How Gas Prices Affect Commodities

By: Sarah Carlye

As gas prices rise in the summer and the price lowers in the winter, it is easy to think that demand is the only thing that influences gas prices. This is not the case. It is not just supply and demand that affects the price of gas; it is also the price of oil futures. Commodity futures, also known as futures contracts, is an agreement to buy or sell a commodity, like oil, by a specific date for a specific amount. These prices are determined by research, historical data, and current events.

One of the factors that affect the price of oil futures is the supply and demand. Supply is affected by OPEC (Organization of Petroleum Exporting Countries), which is a group of 12 oil-producing countries that have an alliance to control the supply (which controls price). Instead of competing against each other, they have chosen to work together. If they were to compete against each other, the prices would drop drastically and a non-renewable resource could be depleted sooner if too affordable. This would leave all the OPEC countries without a major source of income. As a whole, OPEC is responsible for nearly 50% of the oil that is produced worldwide.

Demand is affected by the three major consumers, which include first the United States (approximately 20%), the European Union (approximately 15%), and China (approximately 10%). During times of high demand in the above countries, it will affect the demand, which the price of oil futures.

The combination of supply, demand, and oil futures play a major part in the price of gasoline. When the bids on oil futures are high, it increases the price of gasoline.

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