Because it's used to make everything from plastics to petroleum to paint, crude oil is known as the mother of all commodities.
Oil prices are fascinating. That might not have been what you were expecting to hear but we're going to explain why. First, what's happening?
Prices of crude oil in the U.S. have dropped 26 percent since last month. At first, there were concerns there would be a shortfall in the global supply of crude oil. That caused prices to go up. Now, there are concerns there will be a glut, too much oil available and that sent prices crashing.
OPEC, the Organization of Petroleum Exporting Countries, generally wants higher crude prices. Its members economies are tied into oil sales. Higher prices usually mean more revenue for them.
This can also benefit American oil companies who can spend more money and hire more workers when prices are higher. However, crude oil is the biggest factor in the cost of gasoline. Higher gas prices, home heating prices, and a higher cost to travel can leave people with less money to spend on other things. That hurts the U.S. economy. As far as the global economy goes, rising crude prices can mean that demand is increasing, an indication the economy is growing. Falling prices can mean the opposite and many investors don't like to see that. So there are ripple effects to rising or falling oil prices.
UNIDENTIFIED FEMALE: The 10 year bull run in crude oil is over. U.S. oil prices have tumbled more than 20 percent from their recent high, plunging them into a bear market. It's a stunning turn around. Just a few months ago, some analysts predicted oil could go to $100 a barrel. So what happened? A combination of factors. There are fears of slowing global growth. That would mean less demand for oil pushing prices lower. At the same time, there's plenty of supply. America is flooding the market with a record amount of crude, the most in 40 years.
Saudi Arabia and other OPEC nations are pumping more oil too. Although those countries are planning to cut back production. And U.S. sanctions on Iran are not as strict as some feared. The Trump Administration granted temporary waivers to India, China and a few other countries allowing them to keep buying oil from Iran, that avoided at least a temporary supply squeeze. So now oil is in the bear's den and the companies that drill for it are getting hammered.
Of course, low oil prices are a win for some fuel-dependent sectors like airlines and chemical companies. Consumers are celebrating too. Gas prices are finally slipping after refusing to budge from a near four year high for much of 2018.