Despite the tremendous advancements made in eco-friendly technologies like solar and wind power, hybrids , and electric automobiles, our society is still extraordinarily dependent on fossil fuels to maintain our standard of living—at least for the time being. Of course, crude oil is the most important fossil fuel, as it is needed for nearly every facet of modern society.
However, while the price you pay at the pump for gasoline when you fill up your car might be the most direct example of oil’s impact on your money, a whole host of more indirect costs also impact your pocketbook. In other words, oil affects your finances in ways you might not be aware of daily.
Transportation Costs
Like the unleaded gas you use in your car, the vast and intricate network of delivery trucks that bring the products you rely on to market also depend on fossil fuels. Therefore, when the fuel price rises at the pump, it affects not only what you are paying for gasoline in your car but nearly all of the goods and services you use daily.
Manufacturers, distributors, and shipping companies must maintain healthy profit margins to stay financially viable. To that point, when the price of fuel rises, those higher costs are more often than not transferred to the consumer in the form of higher price points for goods and services rather than absorbed by a company’s profit margins. As the price of fuel rises, it acts as an inflationary force across the entire economy, ultimately resulting in you, as the consumer, losing purchasing power on your money.
Oil and Your Investments
Although a bit of contention remains over the correlation between the price of oil and stock prices, it’s safe to say that rising oil prices will have at least a minimal effect on stocks as they can erode corporate profitability. However, the correlation between the two likely isn’t as strong as most might suspect since several other factors also help determine where stocks trade on any given day.
Rather than seeing oil as a direct and substantial driver of the asset prices within your portfolio, however, viewing oil as an economic indicator provides significantly more insight into short and long-term asset performance. Since the price of oil is primarily determined by the fundamental laws of supply and demand (at least when excluding any price inefficiencies that monopolies have created), a drop in the price of oil might help you at the gas pump and ease transportation costs for the products you rely on, but can also indicate a weakening economy.
The Bigger Picture
When oil prices are low, it typically means an excess supply, which indicates sluggish industrial production. Likewise, rising oil prices are – as previously mentioned – inflationary and can signal a rapidly growing economy. In other words, depending on the direction it’s moving, the price of oil can be both a positive and a negative for your money. It can act as a direct influence at the gas pump or as an economic indicator that speaks of the economy’s direction. Therefore, it can affect your investments as well.
Do you have questions about how fossil fuels can impact your portfolio or how to divest from them altogether? Do you need help with your financial plan? We’re here to help! Simply click here or call (763) 445-2772 to schedule a complimentary consultation today.
This blog was updated June 2026
