Question

How does Government involvement in the petroleum industry aid in economic development?

Answer 1

Government involvement in petroleum industry is very very important in this modern world. This is because the petroleum industry is the backbone of the modern commercial economy, this is because petroleum products are used in every step from production to the transportation of goods. So now a days the government involve in the petroleum industry to make this work in favour of the economy. But the role of the government is different in different Nations according to the fact that whether a country is a producer and exporter or an importer of the petroleum products.

In the countries which produce petroleum products or just crude oil, the government involves in the industry to make them more efficient, they ensure the optimal quantity of petroleum extracted and processed. They also impose taxes on the producers for the production and export of petroleum products. They earn a huge amount of money from the tax revenue which they use for different development programmes which help in the development of the Nation. They also ensure that the firms in the industry errns profit and also give good wages to the people employed in it because these all things also help in the development of the country.

In Countries which are the importers of the petroleum products and don't have the capacity to produce, the role of the government is different. In such countries the government involvement is more necessary because the first thing the government need to do is to tax the imports and hence earn enough tax revenue to finance development programmes but at the same time it is also the work of the government to maintain the price of petroleum products at a moderate level because if the price of petroleum products rise it will increase the prices of almost all the goods and services in the economy and hence overall inflation rate. Inflate is good up to a minimum rate but after a point it is very harmful for the development of the economy.