Shifts in both the supply of and the demand for oil can explain the observation of an increase in gasoline prices.

Question

Quizplus · Accepted Answer

An increase in the supply of oil could lower gasoline prices while an increase in the demand for oil could raise gasoline prices. However, a decrease in the supply of oil (such as due to production cuts) or an increase in the demand for oil (such as due to economic growth or geopolitical tensions) can both lead to higher gasoline prices. Therefore, shifts in both supply and demand can explain the observation of higher gasoline prices.

Shifts in Both the Supply of and the Demand for Oil