If petrol/diesel prices keep rising, couldn’t governments just cap the cost of petrol/diesel to keep prices lower for consumers?

Question

Question’s in the title……
I’m no economist but I’m sure most of the cost of fuel is Fuel Duty (tax)….. so even though capping the price of fuel would mean governments making less money off fuel-duty, wouldn’t they make this back in VAT on other goods as consumer spending increases? (Because consumers have more money in their pocket?)

In: 2

Answer 1

Price controls usually result in the commodity becoming more scarce. As inflation increased the producers’ costs, they’d see less and less profit. At some point it doesn’t make sense for them to continue running at full production because that’s more loss.