Black gold’s rollercoaster: What really moves the price of oil?

Fuel prices in Australia this year have been higher than ever in 2023.

War, geopolitical events, supply and demand, and other factors – all play a role in setting the price of oil.

But ever wondered what really moves the price of oil?

“On a long-term basis, it’s really just supply and demand,” business and financial analyst Tariq Al-Rifai said.

An important question raised by investors and the general public is how geopolitical events around the globe affect the price of oil.

“The recent war with Hamas led to an initial spike in the price of oil, in fact, it was up 10 per cent over a 2-week period, and then we saw a nice steady decline. Now it’s lower than it was before the October 7 events,” Mr Rifai said.

The Organisation of Petroleum Exporting Countries (OPEC), which consists of 24 members, has one vital role: regulate the supply of oil – and to the contrary understanding of many, it does not set the global price of oil.

“OPEC manages the supply of oil – and gives stability to the price of it – so that we don’t see random price hikes. But for Australian consumers, it really has not much of a say in it,” Mr Rifai said.

As the world continues to head towards cleaner, greener energy – Mr Rifai was also asked about the risk on the price of oil in the long run as electrification becomes more dominant.

“Electrification is mostly seen in developed countries – Australia, Canada, New Zealand, and the US. However, the two largest drivers of new demand for oil are China and India and those two countries show no sign of slowing down in their appetite for oil. So even though we’re seeing a weakening demand overall of oil, the outlook for the future I think is positive.”