Here’s What Drives The Price Of Oil | CNBC

Summary

The video explains the major factors influencing oil prices, focusing on supply, demand, and geopolitics. It highlights how the United States, through shale production, is now a key player in oil supply alongside OPEC. Historical events like the 1973 oil embargo and recent political moves, such as President Trump's withdrawal from the Iran nuclear deal, have also shaped the market. The video stresses that oil prices are volatile, influenced by global politics and economic trends, while speculating on the evolving role of oil in the future of energy markets.

Takeaways

• 😀 The United States' withdrawal from the Iran nuclear deal impacts oil prices globally.
• 😀 World affairs, such as geopolitical tensions, significantly influence oil prices.
• 😀 There are two major oil price benchmarks: Brent Crude (international) and West Texas Intermediate (WTI, US-based).
• 😀 Oil prices are driven by three key factors: supply, demand, and geopolitics.
• 😀 Supply of oil is influenced by OPEC and increasing production from US shale fields.
• 😀 When oil-producing countries increase production, it can lead to oversupply, causing prices to fall, as seen in 2014.
• 😀 Geopolitical events like wars or sanctions can disrupt the supply of oil and drive up prices.
• 😀 The 1973 OPEC oil embargo led to fuel shortages and skyrocketing oil prices in the US.
• 😀 The US's role as a major oil producer has increased, with shale drilling changing supply dynamics.
• 😀 Renewable energy and economic growth influence demand for oil, alongside global energy trends.
• 😀 The future of oil markets is uncertain due to ongoing changes in geopolitics, renewable energy, and the global economy.

Q & A

What is the Iran nuclear deal and how does the U.S. withdrawal from it affect oil prices?

The Iran nuclear deal was an agreement aimed at limiting Iran's nuclear capabilities in exchange for the lifting of international sanctions. The U.S. withdrawal from this deal in 2018 led to the reimposition of sanctions on Iran, which impacted its oil exports. This uncertainty caused a spike in oil prices as markets worried about potential supply disruptions.

What are the key factors influencing oil prices globally?

Oil prices are primarily influenced by three factors: supply, demand, and geopolitics. Supply is determined by how much oil is available, demand relates to the need for oil in sectors like transportation and energy, and geopolitics concerns the effects of political instability or conflicts on oil-producing countries.

What is the difference between Brent crude and West Texas Intermediate (WTI) oil?

Brent crude is oil extracted from the North Sea and serves as an international benchmark for oil prices. In contrast, West Texas Intermediate (WTI) is a type of light crude oil produced primarily in the U.S., and it acts as a benchmark for domestic oil prices in the United States.

How did OPEC's role in oil supply change over time?

OPEC, the Organization of Petroleum Exporting Countries, historically controlled much of the global oil supply. However, the rise of U.S. shale oil production has shifted the balance of power, making the U.S. a more significant player in global oil supply.

What caused the oil price crash in 2014?

In 2014, oil prices dropped sharply because oil producers, including OPEC and U.S. shale drillers, pumped more oil than the global market could consume. OPEC's refusal to reduce production, combined with the surge in U.S. shale production, led to oversupply and a sharp decline in prices.

How did the 1973 Arab oil embargo affect the United States?

The 1973 Arab oil embargo led to severe oil shortages in the U.S. as Arab OPEC members stopped selling oil to the country. This caused a dramatic rise in oil prices and led to gasoline rationing at stations, which heavily impacted the economy and consumers.

What role does demand play in the fluctuation of oil prices?

Demand for oil is influenced by factors like economic growth, industrial activity, and the need for transportation and energy. As economies grow, the demand for oil typically increases, pushing prices higher. Conversely, during economic slowdowns, oil demand decreases, leading to lower prices.

What impact did the U.S. invasion of Iraq have on oil prices?

The U.S. invasion of Iraq in 2003 led to a spike in oil prices. The instability in the Middle East caused by the invasion raised concerns about oil supply disruptions, which in turn pushed oil prices higher.

How did President Trump's decision to pull out of the Iran nuclear deal affect oil prices?

When President Trump pulled the U.S. out of the Iran nuclear deal in 2018 and reinstated sanctions on Iran, oil prices surged to three-and-a-half-year highs. Traders were uncertain about how the sanctions would affect global oil supply, leading to increased speculation and higher prices.

What is the future outlook for the oil market given the rise of renewable energy?

The oil market is expected to continue being a significant player in global economics and geopolitics for the foreseeable future. However, with the growing shift towards renewable energy sources, the long-term demand for oil may decline as alternative energy solutions become more prevalent, altering the dynamics of the oil industry.