Brent crude slips to $88.22 a barrel in early July 20 trading

Brent crude traded at $88.22 a barrel as of 5:45 a.m. Eastern on July 20, Fortune reported, marking a drop from the prior morning. The move matters because crude prices feed into gasoline, transport and energy costs across the economy.

According to Fortune, the Brent price was $2.78 below the previous morning’s $91 level, a 3.05% decline. The benchmark was still up from $81.48 a month earlier, a gain of 8.27%, and from $69.83 a year earlier, a rise of 26.33%.

What drives the price

Fortune said oil prices are hard to forecast because they depend on supply and demand, as well as events that can quickly change expectations. The report cited economic downturn risks and war as examples of factors that can alter the direction of prices.

Fortune identified Brent crude as the main global benchmark and West Texas Intermediate as the main North American benchmark. It said Brent is often used to track global oil performance because it prices much of the world’s traded crude, and noted that the U.S. Energy Information Administration uses Brent as the primary reference in its Annual Energy Outlook.

What it means for gasoline

Consumers do not pay only for crude oil when they buy gasoline, Fortune said. Pump prices also reflect refining, wholesale costs, taxes and local station markups.

Even with those added costs, Fortune said crude oil is usually the largest component of gasoline prices, often making up more than half the cost of a gallon. The report said gasoline prices tend to rise when crude jumps, while declines at the pump can be slower after crude prices fall, a pattern sometimes described as “rockets and feathers.”

Reserves, gas and history

Fortune said the U.S. Strategic Petroleum Reserve is intended to support energy security during emergencies such as sanctions, storm damage or war. The reserve can help cushion consumers and parts of the economy during supply shocks, but Fortune described it as a short-term tool rather than a lasting fix.

Oil also can affect natural gas markets, according to Fortune. If oil prices rise, some industries may use more natural gas in parts of their operations where substitution is possible, increasing demand for gas.

Fortune described oil’s long-term price record as volatile, shaped by wars, recessions, supply cuts, oversupply, OPEC decisions and energy policy changes. The report cited the early 1970s oil shock tied to Middle East export cuts and an embargo during the Yom Kippur War, a mid-1980s price drop linked to weaker demand and more non-OPEC production, the 2008 spike and fall around the global financial crisis, and the collapse in demand during the 2020 COVID lockdowns, when prices fell below $20 a barrel.

Fortune said U.S. shale production can affect prices by adding supply, which can help limit spikes. The report also said expensive oil can add to inflation by raising energy costs and the cost of shipping goods to consumers.

This story draws on original reporting from Fortune.