Oil is the New Oil

Learn why oil is up and what this mean for YOU and the stock market

April 05, 2024

Good morning and welcome to another edition of Lemonade Stand Finance!

Have you ever heard somebody say “DATA IS THE NEW OIL”?

Well right now, it seems like oil is the new oil.

Oil prices have been skyrocketing.

In this article you’ll learn why oil is up, why this matters TO YOU, and what implications this has in the investment world!

Let’s get into it.

Oil prices are going up, a lot.
They’ve reached the highest they’ve been in several months, just as we're getting ready for the summer when people usually drive more.
One kind of oil, called Brent crude, has gone up by 18% this year. Now, it costs more than $90 for one barrel, which is the most it’s been since last October.
This means people are paying more for gas too. The average price for a gallon of gas has gone up by 15% this year.

Why Are Oil Prices Going Up?

Trouble in Oil-Producing Areas: There have been drone attacks in Russia and problems in the Middle East. These areas are important for oil, and when there’s trouble there, it often makes oil prices go up.
Less Oil Available: A group called OPEC, which is made up of countries that produce a lot of oil, decided to make less oil. When there’s less oil available but people still want it, the price usually goes up.
People Want More Oil: After the pandemic, more people are traveling and doing things that use oil, like driving and flying. This means people want to buy more oil.

What Does This Mean for You?

Higher Gas Prices: With oil prices going up, it costs more to make gasoline. So, the price you pay at the gas station goes up too.
Expensive Summer Driving: Since it's getting close to summer, when people usually drive more for vacations, it might cost more to fill up your car.
Effects on Other Prices: When it costs more to get oil, it can make other things more expensive too. Things like shipping costs can go up, which might make all sorts of products more costly. This can cause inflation, and lower stock prices this year (learn why in this short article).
What the Future Might Hold: Experts think that the price of oil might go up even more during the summer. But it’s hard to say for sure. It depends on things like whether OPEC decides to make more oil and what happens in places that produce a lot of oil.

Geopolitical Impact: The reasons behind rising oil prices are partly because of trouble in places that produce a lot of oil, like Russia and the Middle East. When there are issues in these regions, it often makes the oil price go up.
Supply and Demand: OPEC, a group of countries that make a lot of the world's oil, has been producing less oil. When there's less oil but people still want it, the price goes up. More people are using oil now for things like driving and flying, so the demand for oil is higher.
Effect on Gasoline Prices: Because oil prices are going up, gas prices are too. This is important for people who drive cars, as they will be paying more for fuel, especially during the summer when many people go on road trips.
Global Economy and Demand for Oil: The whole world is using more oil, which pushes prices up. Even though we’re trying to use cleaner energy, we still rely a lot on oil.
Inflation and Challenges for the Federal Reserve: Higher oil prices can make everything more expensive (inflation). This is a big challenge for the Federal Reserve, which tries to keep prices stable.
What Might Happen Next with Oil Prices: Some people think oil prices could get even higher in the summer. But it’s not certain. It depends on things like if OPEC decides to make more oil and what happens in the world's oil-producing areas.

Brent Crude: A major kind of oil used around the world to set prices.
OPEC: A group of countries that produce a lot of the world’s oil. They work together to decide how much oil to make, which can affect prices.
Supply and Demand: How much oil is available (supply) and how much people want to use (demand). When there’s less supply and more demand, prices usually go up.
Inflation: When prices for things go up and money can buy less than before.
Federal Reserve: The central bank of the United States, which tries to keep prices stable and the economy healthy.

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That’s all for today. I hope you learned something!

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