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Should the government regulate the price of gasoline?

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yaga49 | (Level 1) Valedictorian

Posted April 17, 2013 at 1:52 AM via web

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Should the government regulate the price of gasoline?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted April 17, 2013 at 2:01 AM (Answer #1)

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This is, to some degree, a question that cannot be answered objectively.  There is certainly a correct answer in terms of economics, but that answer is not necessarily correct when one takes into account political and social factors.  My own view is that the price should not be regulated.

Economists would definitely say that the government should not regulate the price of gasoline.  This is because government regulations (which would surely be in the form of price ceilings) would actually be counterproductive.  If the government sets a price ceiling, gas companies will be able to make less profit.  They will not want to produce and sell as much gasoline.  Therefore, the quantity supplied of gas will fall and there will be shortages, particularly because the quantity demanded will be rising simultaneously.

It is possible to argue, however, that the government should keep prices down.  Such arguments would be based on the idea that there are more important things than economic efficiency.  For example, they would be based on the idea that the price of gas needs to be kept low so that people who need the gas (particularly those who are not rich) will not have a hard time buying what they need.

Thus, there are arguments for both sides of this debate, but I would tend to argue that government should not intervene.  A price floor will actually hurt those it is supposed to help because it will create shortages.

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