3 Reasons Elizabeth Warren’s Price Gouging War Doesn’t Make Sense

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It seems some of our elected representatives can’t help themselves.

Earlier this month Senator Elizabeth Warren decided Start the war against raising the price, The shock comes as gasoline prices continue to push up in the household budget.

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The summary of Warren’s bill states the following:

  • It would “prohibit the practice of pricing during all unusual market disruptions — including the current pandemic — requiring the Federal Trade Commission (FTC) and the state attorney general to enforce a federal sanction against unintentional excessive price increases.” To enforce restrictions, regardless of the seller’s position in a supply chain.”

In other words, companies should not take advantage of breaks in the supply chain to make quick money.

Although it may sound good, it is fraught with problems. In fact, all the effort is futile, backwards and self-defeating, at least from the point of view of economics.

Why here?

First, the easiest way for companies to avoid charges of price increases would probably be to inflate any price increases. For example, if the operator of a petrol station is concerned about the state attorney general coming, that person will stop selling gas and diesel. Problem solved for the person handling the gas station, but not for motorists, who would now need to find another source for their fuel. It is likely that such a move by the producers will lead to further rise in prices if the supply falls.

Second, but of less importance it is unclear what counts as pricing. If the price of oil has gone up, and has been, of course we can expect the price of gasoline to be similar. The two have an inseparable relationship.

Brent crude oil recently peaked at $119 a barrel, down from $70 in early December. No wonder a similar move was seen in gasoline futures. they were recently trading on About $4 per gallon (excluding taxes) Less than $2 in early December,

Third, it seems that not all industries will be treated equally. Whereas oil producers and refiners are an easy target. Similarly, the shortage of baby formula is rapidly turning the manufacturers of that food into a pariah.

However, other sectors seem to be shying away from increasing prices at absurd rates year after year. And they do so without comment from our politicians.

The poster child for this is the insurance companies benefiting from mandatory enrollment in ObamaCare for all residents. The Affordable Care Act (aka Obamacare) increased the cost of health insurance coverage Another 21% for 2022 versus a year ago, Such annual growth seems to have been taking place since the introduction of the Act, more than a decade ago.

If oil producers who do not control the global price of oil are the target, why shouldn’t health insurance companies be targeted as well? I think this is where politicians have to explain something.

Credit: www.forbes.com /

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