Oil prices are determined in a very unique way. Firstly, gasoline and diesel fuel that we use are refined from Crude oil or petroleum. Crude oil is a commodity material such as coffee and gold. Commodity material does not depend on the place and the people who get it because it does not change. Commodity price go high and down because depend on the supply/demand of the world. As the supply increase and the demand decrease the prices go down; and as the supply decrease and the demand increase the prices go up.
The thing that makes the oil prices unique is the future contracts. These contracts are agreements to sell or buy oil at a specific date with a specific price. These contracts affect the supply/demand of the world because they can keep the prices high or low depending on the contracts. There are other factors such as crises and disasters but they don’t occur a lot so they don’t affect the prices a lot.
Works Cited
George, Patrick E. "What Determines Oil Prices?" Investopedia, 02 July 2008. Web. 03 Oct. 2015. <http://www.investopedia.com/articles/economics/08/determining-oil-prices.asp>.
Oil Price. Digital image. Oil Boom USA, 10 June 2015. Web. 3 Oct. 2015. <http://oilboomusa.com/wp-content/uploads/2015/06/oil-prices1.jpg>.
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