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Government Intervention In Gas Prices: Good Or Bad? (Report)

1712 words - 7 pages

Executive SummaryAs is now common knowledge, gasoline costs in recent months have surged beyond anyone's expectations. With this sudden and unfortunate turn of events, many have called for the reintroduction of government controls in the petroleum industry (be it in the forms of taxation, regulations or price controls). There stand a few valid arguments to each side; those in favour stating that fuel prices will drop, demand will increase and the economy will be stabilized; everybody wins. The opposing side argues that government intervention in this sector of the market has never been successful in the past, and that any form of tampering with the laws of supply and demand will result in sheer market chaos, far from the intended result. Both sides will be examined in greater depth throughout the body of this report, wrapped up with a conclusion of the best course of action, based on extensive research including market analysis' and historical relevance.Main PositionGovernment intervention is unnecessary, and in the long term does more harm than good to the market.Historical Disasters as Result of Government InvolvementThe majority of intellectuals today prefer to learn from the mistakes of the past as opposed to making their own mistakes and learning from them. Sometimes one should wonder why the government couldn't live by that notion as well. The NEP (Atlantic Institute for Market Studies, http://www.aims.ca/regulatoryreform.asp), a brainchild of the last Trudeau government, worked diligently towards a more "made-in-Canada" price for petroleum products, a closed (strictly domesticated) energy market, and massive government control within and throughout the industry. The result was nothing short of disaster. Almost instantly, Canada became one of the riskiest markets in the industry, plagued by enormous volatility as result of the federal government almost forcing producers to comply with prices far below normal market levels. Consequently, investment into Canada disappeared, taking numerous Canadian jobs with them. By the time the Mulroney government came into power, energy sectors all over the continent were in the process of deregulation, and as a result there was a gigantic boom in the market. Supply swelled, prices dropped, exploration spread, and the continental pipeline infrastructure was completed. This meant that gas found anywhere in North America could be transported with ease and sold anywhere on the continent, allowing everybody in every sector of the industry to benefit from huge supplies, advancing technology and steadily growing investment (http://collections.ic.gc.ca/abpolitics/events/issues_nep.html). After this entire ordeal, anyone would assume the government should, in the future, stay as far as possible from the running of the oil industry. Returning to the old system of a regulated industry would simply render all the progress we've made in the last 20 years totally obsolete.Intervention: Only a Short-term Solution, Think...

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