Summary
Small independent gasoline retailers are demanding the government to set price limits on the petroleum prices at the pumps. This will help in creating more stability in their market that might reduce the chances of unemployment and bankruptcy. The Association Québécoise des Indépendants du Pétrole think this will protect consumers and retailers from constant price swings. 82% of Quebecers agree with setting price limits on gasoline. This group of Quebecers includes both retailers and consumers. Quebec already has the “below-cost” laws that restrain the retailers from selling below the minimum price. However, they still want to set a minimum and maximum daily price that takes into account the operating costs of the retailers. If that doesn't happen, a price war will occur that will threaten competition. In order to prove that, Quebec has had the lowest gasoline prices before tax for the past three years in Canada according to statistics.
Connections
If government set price controls into the gasoline industry, it will create shortages and surpluses in the market. For example, when they set a daily maximum price on petroleum, they will be lower the original price of petroleum from some retailers that sell it at a price that is too high (too expensive). Therefore, this will prevent them from charging unreasonable prices to consumers. An excerpt from the article states this fact, “…prices that are too high …would penalize consumers…” This will create a shortage because more people will buy more gasoline as compared to before because it is cheaper. The price decreases and the quantity increases. On the other hand, when the government sets a daily minimum price, it will create surpluses. That is because the government will raise the price from some retailers that sell it at a price that is too low to a higher price. This will help the retailers to not lose too much money and go into bankruptcy because it will also include operating costs of the gas station. It creates a surplus because less people will demand it if the price is higher. A negative effect of low prices in this situation is if “...prices that are too low …threaten competition.”
Reflection
I agree that setting price controls might help both the consumers and especially the retailers. The 7.8 million consumers won't have to pay unreasonable prices for their gasoline since it is a necessity if they have gasoline cars. Also, the retailers won't have to lose money by driving down their prices for the purpose of competition. And then, go into bankruptcy in the process of trying to get more customers. This will help keep the economy as a whole doing a lot better because the small gasoline retailers will not have to fire employees and cause the unemployment rates to increase since there are about 3,459 gas stations in Quebec. However, I wonder if those gas stations will be satisfied with the price limits after a long time if those limits are set in place. Or will they create new reasons to get rid of them (like they don’t want government involvement in their affairs)? I truly wonder…
Graph for shortage and surplus due to price controls
