Consider the following excerpt from a 2011 New York Times article:

"These should be good times for railroad companies. After all, an improving economy means that more goods and commodities need to be delivered to the nation's ports and department stores. But rising fuel prices have taken a toll on their business. With diesel prices near their highest levels since 2008, the impact has started to appear in the first-quarter results of companies like Union Pacific railroad. Some shippers said they expected to raise fuel surcharges.

Crude oil prices started going up early this year as turmoil spread through the oil-producing regions of the Middle East and North Africa. Increased global demand for fuel has added to the pressure on prices.

At the same time, however, some cargo usually moves to trains when diesel prices are high, because trains are more fuel efficient than trucks, industry officials said. 'Fuel costs are an important factor for us; it costs us more money to do what we do,' said John T. Gray, a senior vice president for the Association of American Railroads. 'Fortunately, it costs our competitors typically more money than it costs us.'

The question now is how long fuel prices will stay elevated and how much will be passed on to consumers, given the tenuous nature of the economic recovery.

'Any time there is a change in fuel prices, eventually that will result in higher shipping rates and perhaps higher prices to the consumer,' said Pierce Myers, the executive vice president for the Parcel Shippers Association."

Answer the following three questions, under the assumption that all the industries discussed can (reasonably) be analysed as perfectly competitive:

1. "Crude oil prices started going up early this year as turmoil spread through the oil-producing regions of the Middle East and North Africa. Increased global demand for fuel has added to the pressure on prices."

Explain using the demand and supply framework why crude oil prices have risen. (No graph needed, explain your reasoning in words.)

2. "In addition, some cargo usually moves to trains when diesel prices are high because they are more fuel efficient than trucks, industry officials said.

"Fuel costs are an important factor for us; it costs us more money to do what we do," said John T. Gray, a senior vice president for the Association of American Railroads. "Fortunately, it costs our competitors typically more money than it costs us. If what we saw in 2008 happens now, there will probably be some customers that will seek out rail service that have not in the past."

Explain in terms of supply/demand and substitutes/complements, the reason that high fuel costs may lead to increased demand for rail service, according to the above excerpt.

3. "The question now is how long fuel prices will stay elevated and how much will be passed on to consumers, given the tenuous nature of the economic recovery. "Any time there is a change in fuel prices, eventually that will result in higher shipping rates and perhaps higher prices to the consumer," said Pierce Myers, the executive vice president for the Parcel Shippers Association. "