Exercise 1: Question 1. The problem of gasoline for everyoneFor any consumer who owns a vehicle and must travel daily, the rise and fall in gasoline prices can be difficult to understand. In order to understand the differences in gas and oil prices, one must evaluate the main reasons for the fluctuation. According to recent research, rapid changes in oil and gas prices can be directly associated with several factors, including supply and demand, market speculation, taxes, and expenses related to refining crude oil into gasoline (Herbert, 2008). These factors affect the price of oil and gas independently, but they are also related. Supply and demand have a direct effect on the price of crude oil and when supply is high, the price of oil generally decreases. When supply is low, the price of oil rises. In terms of demand for example, an increase in the price of oil is seen as a reduction in aggregate demand due to a reduction in spending on goods and services (Olatubi & No, 2003). In terms of supply, this increase will likely produce even broader effects and rising oil prices will cause overall production costs to rise, shifting the aggregate supply curve to the left (Olatubi & No, 2003). According to research, growing economies globally have increased demand for crude oil while supply has remained relatively constant. According to the Associated Press (2013), the average price of regular unleaded gasoline, which is $3.25 per gallon, is the lowest since December 26, 2012. In September 2013, AAA Mid-Atlantic said that the average price of a gallon of regular gas in the Washington metro area was $3.55, up from $3.56 the previous week (AP, 2013). Market speculators play a role because oil is a commodity for them that can be bought and sold depending on price volatility. Speculators attempt to predict world events that could impact supply and demand. They buy oil contracts to protect themselves from sudden increases in the price of oil, and when prices rise, they can then sell their purchased contracts at a lower price to make a large profit (Herbert, 2008). Taxes also affect price variations across the country. The refining of oil into gas and its transportation to market also has a significant impact on the price of gas. Part of the cost of gasoline goes into converting crude oil into fuel, getting it to gas stations, and the retail markup..