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Price Controls Will Cause Shortages, Experts Believe

26 June, 00:00

By Vladyslav MYKHALIOV, Center for Journalistic Research The government has imposed official price controls on foodstuffs and oil products. According to experts polled by the Center for Journalistic Research, the executive branch's desire to curb inflation and stabilize the situation may cause shortages of the products, whose price is controlled and foster the regulated markets' movement into the shadow sector.

As we know, in compliance with the June 18 Cabinet resolution On Measures to Stabilize the Market for Basic Foodstuffs, state administrations are ordered to impose state regulation of prices for bread items, wheat and rye flour, sugar, cereals, and vegetable oil.

Simultaneously, by a special injunction of the Ministry of the Economy, oblast state administrations are to fix prices for oil products at the current level until harvest time.

In the opinion of the Kyiv-based Moskovsky Mist Company, wholesale and retail dealers in petroleum products, strong-arm methods will not bring fuel to market. "Only the suppliers themselves can ameliorate market shortages, while the actions of those in power (price control, increased oversight of filling stations by law enforcement bodies, etc.) are hardly conducive to this and only destabilize normal work," believe Moskovsky Mist experts.

According to them, oil product prices will continue to rise in the immediate future in any case (with or without state intervention in price formation). Yet, price rises will be steeper under state regulation. For instance, Moskovsky Mist traders forecast that this week retail per liter prices of diesel fuel will be UAH 1-1.45, A-76 gasoline UAH 1.15-1.50, A-92 gasoline UAH 1.40-1.90, and A-95 UAH 2. Had state regulation not been imposed, the price level would now be lower: 0.90-1.25 for diesel, 0.95-1.30 for A-76 gasoline, 1.20-1.70 for A-92, and 1.35-1.85 for A-95.

Moskovsky Mist experts noted that, once imposed, state regulation will bring about two components, shadow and legal, in the structure of small-lot wholesale and retail prices of oil products. "Motorists will have to pay the officially posted price, which does not exceed the one fixed by the state, plus a certain amount in cash to be negotiated orally in advance," traders think.

Nor will state price controls prevent food from rising in price. Wholesalers will also calculate such a double price. Doubtless is also the inventiveness of retail dealers, recently demonstrated so well in Kyiv during the panic demand for and shortage of sugar. Store clerks did not show they had any (that is, they did not put it in the windows), but when asked by a buyer, they offered him/her sugar at a price twice the maximum set by the city state administration.

Newspaper output №:

№24, (1999)

Section

Economy