Nassau: Abolish price controls
Those of us in the market for house paint will no doubt be gratified by the Trade & Industry's Minister's remarks in Parliament recently.
With his determination to prevent fuel suppliers from raising prices, we are certain he will hold the line on other consumables – such as the house paint manufactured by a company called Sunburst.
The Wall Street Journal notes that while high oil prices represent a potential windfall for major oil companies, they also make doing business more expensive and eventually undermine oil demand. And the Economist Magazine adds "the sluggish state of the world economy points to softer prices once the spectre of war is gone."
Oil prices behave much like any other commodity, with wide price swings in times of shortage or oversupply. The loss of oil from Venezuela and the prospective loss of Middle Eastern oil if war breaks out have caused prices to climb 50 per cent since December. But in the past half-century they have only exceeded $22 per barrel in response to war or conflict in the Middle East.
The United States imposed temporary price controls on domestically produced oil in an attempt to reduce the impact of the 1973-74 Arab oil embargo. The obvious result was that American consumers of crude oil paid 48 per cent more for imports than for domestic production.
But according to the Energy Economics Newsletter, if controls had not been tried, "The higher prices faced by consumers would have resulted in lower rates of consumption: automobiles would have had higher mileage sooner, homes and commercial buildings would have been better insulated and improvements in industrial energy efficiency would have been greater."
So the Trade & Industry Minister is just doing the usual politicking, trying to fool some of the people all of the time. Is he really going to restrict pump prices because, as he suggested, increases over the past 20-odd years should be enough for Esso, Shell and Texaco, and their hundreds of Bahamian employees and dealers?
We also wonder if he asked the owners of the individual gas stations and workers how much money or profit they see in a week or in a year?
We doubt it, but we nevertheless urge the abolition of all price controls. They are economically unrealistic, unworkable and undesirable. And perhaps if fuel prices were allowed to follow the market, we would have less traffic congestion on our roads!
Posted on Fri, Mar. 07, 2003