Evidence first. Then build the economics.

Oil price volatility is useful for A-Level Economics because oil affects transport, production and energy costs across the economy. If oil prices rise or remain elevated, firms may face higher costs, creating cost-push inflation and reducing short-run aggregate supply.

Mechanism

Higher or volatile oil prices → higher transport and production costs → firms face rising costs → SRAS may shift left → price level rises and real output falls

Evaluation

The impact depends on whether oil prices remain high, how energy-intensive firms are, and whether businesses absorb costs or pass them on to consumers.