Why I think fuel prices should not have been reduced

One of the promised the new Government came into power with is the reduction of fuel prices, and it delivered. Yay!

This is the thing – I don’t think this is for the best. People tend to be happy when price of anything is reduced but generally they don’t see the bigger picture – at least the slightly bigger one.

Let’s take petrol, something that was heavily taxed and what most people use to run their private cars. To the average person who goes uses a car to travel to work daily and the usual weekend runs, yes he will save some good amount. But he would not stop there – usually he would do some more traveling. Again it’s good that he can do more for the same amount.

Flip-side, there are many who had were leaving their cars at home most of the time due to high fuel costs. Now all of them have put their cars back on the road – result – more cars, same capacity of roads -> Traffic! It’s not to say that they should not be using their vehicles, but they surely are spending more now than before right? And they would have done the feasibility BEFORE buying the car.

Congestion specially along Galle Road during peak hours is horrendous now compared to before. Car registrations are sky high. Hybrids seem to be the trend with people revolting against the increase in taxes of hybrid car taxes but any car is going to use fuel. (I’ll post on hybrids later).

The issue here is also the rising import bill of the country. Fuel consumption has increased dramatically after the reduction in prices and we are paying in dollars. In the end, it’s going to bite us in the purse gradually later on. A price formula is in the talks again and is supposed to reduce our fuel prices as global prices are at their lowest. Eventually it’s going to rise and so will our fuel price. People will again blame the government for that – who is going to explain to them how the formula works?

Why can’t we keep the prices as it is now (I’d prefer if it is raised) and increase it with inflation in future while saving the excess profits in  dedicated fund or something? This can be used as something similar to hedging.

Talk about the tuk tuk guys. When petrol is increased by 10/- they increase the fare by 5/- but when it is reduced by 30/-, NOTHING!

Think about it.

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