...Indirect tax is a tax placed on producers by the government for goods such as diesel and petrol. Petrol and diesel are classed as de-merit goods as the products have more overall costs than the consumers realise. This results in an indirect tax being placed on the products in order to discourage consumption, thus correcting the market failure. However, government intervention sometimes leads to a more inefficient allocation of resources than the free market, hence government failure . Indirect tax will internalise the external costs of petrol and diesel. The government will place a tax on the producers, thus increasing their production costs. The size of this tax should be equal to the size of the external costs associated with the product, thus enforcing the ‘polluter pays principle.’ If this were to occur, the diagram below shows what would happen in the market. As there is an increase in production costs, there is a leftward shift in supply from S to S1. This causes an increase in price of the petrol and diesel from P to P1, as the business pass on a "consumer burden" to consumers in an attempt to cover their costs by. The consequence of this is a contraction in demand from Q to Q1, as the high prices discourages some consumers. It could be argued that the indirect tax on petrol and diesel in the UK should be reduced, for various reasons. Firstly, the current tax placed on producers by the government is very high meaning producers pass on large...
Words: 1021 - Pages: 5
...Application: Enlightment to the Impact of Fuel Subsidy Removal in Nigeria Abang I. S.*, Elufisan T.O., Okwubunne A. C. National Centre for Technology Management, an Agency of the Federal Ministry of Science & Technology, Obafemi Awolowo University, Ile-Ife, Nigeria Abstract This paper adopts a linear function approach to analyse the effect of fuel subsidy removal on the value of Nigerian Naira and local production in the country. Data for about eight different periods where fuel hike occurred in Nigeria was used, and a mathematical model with the aid of a graph, was also developed to aid estimated calculation of Naira’s value. We also deduced from this study that increase in fuel pump price has an adverse effect on the standard of living of the people, since fuel is essential for the transportation of major Nigerian commodities, such as Agricultural produce and other market product. The significant impact of the upsurge of petroleum pump price on the price of goods transport initiates this study; with the aim of checking its effect on the purchase value of naira. Though this study is totally neutral about the subsidy removal, its just to enlighten us on the topic and let viewers decide. Keywords GDP, Subsidy, Data, Scarcity calls for a quick intervention. In a bid to averting the continual occurrence of this problem, Nigeria government have decided to intervene by deregulating the petroleum sector in the form of subsidy removal. The aim of the government for doing this is to minimize, if...
Words: 2674 - Pages: 11
...FUEL SUBSIDY REMOVAL AND THE NIGERIAN ECONOMY (A CASE STUDY OF ABAKILIKI LOCAL GOVERNMENT AREA, EBONYI STATE) BY NKWAGU OLUCHI WINIFRED PA/2008/182 DEPARTMENT OF PUBLIC ADMINISTRATION FACULTY OF MANAGEMENT AND SOCIAL SCIENCES CARITAS UNIVERSITY, AMORJI-NIKE, ENUGU. ENUGU STATE AUGUST 2012 1 TITLE PAGE FUEL SUBSIDY REMOVAL AND THE NIGERIAN ECONOMY (A CASE STUDY OF ABAKALIKI LOCAL GOVERNMENT AREA, EBONYI STATE) BY NKWAGU OLUCHI WINIFRED PA/2008/182 A RESEARCH PROJECT PRESENTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF BACHELOR OF SCIENCE (B.SC.) DEGREE IN PUBLIC ADMINISTRATION DEPARTMENT OF PUBLIC ADMINISTRATION, FACULTY OF MANAGEMENT AND SOCIAL SCIENCES, CARITAS UNIVERSITY, AMORJI-NIKE, ENUGU, ENUGU STATE. AUGUST 2012 2 CERTIFICATION This is to certify that Nkwagu Oluchi Winifired with Registratoin Number PA/2008/182 has successfully carried out a research work on “Fuel Subsidy Removal and the Nigerian Economy (A case Study of Abakaliki Local government Area, Ebonyi State.) in partial fulfillment of the requirement for the award of Bachelor of science (B.Sc.) degree in Public Administration ---------------------------------Mr. M. O. Ugada (Project Supervisor) -------------------------Date --------------------------------Mr. M. O. Ugada (HOD Public Adminstration) ---------------------------Date -------------------------------External Examiner ---------------------------Date ...
Words: 26167 - Pages: 105
...Indonesia’s Fuel Subsidies: Action plan for reform David Braithwaite Alexander Chandra Prasetyaning Diah R. L. Ami Indriyanto Kerryn Lang Lucky Lontoh Nataliawati Siahaan Damon Vis-Dunbar Bobby A. Wattimena Unggung Widhiantoro Peter Wooders NE SI A N I N S TI TU T E F OR E N E RG IN DO I I EE FO U N D AT I O N C O NOM I YE CS March 2012 www.iisd.org/gsi © 2012 The International Institute for Sustainable Development © 2012 The International Institute for Sustainable Development Published by the International Institute for Sustainable Development. About IISD The International Institute for Sustainable Development (IISD) contributes to sustainable development by advancing policy recommendations on international trade and investment, economic policy, climate change and energy, and management of natural and social capital, as well as the enabling role of communication technologies in these areas. We report on international negotiations and disseminate knowledge gained through collaborative projects, resulting in more rigorous research, capacity building in developing countries, better networks spanning the North and the South, and better global connections among researchers, practitioners, citizens and policy-makers. IISD’s vision is better living for all—sustainably; its mission is to champion innovation, enabling societies to live sustainably. IISD is registered as a charitable organization in Canada and has 501(c)(3) status in the United...
Words: 22015 - Pages: 89
...purchase, $.50 fuel tax credit per gallon, differentiate ourselves from our competitors as a clean technology company, less risk to fluctuating fuel prices, environmentally friendly. CNG Cons: Higher initial cost, not as many fuel stations so we have to sign a contract for fuel site maintenance, longer to fuel the vehicle, higher maintenance costs. Electric Pros: $8,000 tax credit per vehicle for the purchase, regulated electricity prices, less risk to fluctuating fuel prices, no added time to fuel the vehicle, lower maintenance costs, differentiate ourselves from our competitors as a clean technology company, environmentally friendly. Electric Cons: Higher initial costs, have to build special fuel stations. Redesigned Pros: Vehicles would weigh less, 70% increase in MPG, 50% less time to fuel, 50% lower maintenance costs. Redesigned Cons: Still have risk to fluctuating fuel prices because it runs on gasoline, holds 33% less packages so we have to drive more miles, 2 more hours of labor per day. Diesel Pros: Better MPG than gasoline, takes less time to fuel than regular gasoline vehicles, maintenance is cheaper than regular gasoline vehicles. Diesel Cons: Less environmentally friendly, more expensive than regular gasoline vehicles, highest price per gallon, risk of fluctuating fuel prices. Gasoline Pros: Comfortable with the capabilities, lowest purchase price. Gasoline Cons: Risk of fluctuating fuel prices, higher maintenance cost, takes longer to fuel than electric...
Words: 1595 - Pages: 7
...Closing case Chapter 6 Why did global food prices rise? Summary: In the last 25 years global food prices have been going downwards. This is thanks to the increasing productivity and output of the farm sector worldwide. However in 2007 prices went up dramatically. We can say that one of the main reasons was the increased demand in food. One of the main drivers has been the consumption of food in rapidly developing nations China and India. Rising consumption in meat leads to more demand in corn to feed animals. However farmers have been producing corn and soy beans for other reasons, mainly to create bio-fuels out of them. And to make matters even worse, governments are seeing bio-fuel as a solution for the increasing global warming situation. They are making a solution for global warming and creating another problem food is getting more expensive. The reason behind this is because farmers get subsidies from the government thus leaving the production of their crops as food behind. This makes it more expensive for other farmers to feed animals that will later lead to food in the market. These are 2 big problems that are happening right now because we want to protect the environment but we all know that we do not want to go hungry doing it. What is unfortunate in this situation is that high tariffs are shutting out producers of alternative products that can be turned into bio-fuels, most notable sugar cane, from the U.S. and EU. One of the most notably sugar cane producers...
Words: 1168 - Pages: 5
...contains the necessary critical distance. Note: These essays are for revision purposes giving suggestions for how to answer questions. Don’t try to pass them off as your own work. AS Micro Essays 1.Evaluate the case for and against governments intervening to try to stabilise the price of copper, for example, through setting up a buffer stock scheme. 2.Evaluate advantages and disadvantages of various methods of government intervention to correct market failure arising from aircraft emissions. 3. Discuss the likely effects on the retail market for coffee if there is a large increase in city centre rents. 4.In the UK, students face increasing tuition fees. Discuss the benefits and costs to society of abolishing all tuition fees. 5.Discuss three policies to reduce the level of cigarette smoking amongst under 21s. 6.Discuss the extent to which governments should subsidise companies who are developing cars which run on clean fuels such as hydrogen? 7.Discuss whether the government is mistaken to worry about monopoly power? 8.Discuss the advantages and disadvantages of the government intervening in agricultural markets? 9.Discuss the effects on UK business of a rise in fuel prices. 10. Discuss whether the government should end free health care for people and make them take out private health care insurance like in the US? 11. Discuss the role that pollution permits could play in reducing global warming 12. Discuss the case for implementing a congestion charge...
Words: 8844 - Pages: 36
...Introduction to the fuel market Fuel is the most important commodity in our daily lives and it is one of the main inputs in the economic sectors such as transport, construction and so on. If war occurs in Country A, which is the largest oil producing country in the world, the fuel supply will be disrupted and the economic problems will exist in countries around the world. Let us have a look into a real example of this with the history in world oil market: In 1979 and 1980, events in Iran and Iraq led to round of crude oil price increases (Williams, 2009). It resulted in the loss of 2 to 2.5 million barrels per day of oil production between November 1978 and June 1979 in Iran. At one point, production almost stopped the progress. The Iranian uprising was the immediate cause of what would become the highest price in World War Two. However, its impact on prices would have been limited and of relatively short duration had it not been for subsequent events. Shortly after the revolution, production was up to 4 million barrels per day. In September 1980, Iran already weakened by the revolution invaded by Iraq. By November, the combined production of both countries was only a million barrels per day and 6.5 million barrels per day less than a year before. Consequently worldwide crude oil production was 10 percent lower than in 1979. The combination of the Iranian revolution and the Iraq-Iran War cause crude oil prices to more than double increasing from $14 in 1978 to $35 per...
Words: 3174 - Pages: 13
...Should the Gasoline Tax be Raised? 1. Some people believe that reducing dependency on foreign oil, help the environment, decrease the government deficit and all those things can happen if the federal government increases the gasoline tax. But the proposal is not supported by everyone. At the mention of a tax increase, the general public revolts. Many people do not like to pay taxes, so any suggestions for a tax increase are strongly opposed. The federal gasoline tax topic is actual in the United States today. With the growing concern about global warming, an increased tax could help by reducing pollution and reduce our dependence on oil and to finance alternatives. An increased tax could also make the United States more energy independent in the long run, but American drivers would be hurt by a higher gasoline tax in the short run. The purpose of this issue paper is to analyze whether the federal gasoline tax should be raised. 2. First at all lets go through some history. The first federal gasoline tax was adopted in 1932 at a level of one cent per gallon. The tax has increased in small amounts over the past 75 years. In 1951, government raised the tax to 2 cents per gallon to raise additional funds for the Korean War. The federal gasoline tax doubled in 1959 to 4 cents per gallon to assist in funding the construction of the new interstate highway system in the United States (Williams, 2005, para. 2). The next increase was in 1981 to 9 cents per gallon...
Words: 982 - Pages: 4
...Rising Gas Prices COM/215 Luis A. Garcia June 20, 2011 Pamela J. McGlynn Rising gas prices This essay will show the effects of rising gas prices and how they will be at an all time high in the up coming years. One will read various viewpoints from United States Government officials, Law officials. One will also show how this raise in gas prices will have an impact on businesses and how the consumer will be affected in the long run. Gas prices are on the raise because of unrest in the middle east and because of this it directly affects the cost we pay at the pump to fuel our vehicles. The first viewpoints come from an article published by ABC news. The article was written by Maggy Patrick and Linsey Davis, They interviewed a former executive from the Shell Oil Company this executive is anticipating that gas prices could reach five to six dollars per gallon by 2012. is the founder and CEO of a nonprofit origination called Citizens for Affordable Energy, John Hofmeister was named president of a Houston-based Shell oil company in 2005 until he retired from the company in 2008, said he predicts the hikes by November 2012 due to the increase for gasoline worldwide. He also stated: (Sloan, 2011). “While demand is rising steadily, the world is struggling to increase production. Demand is approaching 90 million barrels per day, while only 85 million barrels are being produced. Today, gas prices are averaging at...
Words: 1008 - Pages: 5
...Addila Bt Noor Ariff Nur Azlinda Bt A.Azaman Norliza Bt P P Mohamed • 2. AGENDA• INTRODUCTION• MANAGEMENT CONSTRAINT• COMPETITION• UNPROFITABLE ROUTES• INCREASED IN FUEL PRICE• MAINTENANCE COST• RECOMMENDATION • 3. INTRODUCTION• 1994- Privatized 32% controlling stake to Tajuddin Ramli through Naluri Berhad• 1998- Asian Financial Crisis MAS faced substantial losses• 2005- MAS reported loss RM1.3b• 1 Dec 2005- Idris Jala became CEO of MAS• 27 Feb 2006 - BTP 1 was announced • Action taken by management(Government intervention (Constrained freely changing destination, routes and pricing (4. 1. MANAGEMENT CONSTRAINT • 5. Constrained Freely ChangingDestination, Routes And Pricing • MAS suffered high losses due to poor management & fuel price increases. • MAS operations were identified as the causes of the RM1.3 billion loss are: – Escalating fuel prices – Increased maintenance and repair costs – Staff costs – Low yield per available seat kilometre • 6. Government Intervention • Transformation Programme: - Widespread Asset Unbundling (WAU) RM7bil in debt were shifted to Penerbangan Malaysia Berhad (PMB) - Government Linked Corporation (GLC) BTP is also part of the GLC which aims to make all GLCs more successful. • 7. Action Taken By The Management • Increased domestic price • Major cost reductions were made • Improve MAS network • New low cost community airline • Malaysia’s first commuter airline was launched • 8. 2. COMPETITIONLOCAL AND...
Words: 1114 - Pages: 5
...Md. Arafater Rahman Bhuiyan Assistant Professor Department of business studies Bangladesh University of Business & Technology Subject: Letter of Transmittal Dear Sir, With due respect we, the undersigned students of BBA 28 intake, section 07 of a group have Case study on “Why did global food price rise” under the course: International Business. This case study has enabled us to gain how to increase global food price rise. So it becomes as an extremely challenging and interesting experience. Thank you for your supportive consideration for formulating an idea. Without your Inspiring this case study would have been an incomplete one. Lastly, I would be thankful once again if you please give your judicious advice on effort. Yours’ sincerely, On behalf of my group Md. Mahmud Hasan ID No- 11123101283 Department of Business Studies Acknowledgement Every case study big or small whatever, is successful largely due to dedicated people who have always given their valuable advice. I sincerely appreciate the support and guidance of all those people who help us to complete this case study. I am Md. Mahmud Hasan. Extreamly grateful on behalf of my group to my course teacher Md. Arafater Rahman Bhuiyan who gave a case study task to complete with good direction. And also, grateful unknown economic online blogger who wrote articles on his blog & we got some important information. I also grateful to my group...
Words: 2394 - Pages: 10
...Discuss Whether Indirect Taxes on Petrol and Diesel Fuel in the UK should be reduced The main reason that a government imposes a taxes on fossil fuels is to try and correct for the negative externality (pollution) which is produced when they are consumed. Without the tax there would be a market failure as drivers would be over consuming petrol as they are not being charged for the damage to the environment. In order to order to answer this essay as to whether the tax should be reduced, I am going to focus on 3 aspects; those that lose from a reduction, those that gain from a reduction and finally at what level the overall price for petrol was BEFORE the tax reduction. In my conclusion I will show that this is key to deciding whether the tax should be lowered or not. The major argument for maintaining the level of taxation on petrol and diesel is to protect the environment. When the social costs of consuming a good are higher than the private costs, there is said to be a negative externality. As an individual consuming fuel is polluting the environment for all, then it can be seen that fuel produces a negative externality. This is illustrated in diagram 1 below. This shows that without any government intervention, the market equilibrium would consume Qp at price Pp. This is higher than the social equilibrium, Qs, meaning there has been a welfare loss to society of (shade triangle). Government fix this by imposing an indirect tax on producers, which effectively raises their costs...
Words: 1254 - Pages: 6
...paid to a business or economic sector. Most subsidies are made by the government to producers or distributed as subventions in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labor (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production.[1] EFFECTS OF SUBSIDY REMOVAL In a country of power instability the removal of fuel subsidy has triggered double in the price of fuel . 1. increased price of fuel and other petroleum product 2. increase in transport fares 3. increased price of food products. The Lagos Chamber of Commerce and Industry (LCCI) has listed some of the adverse effects of the Federal Government's recent policy to deregulate the nation's downstream oil sector LCCI, in a statement, said the policy has led to fresh inflationary pressures resulting from sharp increases in transportation cost, high inflationary expectations across all sectors of the economy, and a devastating impact on the psyche of the common people as the new policy poses a serious risk to their survival. LCCI said the policy would also lead to the sharp increases in operating costs of micro and small enterprises, many of which rely...
Words: 717 - Pages: 3
...revenue management to get it to show profits. For all airlines, the final quarter of last year was a difficult one, the main reason being rising costs of jet fuel along with the rise in oil prices. To manage that, Malaysia Airlines needed to maximise yields to recover cost increases. Yield is the amount obtained for each revenue passenger km (RPK – totalling up passengers flown multiplied by distance flown). Meantime it needed to keep the load factor up (a measure of capacity usage, RPK as a percentage of available seat km or ASK which is obtained by totalling up available seats multiplied by distance flown). At the same time, it needed to keep a tight hold on costs, which is difficult to do when fuel costs are rising so fast. It is the airlines with tight cost control and who already have a decent yield that bear up better when fuel prices soar. To get a handle on how Malaysia Airlines performed, let’s look at how it did for the quarter ended Dec 31 last year and then at the full year results. At first glance, the net loss for the quarter seems horrendous at RM1.277bil but of that a huge RM1.095bil was due to provisions. Provisions for aircraft delivery accounted for a huge RM602mil, for impairment in value of freight aircraft RM314mil and stock obsolescence RM179mil. These are non-recurring items. Increase in fuel costs accounted for RM305mil, and if not for this and the one-off provisions, Malaysia Airlines would have actually recorded a net profit of about RM123mil,...
Words: 1383 - Pages: 6
