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
Price controls like that historically haven’t worked very well.
If people can’t sell their products at the prices they want, they might always decide to not sell them at all, produce less of it, try to hoard it, refuse to sell publicly and only on a black market where they can charge what they want, reduce the quality of their product, use it to make something or turn it into something else to sell at whatever price you want or simply export it to sell it elsewhere.
Right now the oil industry is making record profits so even if you limit them to how much they can make they will still make a profit. they can threaten to stop selling gas but they won’t because a little bit of profit is better than none.
You also can’t store gas a whole lot. There is only limited storage and the refined product will go bad if you store it for too long.
You can’t easily and quickly reduce production either. (this is why we had negative oil futures that one time)
So gasoline is actually one of the few products where you could in theory mandate a price cap and have it work.
In practice the people who stand to profit have too much power to allow something like this to happen though.
Latest Answers