Sustainable Living: 3M FuturewiseTown PlanIntroductionGo BackEnd of section: Go to Town view3M

Fuel for the
journey

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The rising price
of oil

Why does the price go up and down so much?

The price goes up and down with demand. The more people there are who want petrol and other oil products, the more demand there is for it. If demand goes up, the providers of oil have to go to more expensive places to get the oil to meet demand and so the price goes up.

But it isn't quite this simple; the price of a barrel of oil also depends on:

  • Type (how heavy it is, how easily it burns)
  • Quality (how much energy it gives out, how much processing it needs to remove pollutants)
  • Location (how far it has to travel to get it to people who want it)
  • Taxes (different governments apply different taxes – some tax heavily to limit use)
  • Cost to manufacture (some oil may be expensive to clean)
  • Cost to distribute (how much it costs to transport the oil from source to purchaser)
  • Cost to market (how much it costs to sell the oil)
  • Competition among retail outlets (e.g. promotions at petrol garages)
  • Supply shortages resulting from refinery outages, transportation issues, adverse weather conditions, or pipeline problems
  • Demand (how many people are trying to buy oil at the same time)