EVERYDAY SCIENCE

Detailed explanation-1: -When oil prices rise, costs for production and transportation rise, which decreases supply at a given price. If oil prices fall, production and transportation costs fall, so more can be produced at a given price. Demand then increases or decreases in response to the supply fluctuations.

Detailed explanation-2: -If the supply of oil decreased: quantity demanded would decrease. A leftward shift is a decrease, which causes quantity demanded would decrease.

Detailed explanation-3: -An increase in oil prices usually lowers the expected rate of economic growth and increases inflation expectations over shorter horizons. Decreasing economic growth prospects, in turn, lower companies’ earnings expectations, resulting in a dampening effect on stock prices.

Detailed explanation-4: -The factors that affect the demand and supply of oil include levels of oil consumption, oil reserves, global exchange rates, environmental issues, politics, and oil speculation on the financial markets.