Oil Prices
What is it?
Oil prices are the cost of crude oil on the global market — the raw material that gets refined into petrol, diesel, jet fuel, and hundreds of other products we use every day.
When people say "the oil price went up," they mean the price of a barrel of crude oil — 159 litres of unrefined oil — changed on the global market. That single number ripples through almost everything in the modern economy.
Where does oil come from?
Oil is extracted from underground reserves found mostly in:
- The Middle East — Saudi Arabia, Iraq, Iran, Kuwait, UAE. The world's largest reserves, producing roughly a third of global supply.
- The United States — Now the world's largest producer, pumping around 13 million barrels a day.
- Russia — A major producer, though heavily sanctioned since 2022.
- Other regions — Canada, Brazil, West Africa, the North Sea.
New Zealand produces a small amount of oil off the Taranaki coast — nowhere near enough to meet our own needs. We import virtually all of the fuel we use.
Who sets the price?
No single person, company or government sets the oil price. It is set by global markets — millions of buyers and sellers trading every day, responding to supply, demand, and world events.
But a few players have outsized influence:
OPEC+ (the Organization of Petroleum Exporting Countries) A group of 13 major oil-producing nations — led by Saudi Arabia — that coordinate how much oil they produce. When OPEC+ cuts production, supply drops and prices rise. When they increase production, prices fall. They meet regularly to set targets and hold enormous power over global prices.
The United States The world's largest oil producer and consumer. US production levels, storage data, and economic conditions all move global prices. When the US economy slows, demand for oil falls and prices drop.
Global traders and financial markets Oil is traded on futures markets — meaning buyers and sellers are making deals today for oil to be delivered in the future. Traders, banks, hedge funds and energy companies all buy and sell oil contracts based on their expectations of where prices are heading. This means fear, uncertainty and geopolitical tension can push prices up even before a single barrel of supply is actually disrupted.
How is the price measured?
Two main benchmarks set the global reference price:
Brent Crude — the global standard. Sourced from the North Sea. This is the price most of the world — including NZ — uses as its reference. As of late March 2026, Brent is trading around US$108 a barrel.
WTI (West Texas Intermediate) — the US benchmark. Slightly different quality of oil, trades at a small discount to Brent. Around US$94 a barrel currently.
When you hear "the oil price" on the news, they're almost always talking about Brent.
What makes the price go up?
Supply drops — War, sanctions, natural disasters or OPEC+ production cuts reduce the amount of oil available. Less supply, same demand = higher price.
Demand rises — A booming global economy means more factories running, more trucks moving, more planes flying. More demand, same supply = higher price.
Geopolitical risk — Even the threat of supply disruption pushes prices up. Traders price in the risk that something bad might happen — even if it hasn't yet. War in the Middle East, for example, sends prices up immediately, not just when oil actually stops flowing.
Chokepoints get threatened — Around 20% of the world's oil passes through the Strait of Hormuz — a narrow waterway between Iran and Oman. Another 10% passes through the Suez Canal. When these routes are threatened, the whole market reacts.
A weak US dollar — Oil is priced in USD. When the dollar weakens, oil effectively becomes cheaper for buyers in other currencies — which increases demand and pushes prices up.
What makes the price go down?
Supply increases — OPEC+ increases production, or US shale producers ramp up output. More supply, same demand = lower price.
Demand falls — A global recession, a pandemic, or a major shift to electric vehicles all reduce demand for oil.
Geopolitical tension eases — Peace talks, ceasefires or diplomatic breakthroughs reduce the risk premium traders have built into the price.
The US dollar strengthens — Makes oil more expensive in other currencies, reducing global demand.
How does the global oil price affect NZ?
New Zealand imports 100% of its refined fuel. We buy it in US dollars. So, the global oil price affects us directly and immediately in two ways:
- The base price moves — If Brent crude rises, the cost of the fuel we import rises with it.
- The exchange rate moves — If the NZD weakens against the USD at the same time, we pay even more in NZ dollars for the same barrel.
Both can — and do — happen simultaneously, which is exactly what NZ experienced in early 2026.
The big number right now
As of March 27, 2026, Brent crude is trading at US$108 a barrel — up sharply since the US-Israel-Iran conflict began and the Strait of Hormuz came under threat. Prices have risen around 50% since the start of the year.
For context — at the start of 2026, Brent was around US$83 a barrel. The conflict added roughly US$25 in a matter of weeks.