The Ministry of Finance has set the maximum price for gasoline at the level of 43.15 K�/l, for diesel the ceiling is 49.59 K�/l. The maximum price of gasoline is thus 1.54 K�/l above the average price according to CCS. In the case of diesel, it is 1.08 K�/l. In both cases, the maximum price is set relatively significantly above the market price. Thus, compared to the situation without price regulation, only a few gas stations will have to be cheaper, especially many of those that are located near highways. On the other hand, pumps outside the highway should practically not be touched. If such regulation lasts for some time, it cannot be ruled out that some gas stations of the shareholdings will try to compensate the coal profit by increasing margins and prices for additional goods, such as baguette-type foods or, perhaps, metal-type beverages. It is unlikely that the measure will lead to higher prices of fuel outside the highways, as some critics of the government measure claim. Why, for example, should Tank ONO pumps, which show a long-term margin of up to one kroner per liter, suddenly increase in price so that they will have a margin of 2.50 K�/l (the maximum allowed by government measures)? It does not have sufficient support even in economic theory and academic literature. For example, the study published in the Journal of Economic Behavior & Organization under the title «Collusion through price ceilings? In search of a focal-point effect» (see abstract below) does not confirm that the ceiling would act as an anchor for prices. The authors of the study tried to prove that the maximum amount of the administratively determined ceiling (margin, price) represents a reference point to which prices are anchored. So, as the title of their work goes, they tried to prove the existence of a focal point effect, i.e. an administratively given maximum, its determination and enforcement will lead to collusion or to some kind of silent cartel agreements on prices. And this to the kind of collusion that will lead to the fact that all the shares on the market will soon agree to apply margins to the extent of the administratively established maximum. So they tried to prove that even if Tank ONO has a long-term margin of up to one kroner per liter, the government margin regulation allows the margin to increase to 2.50 K�/l, as a new reference point. They found nothing of the sort. They did not confirm that the ceiling would act as an anchor. Of course, margins can be significantly higher on the streets than outside the streets, so capping them will lead to a discount there on average. However, the ceiling margin should be understood as a measure that prompts the pump to reflect the parallel reduced consumption tax into the final prices as fully as possible. If the gas station chain wants to compensate for the limited margin on the highway by increasing fuel prices outside the highway, it will encounter competition from the Tank ONO type (which does not operate any other pumps directly on the highway), independent pumps or those associated with shopping centers hypermarkets, whose competitive pressure should prevent a compensatory rise in fuel prices outside the highway. Government measures can certainly be criticized, but this should be done with relevant arguments, based on valid economic theory and empiricism.
Luk� Kovanda, Ph.D.
Hlavn�ekonom, Trinity Bank
TRINITY BANK Trinity Bank has been operating on the financial market for 25 years and was the result of the transformation of the Moravian State Bank into a joint-stock company. It has more than 92,000 clients and its balance sheet total exceeds K 65 billion. Trinity Bank specializes in private and corporate banking, for individuals it is mainly interested in deposit and savings products, which offer above-standard dispute resolution. More information at: www.trinitybank.cz
