Answer to Question #304956 in Economics of Enterprise for esha

Question

With the reference to the above case study, discuss the likely factors that influence the price of fuel.

Answer 1

The likely factors that influence the price of fuel include:

Supply - this means how much oil is available. Supply is determined by key oil producers in the global market such as the US and OPEC countries. When supply is high, oil prices fall sharply.

Demand - this relates to how much need there is for oil at a given time. Higher demand than supply of oil drives prices high in the market.

Global economic growth - high economic growth drives higher consumption of oil and is thus one of the main determinants of demand for oil.

Geopolitics - political tensions and instabilities such as wars or conflict in major oil-producing regions threaten crude inventories and ultimately affect the price of oil.