Introduction / Context:
This is a classic “Which arguments are strong?” question from public policy and economics. The issue is whether oil companies should be allowed market-based pricing for petroleum products. A strong argument must be relevant, factually plausible, and address the core of the decision without relying on exaggeration or trivialities.
Given Data / Assumptions:
- The question concerns pricing freedom tied to market conditions.
- Argument I claims commercial viability is tied to market pricing.
- Argument II claims social hardship if prices rise and transmit to essentials (transport, logistics, food).
- No hidden data on subsidies, competition, or safety nets are provided; we judge arguments on general merit.
Concept / Approach:
- Energy pricing affects firms’ cost recovery, investment, and supply reliability (efficiency view).
- Energy prices also have strong pass-through effects on inflation and cost of living (equity view).
- In evaluation questions, two opposing but independently cogent perspectives can both be strong if each presents a valid policy dimension.
Step-by-Step Solution:
Assess Argument I: Market-based pricing supports cost recovery when crude prices, exchange rates, and refining margins fluctuate. Without adequate recovery, companies underinvest, creating shortages and fiscal burdens. This is a relevant, policy-grounded argument—strong.Assess Argument II: Petroleum is a universal input. Price spikes raise transport costs and feed into prices of essentials, disproportionately hurting low-income households. This social-cost argument is also relevant and strong.
Verification / Alternative check:
Many countries balance these concerns by pricing via market while using targeted transfers or tax policy to protect the poor—confirming both efficiency and equity are legitimate considerations.
Why Other Options Are Wrong:
Only I or Only II: Ignores the other valid dimension (efficiency vs. equity).Either I or II: Suggests mutual exclusivity, but both can stand as strong concurrently.Neither: Both are clearly relevant and reasoned.
Common Pitfalls:
Mistaking “strong” for “agree with personally.” Strength refers to reasoning quality, not personal preference.
Final Answer:
Both I and II are strong
Discussion & Comments