In response to recent rise in gas prices, we are once again hearing calls for the government to “do something” to force prices lower. But no matter what the price of gasoline is, such calls are wrong. All market fluctuations in the price of gasoline, up or down, are a good thing and none of the government’s business.
In the realm of business, a higher price means that firms will only purchase oil or gasoline to the extent that they can make profitable use of it at those prices. An efficient airline will still be able to offer low prices while using high-priced jet fuel; a less efficient airline may not be able to. A company in China or India that uses oil to run highly efficient factories can make profitable use of oil at $70 a barrel; their laggard competitors may not be able to.
There is no moral or economic justification for any politician or consumer to declare market prices “too high,” and to use the government to force lower prices. Doing so violates both the rights of gasoline producers and their productive customers to set voluntary prices and thus causes destructive shortages.
The government is right in taking action if an oil company provably threatens or harms a person’s property. But to impose huge costs on oil companies and their customers in the name of preserving untouched nature is unconscionable. What should the government do about gasoline prices? Get its hands out of the market and keep them off.
1)How do high oil prices affect companies?
a) Efficient companies can make profitable use of these prices
b) Inefficient factories are provided subsidies by the government
c) It provides stability for the fluctuating market
d) There is a marginal effect on profits
2) What is the meaning of ‘laggard’?
a) Complicate situations for one’s benefit
b) Move or respond slowly c) Respond fast in crucial circumstances
d) Increase efficiency in short period of time
3) What is the conflict regarding market fluctuation in prices?
a) Oil prices are being lowered forcefully by companies
b) Companies are making no effort to stabilize prices
c) Importance of government intervention is negligible, contrary to popular belief
d) Market is suffering with government’s future plans of control
4) Why should the government not intervene in lowering prices?
a) Market prices are governed by monopolistic competition
b) Rights of producers will be violated with the intervention
c) Massive costs to companies are not advisable during financial crisis
d) Preserving oil for future generations should be in the hands of organizations