Determining Fuel Prices Consumers worldwide have watched the cost of petroleum (motor fuels) continue to fluctuate throughout the year. This raises the question, 'Why do petrol prices rise and fall?'

In the long term, the greatest single factor influencing petroleum prices is the cost of crude oil. Although the cost of crude oil has the most impact on average petroleum prices in the long term, local market conditions, which include the forces of supply, demand, competition, and government regulation, can also have a significant impact on petroleum prices, and explain some of the variations in petroleum prices across different markets.

Crude oil prices have risen dramatically over the last few years, driven by strong global demand, limited spare oil production capacity, and continuing political instability in certain oil producing regions. The price of crude oil has the most significant long-term impact on the average price of petroleum.

Adapted from www.caltex,coni a) Explain how the equilibrium price of petroleum (motor fuels) is determined. Use a diagram to illustrate your answer. (3 marls) b) Based on the a rtide above, list (3)f actors influencing petroleum prices. (3 marks) c) Explain any two (2) determinants of demand for petroleum. (4 marks)