what drives petroleum product prices?

money inside a wallet

My knee jerk response to this question is “what doesn’t?” There are numerous factors that drive the petroleum prices daily, minute to minute and even every second. However, the basic driving factors are SUPPLY and DEMAND. Within those topics are too many micro factors to list, all of which influence price. We will dive into the basics below, but a reliable source to go deeper into this valuable information is the U.S. Energy Information Administration at www.eia.gov.


Consumption: The using up of a resource.

  • Country:                               % of world share:
  • #1 – United States 20.3%
  • #2 – China                            13.2%
  • #3 – India                            4.6%
  • #4 – Japan                           4.1%
  • #5 – Russia                          3.7%



Production: The making or manufacturing from components or raw materials.

  • Country:                              % of world share (in barrels: 1 barrel = 42 U.S. gallons):
  • #1 – United States            14.8 billion
  • #2 – Saudi Arabia             12.4 billion
  • #3 – Russia                         11.3 billion
  • #4 – China                          4.9 billion
  • #5 – Canada                       4.6 billion



Trade: Imports, or the bringing of goods into a country from abroad and exports, sending goods to another county also affect petroleum prices. Net imports is the difference between gross imports and exports.


financial markets

Financial Markets: Futures contracts (or legal agreement to buy or sell a particular commodity, asset, or security at a predetermined price at a specified time in the future) for both gasoline and distillates grew substantially over the past decade. The activities of multiple trading categories including physical participants (producers, merchants, processors, and end users), money managers (hedge funds and sophisticated traders), and swap dealers (investment banks or commodity broker/dealers) all affect the financial markets.



Balance: Seasonal consumption.

  • Gasoline: Higher consumption in the summer months, lower in the winter.
  • Distillates (heating oil): Higher consumption in the winter months, lower in the summer. More significant in colder regions.
  • Distillates (diesel fuel): Used in Transportation. This the driving factor in distillate balances as the need for heating oil is reduced with the adoption of electricity, natural gas, propane and other heating sources for homes.


other key factors/terms

  • OPEC: Organization of the Petroleum Exporting Countries. This organization seeks to actively manage oil production in its member countries by setting production targets. OPEC member countries produce about 40% of the world’s crude oil and OPEC’s oil exports represent about 60% of the total petroleum traded internationally. Saudi Arabia is the largest of the 15-country member group producing 30% of the total. Members include Algeria, Angola, Congo, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.
  • Weather: Various weather conditions can be a major influence as we have seen during hurricanes, winter storms and other related anomalies.
  • Pandemics: Yes, we now must include this as a potential factor.
  • Transportation Interruptions: Remember the vessel Ever Given that blocked the Suez Canal for several days impacting global trade? Various transportation lines such as rail, land and water can be affected.
  • Cyber Attacks: The Colonial Pipeline cyber-attack lasted six days had a long-term affect for the weeks following the initial shut down. 

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