The Price Control of Gasoline in the United States

Subject: Economics
Pages: 2
Words: 348
Reading time:
2 min

Americans are obviously not happy about the ever-increasing price they have to pay for gasoline. Therefore, many are advocating that the solution lays in the government enforcing price controls for the price increase is due to the company’s greed. There are disadvantages and advantages of price control on gasoline.

To some extent, price controls will be a bad idea, for this would lead to shortages and consequently lineups, hurting both consumers and producers. What determines the price of gasoline is the amount supplied and the amount consumers demand at the various prices. At the current price of gasoline, a consumer can buy a certain amount of fuel at a certain amount. If the government imposes price control and lowers the price by say 20 cents per gallon, the consumer will be able to purchase more fuel than before using the same amount of money. This will lead to consumers consuming more fuel than is being produced, hence leading to shortages, consequently leading to lineups. Consumers will start competing with one another, not only by spending money by also the time in line.

Economists refer to this as “deadweight loss”. A loss to some is not again at all. Price controls will also deter new companies from entering the market, setting up refineries, and even stockpiling supplies. On the other hand, there are advantages to price regulations of gasoline prices. This will reduce the burden imposed on the consumers by the high oil prices. The consumers will be cushioned by the government from spending too much on gasoline. Price controls will also reduce the high profits the oil companies continue to make. All in all, from an economist’s point of view, price control will have a negative impact on the economy and not help but hurt the consumer. President Cheney tried to impose price controls in the 1970s and ended up causing shortages. So in my view, I say no to the implementation of price control by the Bush administration.