My topic is regarding the demand and supply for particular resources in Australia. I chose an article concerning the increase in electricity prices which led to a one percent national decline in the demand. The article was published in the Australian Business Review in 5th January 2017 (Kylar, 2017). I chose this topic and the essay since it was experienced countrywide. It did not happen to a given region.
The article says the country at that time depended on two major power generating centers. These were AGL and Origin Energy. Some similar companies in the same industry are planning to close causing a slight decline in supply. Therefore, the prices were raised to meet the new equilibrium. Residential homes had an increase of $94 while small businesses had $297 more money to pay per year. The two dominating power stations also increased their prices by an average of $132 and $ 135 annually.
A large number of residents in Australia use electricity for lighting, heating, running devices and business activities. The decline of demand originated from the rise of prices. The issue happened when some power stations such as the Hazelwood in Victoria are retiring from the market. The remaining firms were forced to increase their supply to meet the deficit created by Hazelwood. That led to a decline in supply making prices to escalate. As a result, demand for electric power reduced countrywide.
I chose the article since it may be interesting to the whole country. Individuals in Australia must have complained why the unit prices for the electric power are hiking. The article would be important in giving them answers. Moreover, researchers and investors could also be interested. The fact remains that most residents are switching to other forms of energy such as generators, and solar panels. The investors can now make cheaper power machines to take advantage of the market situation.
Based on microeconomics, demand is influenced by some factors such as changes in prices of commodities, income levels of the consumers, competition, and changes in consumer preferences (Jindal, 2016). The first three influenced demand since the rise of prices made consumers start disliking the service. Their income remained constant, and there was an availability of other sources of energy. They include CSIRO, Eurosolar, which offer and BP Solar affordable solar energies (Cludius, Forrest & MacGill, 2014). Therefore, the citizens lost their tastes and preferences for the former power and shifted to the competing sources. That led to a decrease in demand.
The issue raised both micro and macroeconomic factors. The first one occurred when some consumers found it unbearable to keep up with the electricity costs. They, therefore, switched to other sources. For the latter, it concerned the whole nation. Withdrawal of some firms in the sector led to a decline in the GDP. The federal government obtains money through taxation to the enterprises and charges imposed the consumers (Bird, 2016). Therefore, the remaining companies were forced to boost their supply to sustain all customers. The government, on the other hand, introduced a fiscal policy where it levied more taxes on the firms and the consumers to maintain its GDP (Ban, 2015). That made the prices to shift upwards.
This part gives a remedy to the issue. From my point of view, the problem originated from the closure of some of the central power stations. My first suggestion is based on the Victorian government policies. Anderson, (2017) says the Hazelwood was to close on 2005. However, the government privatized it for it realized its importance to the Victorian people. It was scheduled to close at 2030. The plant is now considering shutting down due to carbon taxes imposed by the federal government. Also, it will take three more years to demolish the premises.
I would recommend the Victorian government to improvise ways of doing away with carbon disposal since it is the one causing the whole problem. Upon doing so, its tax rates for the same will also decline. The facility is a public good and provides much energy assistance to the residents. Besides, people the staff and contractors will lose their jobs, costs will go up due to reduced supply, the land will be degraded plus the same government will heavily spend on demolishing than paying the taxes (Enos, 2016). It can then postpone its closure up to the expected 2030.
The other possible solution is letting private investors run the firm. It is changed from government-owned to privately-owned. Mbeche & Dorward, (2014) say most government businesses are poorly managed and full of frauds. But when left under the control of an investor, the new management will run the company in the best manner. They will be focusing on profit maximization, and the company will last for long.
Based on the above analysis of the article, it is clear that prices in Australia regarding electricity shall go up. However, after studying the issue, it is realized only one power station, Hazelwood. The firm is government owned and is closing due to tax impositions. The report explains measures to keep the company in operation up to 2030. I base my conclusion to Hazelwood. Should it close, then people will face a crisis in paying high bills and taxes which the Victorian government will use to demolish the plant. If it adopts my recommendations, the plant shall operate till 2030. By that time a power solution will be available to replace Hazelwood if it will close.
Anderson, S. (2017). Hazelwood power station closure. Retrieved from www.abc.net.au: https://www.abc.net.au/news/2017-03-30/hazelwood-power-plant-shutdown-explained/8379756
Ban, C. (2015). Austerity versus stimulus? Understanding fiscal policy change at the
International Monetary Fund since the great recession. Governance, 28(2), 167-183.
Bird, R. M. (2016). Reforming International Taxation: Is the Process the Real Product?
Hacienda Pública Española, (217), 159.
Cludius, J., Forrest, S., & MacGill, I. (2014). Distributional effects of the Australian Renewable
Energy Target (RET) through wholesale and retail electricity price impacts.
Energy Policy, 71, 40-51.
Enos, R. D. (2016). What the demolition of public housing teaches us about the impact of racial
Threat on political behavior. American Journal of Political Science, 60(1), 123-142.
Jindal, S. (2016). Factors Affecting Demand for Money: An Empirical Study Based on
Time Series Analysis.
Kylar, L. (2017). Electricity demand falls a little as supply plunges. Retrieved 4 25, 2017, from The Australian Business Review: https://www.theaustralian.com.au/business/mining-energy/electricity-demand-falls-a-little-as-supply-plunges/news-story/24ae8c69953dcae67ad2b2484052d43f
Mbeche, R. M., & Dorward, P. (2014). Privatisation, empowerment and accountability:
What are the policy implications for establishing effective farmer organisations?
Land Use Policy, 36, 285-295.
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