Comments on: Ah ha - so that explains the long lines at the petrol stations around Shanghai this weekend!

By: Mond

Mond — Sun, 18 Nov 2007 09:00:44 +0000

The government should remove the price ceiling, although it might sound impressive to the uneducated masses of China that the government is regulating and controlling oil prices, it creates inefficiency (dead weight loss). The quantity demanded exceeds the quantity supplied, which is problematic in the long-run and will potential cause more and more problems

By: MichaelChow

MichaelChow — Thu, 15 Nov 2007 10:27:36 +0000

By limiting the amount of diesel fuel each truck gets to 20 liters, shows the power of the command economy in China. The government in China has tried to set a price ceiling on the amount of fuel able to be purchased at each time. I agree with how although prices can be as low as the government wishes as Kevin Yeh mentioned there is nothing done to the supply curve but in trying to keep up with the prices there will be a shortage in supply

By: ed tang

ed tang — Mon, 05 Nov 2007 03:14:41 +0000

The chinese government is helping the consumers only to create problems in the future. The quantity demanded will exceed the quantity supplied which means the market price will never result at equilibrium price.

By: Welker’s Wikinomics Blog - for students and teachers of AP and IB Economics » Quit cutting chemistry class!

Sun, 04 Nov 2007 12:35:17 +0000

[...] Ah ha - so that explains the long lines at the petrol stations around Shanghai this weekend! [...]

By: andreas

andreas — Thu, 01 Nov 2007 15:11:34 +0000

This can be viewed as a price ceiling. The reduction in supply of oil only goes to show how the government/economy is clearly inefficient. The supply will not change even if prices are set lower which is what causes the long lines at petrol stations, the QD is beyond that of the supply. In the long run, in an attempt to try and help consumers of petrol, they will probably actually end up hurting their own economy.

By: Angel Liu

Angel Liu — Wed, 31 Oct 2007 11:23:39 +0000

I think the Chinese government is too protective of its consumers. The problem comes from China’s high inflation. If inflation rate can be controlled, the government will release grip on diesel rationing because right now, the Chinese government is afraid that if they let diesel adjust into equilibrium, it is too much inflation for the country to handle. As a few people mentioned above that a price floor can only temporarily ease the problem, the government would perform rationally if it has less economic problems to deal with.

By: Bryan Bock

Bryan Bock — Mon, 29 Oct 2007 14:19:08 +0000

It is very ironic how the Chinese government tries to help improve the conditions of the consumers but they are actually creating more problems in the future. Although there are certain advantage of having a command economy, but for situation like this, it is where the command economy meet its limitation. Like how Hansen and Jonathan said, the Chinese government should think about an alternative in order to solve this issue. Therefore, they should release at least a fair amount of control on the oil market.

By: Jonathan Lau

Jonathan Lau — Mon, 29 Oct 2007 13:07:48 +0000

I agree with Hansen. If the Chinese government wants to solve this issue with the petroleum market, it must loose its hold on the price of oil. Although the price ceiling is imployed in order to make gas more affordable, quantity demanded is currently exceeding quantity supplied and as a result, large lines of trucks are queued up at gas stations. To solve this problem, the government must gradually remove the price ceiling so that the market price for fuel climbs back toward equilibrium price.

By: Hansen Gu

Hansen Gu — Mon, 29 Oct 2007 09:40:24 +0000

I think the government should relinquish their hold on the oil market a little. As Gao stated, some people are ready to pay a little more if they can get the oil. The Chinese government, in hopes to shield consumers, has reduced supply. This is only a quick fix for consumer happiness. In the long run, supply will not reach equilibrium again because the price ceiling is in order and new firms cannot enter the market.

By: Jessica Ng

Jessica Ng — Mon, 29 Oct 2007 02:09:08 +0000

In a government regulated economy like that of China’s, the economy fails to adjust itself like a competitive economy will. In a competitive market, in the long-run, the economy will return to equilibrium. But since in this case, the market is not a “price-taker” and instead acts as a “price-setter”, this situation leads to disequilibrium of the oil market, leading to crisis such as this, in which the quantity demanded exceeds the quantity supplied.

By: kevinyeh

kevinyeh — Sun, 28 Oct 2007 19:09:44 +0000

This article actually also shows how ineffective command economies are when it comes to resource and price allocation. Although the government can set the price as low as they want, it doesn’t cause a change in the supply curve, and so suddenly there is a shortage of supply, leading to these long lines and diesel rationing.