock containing oil and natural gas—effectively a reserve of energy not yet tapped. The more shale resources the United States is able to access, the greater the potential energy supply, which can help moderate price spikes. U.S. shale production has been a defining factor in global oil markets over the past decade, making the United States one of the world's largest oil producers.

Key Benchmarks: Brent and WTI

Oil performance is typically measured against two benchmarks:

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

Brent is generally regarded as the better representation of global oil performance because it prices much of the world's traded crude. The U.S. Energy Information Administration now uses Brent as its primary reference in its Annual Energy Outlook.

Historical Oil Performance

Examining the Brent benchmark over several decades reveals a history of sharp swings—spikes driven by wars and supply cuts, and crashes caused by global recessions and oversupply, known as a "glut."

• Early 1970s: The first major oil shock occurred when Middle Eastern producers cut exports and imposed an embargo on the United States and other nations during the Yom Kippur War.
• Mid-1980s: Prices fell due to factors including lower demand and the entry of more non-OPEC producers into the industry.
• 2008: Prices surged with rising global demand, then plummeted alongside the global financial crisis.
• 2020: During COVID-19 lockdowns, oil demand collapsed unprecedentedly, pushing prices below $20 per barrel.

Oil's historical trajectory has been shaped by wars, recessions, OPEC decisions, evolving energy policies, and numerous other forces. Market participants continue to monitor upcoming OPEC+ meetings, geopolitical developments, and macroeconomic data releases for signals about where prices may head next.

This story was originally featured on Fortune.com.