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Should The Government Increase The Petrol Prices In Developing Countries?

2084 words - 9 pages

Although some might think the government should increase the prices of petrol as a medium to help develop a country economically, there are many negative impacts of doing so. Thus, the purpose of this paper is to point out the consequences of the increase of petrol prices on individuals, society, and the country itself.
First and foremost, petrol prices should not be increased as it can cause inflation. The increase in petrol prices affects the costs of production, such as oil-derived fertiliser and freight costs. Suppliers and vendors take the opportunity to pass along the high cost of productions to consumers in the form of higher food prices. This means that customers would have to pay ...view middle of the document...

The governments’ decision to increase petrol prices can result in the increase of gas price as well. From the announcement made by Tenaga Nasional Berhad (2011) , they increased the electricity tariff during the year 2011 to cover the additional cost in order to tandem with the market price trend when there is an increase of petrol prices. It becomes a burden for all the households as they have to spend more money to sustain their cost of living. This shows that the increase in petrol prices can lead to inflation of food, transportation fees, and electricity bills.
Nevertheless, petrol prices should not be increased as it can cause high unemployment among adults. According to Tverberg (2012), human energy is the most expensive form of energy. When the petrol prices increase, the input costs of a company can increase, and they are less likely to hire at a time (Riddix and Benzinga, 2011). They then cut down the number of employees to reduce the budget spent on employees and a company. Therefore, this causes high rate of unemployment when people lose their jobs. The competitions among people to get a job occur as it is getting more difficult to get a job. Furthermore, as child labourers are cheaper and easy to exploit, they are hired by companies in preference to adults (Stop Children Labour, n.d.). When they cut down the employees and choose to hire child labourers, many adult employees can lose their jobs as their job opportunities are taken by the child labourers. Apart from that, when there is an increase of petrol prices, the demand for services also decreases. According to New Strait Times (2013), the increase in petrol prices narrows the profit margin of bus operators and the bus companies in Malaysia are not able to offer better pay to these drivers. So, the companies are less likely to afford the expenses to hire drivers to operate the buses. They have to lessen the frequency of travels to the buses reduce the consumption of fuel on them. The demand for labourers decreases and the bus drivers can lose their jobs. Therefore, it is obvious that the increase in petrol prices can cause unemployment.
On top of that, petrol prices should not be increased as it can lead to the changing in lifestyle of people. People can initially face the psychological impacts when they have to face the sudden increase in petrol prices. According to the research shown by HIS Global Insight (2012), the confidence of consumers will be lower by 1.4 to 1.5 percent when there is an increase of every 10 percent rise in fuel price. Consumers can always be worrying about the increase of petrol prices in the future as it will cause on many unexpected consequences which will bring on a big burden for them. When this happens, it contributes fear towards people and soon changes their lifestyle. They will then find out some effective ways to overcome the increase of petrol prices. People can change their spending habits and spend more carefully to avoid from unnecessary...

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