Real World TYPES OF Price Ceiling Economics Essay

The President of the Philippines, Arroyo placed the entire land under a state of calamity on 2 October 2009 which really is a week after tropical surprise "Ondoy", and per day before ultra typhoon "Pepeng" started out. The onslaught of typhoons Ondoy and Pepeng smashed up many elements of Philippines, brought on over P30billion in damage and claimed almost a thousand lives, mostly Metro Manila and north Luzon provinces. Despite devastation of typhoons, several oil companies raised petrol prices which prompted open public protests and criticisms and set off more than the common grumbling from consumers. With millions of Filipinos still experiencing the effects of those typhoons, the firms were criticized as greedy, heartless and predatory. Royal Dutch Shell, Petron and Chevron (known here under the brand Caltex) increased the costs of diesel by 2pesos per-liter, or 4 cents, a rise around 6. 7 percent. Gasoline prices went up 1. 25 pesos a liter, or 4. 74 pesos a gallon, and kerosene by 1. 50 pesos. Based on the Ibon Foundation, an unbiased economical research group, the raises were the biggest of the year. The companies demand the increases echo world essential oil prices. After Ondoy and typhoon "Pepeng" have left the country for some time, the entrance of new typhoon "Ramil" make the imposition of price ceiling more necessary.

To protect open public interest, the government enforced a gasoline price ceiling to avoid predatory rates, unreasonable pricing and also to lessen the adversities triggered by those calamities by temporarily imposing price roof on essential oil. The president, through the EO, bought the joint Office of Justice (DOE) activity force to institute problems against the violators of the EO as well as the provisions of RA 8479. Chief executive Arroyo revoked Executive Order 839 on the Philippines' main island of Luzon, which kept the level of the price of petroleum products prevailing on 15 October 2009. The announcement was made after she fulfilled with Cabinet secretaries and staff from the essential oil firms and move sectors.

Before the EO was released, the President bought a report of how to add petroleum products under price control, considering that fuel is an important product utilized by virtually all consumers. Before revoking the edict, Arroyo desired petroleum companies' assurance that they might continue steadily to provide fuel special discounts to transport organizations for another half a year to keep fares down. Arroyo also suggested that sellers of liquefied petroleum gas (LPG) can stagger their price on the Xmas season so consumers won't too harshly have an effect on by increasing price. The Palace further pointed out it was predicated on the EO is Section 14 (e) of Republic Action 8479 or the Engine oil Industry Deregulation Laws, which states that: "In times of countrywide emergency, when the general public interest so requires, the DOE may, during the disaster and under fair terms prescribed because of it, temporarily dominate or point the procedure of any person or entity involved in the industry. "The EO took effect immediately upon its publication in a newspapers the very next day.


Many consumers and few companies praised the president's decision because the imposition may help an incredible number of Filipinos get over those calamities in addition the changes in price when price ceiling was imposed was an insensitive proceed to the oil companies.

Economists said the unprecedented interference could scare shareholders away from the country. The Joint Foreign Chambers, a collection of chambers of business whose users include major engine oil businesses, argued in their notice a price cap in the northern Philippines would lead to lower gasoline imports, shortages and a dark market. The order has prompted olive oil companies to warn of an shortage since they may be required to sell their products at a loss if global fuel costs rise. For the reason that the olive oil prices are linked with world market segments and the firms would think about importing more petrol. Petron Corp. , the Philippines' most significant oil company predicted that it could lose up to P1. 5 billion pesos, or $32 million, in its fourth 1 / 4 going back 90 days of the entire year since the executive order may pressure it to sell baffled. Some people compelled the government to raise the price freezes countrywide especially because the price of olive oil in the Visayas and Mindanao, which will be the two other main island, are 5 to 7 pesos more costly than price in Luzon.

The companies have insisted that their prices are dependant on the entire world market and did not prosecute for predatory costing. However, due to increasing of price all at once and the companies refused to open their literature, suspicion has grown among the general public. To comply with EO 839, olive oil businesses reverted to prices before 19 October 2009. Most olive oil firms elevated prices by P2. 00 per liter for diesel, P0. 85 per liter for regular, P1. 50 per liter for kerosene and P1. 25-1. 50 per liter for fuel.


MAP said that with the imposition of the order, the federal government is breaking its promises to provide olive oil investors stability and protection under regulations and the federal government should subsidize the products.

On 2 November 2009, overseas and local businessmen demanded the termination of Leader Arroyo's Professional Order 839, to reduce the adverse affect of loses on the petroleum, threat of future stock products, and hindrance to future and appearance of dark market.

In a declaration, the Joint Foreign Chambers (JFC) said olive oil supply in Luzon, which makes up about 80 percent of the country's petroleum market, will be reduced because importers will not sell baffled.

EO 389 won't really help the most needy of typhoon victims. It is because the poorest income groupings are not consumers of petroleum products. This happens because the government is not clear what products they usually purchased and then imposed price ceiling on oil that provide low reconstruction and rehabilitation.

Reports on gasoline supply shortage coupled with spiking fuel prices brought fears to Cebuano people that these might create a poor impact towards the prices of other goods.

However, the purchase price monitoring report of the Team of Trade and Industry proved that prices of goods in the market have not put up alarming changes due to fuel supply scarcity.

Oil organizations warned that much more serious fuel supply scarcity in under two weeks from 11 November 2009 if the freeze on petroleum prices continues. 13 days from then on day they would run out of done product stock. The big oil firms didn't face any real financial difficulties or personal bankruptcy as they have over a decade of overpricing and gathered super profits.

How to settle the problem

Government responded that the DOE and the essential oil companies must open up their books and show the general public that all the negative things attributed to them are just misperceptions because even though the price of crude has gone up to $80, the increase should not be afflicted immediately at least not until after 45 days.

On 4 November 2009, Deputy presidential spokesperson Lorelei Fajardo said the purchase price freeze would stay in effect throughout the status of calamity in Luzon based on the advice of Justice Secretary Agnes Devanadera. This is emphasized by deputy presidential spokesman Lorelei Fajardo on 2 November 2009 following the Joint Foreign Chambers (JFC) asked the termination day of Professional Order 839. However price caps can only just be imposed for a maximum 60 days, the imposition will be raised ultimately.

The government exposed to selective implementation of the engine oil price freeze after weeks of protests and warnings of an fuel supply turmoil. Petron has agreed to open its catalogs and the federal government hoped that the rest of the industry, especially the Big 3, would also be this transparent.

Meanwhile, Malaca±ang said that the power Regulatory Commission rate (ERC) and the Dept. of Energy (DOE) will study proposals about price freezing as the ERC and DOE are in the best position to look for the merits of the proposal because they are alert to the factors involved in the incident.

President Arroyo released her decision on13 November 2009 by the end of an emergency appointment at Malaca±ang with representatives of engine oil companies as well as officials of labor and transfer and ordered the lifting of the price freeze on petroleum products and basic goods in Luzon, which was still officially under circumstances of calamity, effective on 15 November 2009. This decision was made after making essential oil firms and professionals guarantee to recoup their losses on the staggered basis, stabilize prices and supply of products, devote more assets for the poor to spur economic activity and create jobs and provide some form of subsidy or discount in decided on areas, especially those damaged by the calamities.

The important thing is to stay the same in the next six months, let's assume that world markets remain secure. If international pump prices become very high, then the federal government can review this coverage.

Most of the organizations committed to contain the price for at least half a year.

It was arranged during the assembly that information on the price modifications and subsidies would be finalized over the weekend.

The DOE (Department of Energy) and the essential oil firms are given the weekend to go back to the pulling plank and make their calculation or formula (on the purchase price increase).

Mrs. Arroyo also instructed Favila and Energy Secretary Angelo Reyes to help transfer groups set up a consortium that could allow them to directly transfer fuel.

Favila said the National Development Corp. and the Philippine International Trading Corp. , both federal government corporations, can help put up capital for the enterprise.

The oil companies welcomed the move and also have agreed never to increase their prices on the one-time basis. Preceding estimates confirmed that consumers may need to bear P4. 50 to P5 per liter increase in pump prices after the EO is lifted.

As to how much the first increase in price on 15 November 2009 depended on competitive pushes. According to Martinez, the P1-billion account which was earlier set aside by the federal government to aid the transportation group in conversion to LPG may also be tapped to help cushion the impact of the expected surge in petrol prices within the next couple of weeks.

Martinez advised that assistance or subsidy could come by means of discounts for legitimate carry groups. The petrol organizations as well as manufacturers and investors decided to his proposal to reduce prices in areas that continue to suffer from the effects of the storms.

On 16 November 2009, President Gloria Macapagal Arroyo said that the government will not be reluctant to re-impose the freeze on fuel prices in Luzon if petrol companies will renege on the offer to stagger boosts in the costs of these products. The engine oil companies, manufacturers and stock traders are completely aware that the federal government can again impose price controls.

Drugs price control in Canada

Government in Canada have imposed price settings on prescription drugs for many years for its people. Through this motive, the affordable of Canadian residents in purchasing the necessary drugs they need can be ensured. To attain the efficiency in drug prices control, several mechanisms have been instituted to regulate drug prices. These includes the establishment of a semi judicial by the government to control drug prices and several measurements to regulate the drug prices at the provincial level, for instance, formulary management, use of generics, reference-based costs, price control of patented medicine, price freezes, reimbursement rates, cost showing arrangements and limitations on markups. These way of measuring have make performance price control to a large range.

Patented Medicines Prices Review Panel (PMPRM), a national quasi- judicial firm set up under the Patent Take action in 1987 to regulate medicine prices. This company take responsibility to regulate price of branded medications only. The PMPRM was intended to avoid preventing the prices of patented medication reach excessive which might result from makes' new right to market exclusivity. Hence, certain suggestions are being used by PMPRB in determining the excessiveness of a medicine price :

The cost of remedy of new trademarked drugs must make sure not exceed the best cost of therapy and in the range of existing drugs used to take care of the same disease.

Manufactures can charge the discovery drugs and those that offer a considerable improvement to the median of prices charges of the same drug in other given countries that happen to be United State, UK, Switzerland, Sweden, Italy, France and Germany to ensuring that Canadian prices aren't highest on earth.

The increases of prices of existing copyrighted drug cannot go beyond the buyer Price Index.

The PMPRB profits control over the rates of the medicine once the drug accepts a patent of any sort and also review the drug's price when it was primarily marketed. An organization that consider out of conformity with the rules by the PMPRB must decrease the price. Moreover, any excess earnings that have earned by that company from sales of the drugs will be relinquished and can order the repayment of the surplus revenue of the business to the federal government.


Federal price settings on trademarked drugs is to avoid brand-name companies from minimizing prices on these products once a patent expires. The highest price of the exisying drugs in the same therapeutic class is take as a guide by Canada's Price-Control Policy. This is done to determine the utmost allowable for new patent-protected medication formulations entering the market. Because of this, due to fearness of creators of brand-name drugs of unintentionally minimizing the utmost allowable entry price for new drugs in the same category, the designers of brand-name drugs will reluctantly reduce the price of the original medication when it will go off-patent. An manufactured incentive is created by Canadian price controls to resist fighting for brand-name companies based on price with generic businesses for sales of off-patent drugs.

Consequences of Medication Prices Control

Although administration of Canada have imposed drug price control system to guarantee the prices of drugs are under control, however, cannot deny that, the medicine price control system also cause consequences.

Price- handled system of Canadian bureaucracy indirectly lead to diminish in producing fewer new drugs Canadians are often forced to hold back to yearly for more advanced medicines. As a result, Canadians are consistently denied usage of newer and better drugs, and often happen to be America to buy them.

Moreover, price discrimination is one of the consequences of drug price control. Medicine companies and industry often participating in price discrimination by charging the various buyers for different prices of the same product. Medicine companies are like to sell the drugs for less in Canada and in other places only. This phenomena is happen because of the medicine companies can sell to get more in the United States.

In addition, the expensive development of drugs and reasonably cheap to manufacture will indirectly lead to price discrimination works in the medication industry. Price discrimination causes medicine companies in Canada to impose high prices of the same product of drugs in USA. Hence, companies can recoup their research & development costs. Besides that, companies can make money in Canada and anywhere else simply by covering the expense of making the tablet so long as the research & development cost of companies can recoup.

Further, price adjustments make investing in research & development less attractive. This is the result of the continuing of growing in costs and risks involved in growing new drugs. With extra hazards and uncertainties, companies never making certain of the selling prices of their future drugs and even end up needing to reimburse sizable sums. For example, Schering Canada Inc. needed to reimburse $7. 8 million in 2003 since it charged a price judged as excessive for its infliximab (Remicade) medicine.

Price control causes a direct reduction in volume. For this reason, a declining number of research & development missions are obtaining by Canadian subsidiaries. Because of this, pharmaceutical creativity is indirectly become slower, and lead to a impressive drop in pharmaceutical research & development. A decline of pharmaceutical research in Canada would struck Quebec hardest, which is the home to Canada's largest attentiveness of pharmaceutical research & development, with 42. 3% of total spending in2002. However there other major costs linked to drug price manages, these include losses of very skilled jobs, corporate research centers and careers forgone in the subcontracting of goods and services and in market sectors associated with research & development.

Downward strain on the prices of more mature branded drugs and non-patented drugs since distortions triggered by price handles would cease to exist. Pharmaceutical businesses eliminate incentives to lessen the costs of drugs already on the marketplace is derive from price control. As a consequence, some generic drugs are more expensive in Canada. In order to totally recovery of research & development, launch and marketing costs, companies have a tendency to keep these prices higher. This problem will also lead to a higher selling prices of the products by generic medication producers.

Last but not least, drug price control will lead to lessen rates of substitution of generic editions of drugs by consumers in Canada for their brand name originals drugs. The likelihood of price competition between off-patent, brand-name drugs and generics altogether is eliminated by the general public insurance policies forcing substitution of generics. Common companies no more have to be competitive on price against consumer loyalties toward brand-name drugs when forcing universal substitution for brand-name drugs is done by government. As a result, consumer need to acquire the medication at higher price due to the absence of different products.

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