Inefficiency

People consume more gas than is necessary when the price is too low, according to society.
This indicates overconsumption. When gasoline prices are too low, filling up the tank is
affordable for both people and businesses, which considerably lowers transportation costs.
The societal impact on fuel isn't reflected in the market price, though. This indicates that
the price

Petroleum products are a precious asset and an essential part of modern human existence on
Earth, but their production and distribution have a variety of environmental consequences,
not all of them beneficial. Although some of these issues have been partially solved by
modern technology, the most important effects of petroleum consumption are on the planet's
climate. Being a fossil fuel, its burning results in the release of harmful pollutants,
particularly carbon dioxide, among the most destructive greenhouse gases. The atmospheric
greenhouse zone has changed as a result of human emissions of greenhouse gases, which is a
key factor in regulating world temperatures. It is hazardous and very flammable to use
gasoline. Air pollution is caused by both the chemicals created when gasoline burns, and the
vapors released when it evaporates. Carbon dioxide is another greenhouse gas produced when
gasoline is burned. Although it's still debatable, several studies have shown that certain gases
produced by human activity, particularly co2 and n2o, have an effect on global warming.
According to several study, an increase in atmospheric temperature has the power to alter the
weather, alter ocean levels, hinder crop harvests, and threaten coastal towns.

The aforementioned information demonstrates how cheap fuel is on a nominal basis. It is also
simple to spot the inefficiencies that are brought on by that cost. At the current costs,
excessive consumerism is hurting society. Surowiecki concurred with the information above.
He claims that the usage of gasoline has spillover costs.
 P

S=MSC=MPC

P0

P1

D=MPB

MSB

Q1 Q0 Over Consumption Q

According to the graph, in a free market, where people just take into account their own gains
from using petrol, the price paid will be P0, and the amount bought and provided will be Q0.
However, since using petrol reduces the benefits gained by third parties, the social gains are
less than those gained by those who use the commodity.

How does taxation affect efficiency?

Fuel taxation is a hotly debated topic in both economically and environmentally.  Excessive
petrol use is subject to negative externality taxes, which are designed to force manufacturers
and users to pay the full social cost of the product. Consumption decreases as a result, and
higher socially optimum results are obtained. The optimum legal system may be to set the tax
at marginal harm, which is the total of every negative externality linked with a gallon of
petrol, if taxes on petrol are exclusively decided by their influence on gasoline use.
 P
S1

S0=MSC=MPC

P2
B
P0

P1 C

D=MPB

MSB
Q1 Q0 Q

due to the S1 to S2 change in the tax supply curve. The altered equilibrium that develops just
after tax is put into place is denoted by "B". The tax will lead in higher prices (P2) for
consumers and lower prices (P1) for producers. Additionally, Q1 is the quantity delivered at
the revised equilibrium. Here, Q1 stands for the quantity that is socially ideal. At the higher
price, the petroleum is produced and utilized in an economically efficient manner. As a result,
the harmful externality of consumerism has been thoroughly internalized.