Oil is the world's most important commodity, and improving the understanding of drivers of its price is a longstanding research objective. This article analyses real oil prices during 1984-2007 using a monthly dataset of fundamental and market parameters that cover financial markets, global economic growth, demand and supply of oil, and geopolitical measures. The innovation is to incorporate proxies for speculative and terrorist activity and dummies for major industry events, and quantify price impacts of each. New findings are positive links between oil prices and speculative activity, bond yields, an interaction term incorporating OPEC market share and OECD import dependence, and the number of US troops and frequency of terrorist attacks in the Middle East. Shocks also prove significant with a $6-18 per barrel impact on price for several months. (C) 2011 Elsevier Ltd. All rights reserved.