Petrol pumps running dry in Russia

There is one certain way to create petrol and diesel shortages in any country, town, or village. Limit the maximum price that retailers may charge below the rate as set on the free market, and shortages will occur.  Demand will exceed supply, and voila!, supply shortages result.  You’d think that this should be in the “Central Planning for Dummies” handbook.  A grade 1 child can understand this, it is so basic. Yet here we have a president who doesn’t understand it.  I would caution letting this guy lead you across a traffic intersection without his security fleet nearby.

Putin first set a maximum price on fuel prices. Predictably, this resulted in supply shortages.  Then, he ordered that exports be halted, as sellers wanted to receive the best available market price in return for their product elsewhere.  Now, we wait for a decree forcing oil producers, distributors and retailers to stop the hoarding of fuel, and to sell it to market (absent subsidies from the state, which means the people in any case, of course).  Next, we will see the market disintegrate as losses are suffered and businesses liquidate.

Note how the economic idiot blames evil “colluders” as the cause for supply shortages and price increases.  Yet, as was just demonstrated, it is none other than Putin’s government itself that caused the disruptions.

Now here is another point worth pondering.  Even if there was collusion among producers to restrict supply and charge the highest possible price, if consumers are still willing to pay this higher price, are they not still finding value in the exchange?  No-one is forcing consumers to buy their product.  If consumers really had an issue with this practice, they should stop buying the product and break the colluding oligopoly apart.  That is how the free market would deal with such a problem, if it is deemed a problem in the first place.

Putin accuses oil groups of price-fixing

By Courtney Weaver in Moscow

Published: May 5 2011 20:21 | Last updated: May 5 2011 20:21

According to Rosstat, the state statistics agency, diesel prices rose 1.5 per cent in Russia during the week of April 26 to May 3, while gasoline prices rose 2.8 per cent.

Vladimir Putin has lashed out at Russia’s oil groups and accused them of price-fixing amid fuel shortages across the oil-rich country.

Speaking at a government presidium, the prime minister cut off his deputy Igor Sechin who mentioned the fuel shortage, which had forced drivers in certain regions to queue up for petrol.

Mr Putin ordered Mr Sechin and the anti-monopoly service to look into the possibility of price-fixing among oil majors.

“There is no deficit. This is not an issue of a deficit. The issue is collusion,” the prime minister said. “[The oil groups] have agreed among themselves to put just a small quantity on the market.”

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