George_D:

very good! available alright, but at what price? what use is an 'available' product when nobody can buy it?

erico2k2:

But guys, I think you are only looking at it from one end, look at it from this end, every petrol station will now have fuel for sale,NNPC would not be scraped like NITEL  but will be focused on,they will definately wanna make profits,more people would enter the market,there would be no hoding of fuel,ie divert alocation cos everyone is now lifting at same price, no major or independent marketer,what Im trying to say here in local words is for example, If texaco lifts petrol from NNPC @ N55  and intend to sell it @ N65 he wont need to sell his alocations to Bonex petrol station cos he(Texaco) can sell to the public whatever price he wants,my idea is petrol will end up N90-100,.but the best part of this is that its gonna be available  and when goods are available market forces determine the price.

George_D:

you're saying one thing and exactly the opposite in the same sentence. why placing a price cap on a commodity that is supposed to be 'deregulated'?

George_D:

friend, it's either you're for deregulation or you're not. you can't eat your cake and still have it!

George_D:

you're not saying what he has said. read his post again. he was talking about a 'price cap'. is that deregulation?

George_D:

you're not saying what he has said. read his post again. he was talking about a 'price cap'. is that deregulation?

manny4life:

Here is how things will work, in economics there are factors affecting demand and supply, and their major players are consumers (Quantity -Qty), and producers (Price - Pr) respectively. The govt would only intervene after the free market doesn't work itself out, more so has failed and is stagnant and like you explained, when Texaco purchase a liter at N55, and they bypass all third party and deal with the public, and sell at N90 - N100, what happens is that the Qty demanded would decrease drastically, and a % point decrease in Qty translates to one % point in losses with respect to the cost associated in buying the liter which means more price, in other words they buy at N55 was supposed to sell at N65, but wanted to sell at N90, what happens is that they incur more cost for every liter unsold that includes from storage, administrative, and all other contingencies that would arise.

A liter that was to be sold at N65 is now really worth N90, therefore market is stagnant, NNPC can't sell because Texaco isn't buying because they have lots of inventory, then the Govt would intervene, kinda like a bail out, and impose a price ceiling and say a liter of gas cannot be sold no more than N75 since they buy at N55, this is to build consumer confidence, protect the consumers from harsh pricing, and also to stabilize the market, the price ceiling can be changed often when necessary and depending on the scenerios so that price and qty would intersect at equilibrum after that govt would leave it at that price.

So if Govt set price ceiling at N80, suplliers like Texaco who are in the N60 to N70 sale price would tend to sell more than those who sell from N70 to N80 meaning that there is competition now. However, if the Qty demanded becomes more than Qty supplied, Govt would intervene to protect the suppliers from harsh cost and change the price ceiling higher to may be N85 and reduce consumption or leave it at that price and instead give petrol suppliers incentives on the fuel not bought but actually sold to the public. Incentives could be tax breaks and holidays, grants anything that would drive their cost not minimal but standard.

manny4life:

I said after the free market system has failed, a price ceiling is the govt option used to balance Demand and supply. For instance, a lot of markets in the U.S. are deregulated, however let it not surprise you that one major market; utility companies operate under a price ceiling, meaning that they just can't increase you bill just because they want to, it goes through several process to approve just to add one cent to the price.

naijaking1:

US utilities are not a good example of a deregulated market. In GA and NY, gas companies set and adjust their own prices, and customers have opportunities to switch from one company to another just by notification. I don't see any price ceiling, price cap, or whatever you call it. I do understand the companies being prevented from cheating customers because of bad weather or because of their respective location, but that's not alluding to deregulation, that's obeying the law.
A better example a deregulated industry would be airlines of the 1990s vs airlines of the 1970s before Reagan came to power.