When oil prices spike, where does the money go?
The market for oil is global, which is why events like the war on Iran affect oil prices – and prices of the wide range of products made from oil – literally everywhere. Federal data shows that the price at the primary crude oil hub in the U.S. was US$66 a barrel in late February 2026 – before the U.S. and Israel attacked Iran – and $101 a barrel on April 13. Similar price increases have reverberated around the globe.
As an energy economist and an international trade economist, we field a lot of questions during such episodes, because when oil prices go up, manufacturers, businesses and ultimately consumers pay more.
Some basic economics
Crude oil may be the most important commodity in the global economic system.
It’s a literal fuel for the industrial economy. It powers the engines that drive transportation and paves the roads vehicles drive on.
It’s a source for plastics from which the world’s products get made and packaged, and a key ingredient at some point in almost every supply chain.
Even fertilizers that boost the food supply are made from it.
In short, it is difficult to imagine modern life without oil and its derivatives.
And when its supply changes, its price changes. Economists explain this using a fundamental model of our field: the supply-demand diagram. When there’s less of something to go around, competition among consumers who want it and companies that need it can drive the price up.
Sometimes this process can play out over time, allowing people to adjust their purchasing or activities to dampen price shocks. But when a significant source of the world’s oil is effectively blocked without much advance notice, such as when the the U.S. and Israeli attacks on Iran closed the Strait of Hormuz, prices can rise sharply in a short period of time.
A natural question many people ask when oil prices spike is: Where does all that additional money go, and who benefits from it?
Some people have written entire books dissecting all the places that money goes when it leaves consumers’ pockets. But ultimately, the bulk of the money heads in the direction of the source of the oil itself.
What they do with the money varies widely, depending on where in the world the oil producer is operating and who owns it. What also matters is the business environment – the set of laws and regulations – in which the producer operates.
Oil producers in the Middle East face significant new risk because of the war on Iran, including threats to production, processing locations and shipping routes. These risks raise their costs for insurance, security and transportation.
The Permian Basin, the largest oil field in the U.S., is a long way from the Persian Gulf. When global oil prices rise because of the war in Iran, oil companies operating in West Texas effectively get a windfall gain: Prices rise more quickly than costs, at least in the short run.
The immediate effect is more income from higher prices. The money largely goes to company owners – meaning shareholders – through dividends, debt reduction, company-backed purchases of its own stock, and reinvestment in drilling and production.
Everyday U.S. consumers may not like the idea, but in the short run, there’s not much to do but pay the price.
