Question: How Are Oil Prices Determined?
Answer: Commodity traders are responsible for oil prices by bidding on oil futures contracts. There are many factors they look at when developing the bids that create oil prices:
- Current supply in terms of output, especially the production quota set by OPEC.
- Oil reserves, including what is available in U.S. refineries and what is stored at the Strategic Petroleum Reserves.
- Oil demand, particularly from the U.S. (as estimated by the Energy Information Agency . During the summer, forecasts for travel from AAA are used to determine potential gasoline use. During the winter, weather forecasts are used to determine potential home heating oil use.


