Price Ceiling is a situation when the price charged is more than or less than the
equilibrium price determined by market forces of demand and supply. It has been
found that higher price ceilings are ineffective. Price ceiling has been found
to be of great importance to the consumers.
CHINA RAISES FUEL PRICE
Recently,
the capital of China Beijing raised its ceilings on the oil prices due to response
to rising prices in international markets. But why? Government imposes a price
ceiling to control the maximum prices that can be charged by suppliers for the
commodity. This is done to make commodities affordable to the general public.
In this case, Beijing balances its efforts to protect consumers from the rising
cost of oil with its desire to tame growth in energy consumption and to make
its booming economy more energy efficient.
OIL BLACK MARKET IN ARAB COUNTRY
However,
prolonged application of a price ceiling can lead to black marketing and unrest
in the supply side.The criminal selling the stolen oil in the border countries
in a higher price will result into massive profit. Moreover, smuggled oil
products are extremely hard to trace. Today, there are a lot of companies are
involved in the smuggling subsidized oil products in Saudi Arabia.
-Aun Jian
Reference List :
http://news.xinhuanet.com/english/china/2013-05/09/c_132370822.htm
http://www.al-monitor.com/pulse/originals/2013/05/syria-oil-kurds-pyd-eu.html
