How To Guide For: Understanding Why Oil Prices Fluctuate

Oil is a hydrocarbon liquid substance that is greasy to the touch and is formed by natural resources or the breakdown of fats. Oil comes in many forms as diverse as crude oil and vegetable oil, which serve very different purposes. Products consisting of oil are insoluble when added to water, but will dissolve in organic substances such as those acquired from living organisms. Oil is considered a commodity. So

oil-consuming and oil-supplying countries are economically dependent on oil. Therefore any changes in the price of oil will affect oil-consuming countries and oil-supplying countries. Oil market dynamics can change due to technological changes and political events, which result in price fluctuations that affect the entire world economy. Some other factors that can affect the oil price changes are price level vs. price variability and the relationship between oil prices and GDP of a large oil exporting country such as Russia. Since oil is priced in dollars it will trade inversely to the price of the world’s reserve currency. To learn more about why oil prices fluctuate click on the pictures below to read the articles.