Brent sits $2.56 above $100, barely more than its latest one-day gain

Subtract the two changes from the Sept. 30 price and yesterday's reading comes to about $100.19 ^[1]. A year ago Brent was near $66.69 ^[2], so the $35.87 gain is a rise of roughly 54% in twelve months ^[3]. The one-day gain was about 2.4% ^[7]. Brent has now been above $100 on two readings in a row ^[1]. It clears that line by $2.56, or 2.5% of the price ^[4]. That margin is about 1.08 times the latest daily move ^[5].

The evidence gives a price level and two changes. It does not show that the level will last, and Fortune's price report says so directly: "Nobody can predict the future path of oil prices with certainty" ^[4]. The report names supply and demand as the main drivers ^[4]. On supply, the publisher's own recent coverage reports that the US is helping double the volume of oil leaving the Persian Gulf, with the military guiding ships through Hormuz in broad daylight ^[8]. More barrels through the strait work against a $100 floor.

The paths run like this. If escorted Gulf flows keep rising, the price has room to drift back toward last year's level. A budget pegged above $100 then holds back cash that sits idle when it could have been spent. If supply is disrupted again, $100 becomes the bottom of the range. If neither happens, the price stays about one daily move from the line, and the budget is right by 2.5%.

The case for planning above $100 is strongest for buyers at the pump. Crude is typically more than half the cost of a gallon, and refining, distribution, taxes and the station's margin make up the rest ^[5]. Suppose crude was half the gallon a year ago and the other costs stayed flat. A 54% rise in crude would then lift the gallon by about 27% or more ^[6]. Pump prices also climb fast on spikes and come down slowly, a pattern known as "rockets and feathers" ^[6]. A fleet paying retail prices that budgets at today's level will stay close to right for some time after crude falls, because the decline reaches the pump gradually. Brent prices much of the world's traded crude ^[10], and a contract that resets on it gets no such delay. For that buyer the 2.5% margin is all the protection there is.

Government backstops do little for the level. Fortune describes the Strategic Petroleum Reserve as immediate support in an emergency and not a permanent fix ^[7]. Buyers of natural gas take some of the move too: when oil rises, some industries switch parts of their operations to gas, which pushes up gas demand ^[9].

In my view the sound plan treats the two groups differently. Budget pump fuel at today's prices. Budget costs linked to Brent on a range that goes below $100, since the current price is about one daily move above that line ^[5]. The case for $100 holding is wrong if Brent falls under it while escorted Gulf volumes are still rising ^[8].