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import
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a.
Domestic port
include
7. It is not applied to locally produced goods in a regional market that is selfsufficient in the goods as this would be unfair to the consumers in the
region and lead to an exorbitant profit for the seller.
In such cases, the selling price is determined by the production cost in
the region and governments may introduce price control to protect
consumers
8. Developed countries such as the US, UK, Canada, Germany, etc., do not
use the IPP to determine local selling prices. For example, in the US, which
imports about 30% of the crude oil it consumes, the price of fuel is
determined by the local production cost of gasoline, diesel or propane,
including refinery cost, with the cost of any imported crude oil taken into
consideration (added) when calculating the selling price. This practice is
followed in almost every developed country
9. It has no economic or trade validity. It is considered a variation of
Purchasing Power Parity, which is an entirely different concept that is
economically accepted. IPP is a recent concept introduced as a result of
globalisation by commercial organisations to enable them to profit from
petrol and natural gas Page 1
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a.
factory
domestic port
include
In FOB cost of delivering the oil to the nearest port is included i.e.
= no inland freight charges
4. It applies only to the quantity that is exported and not to the quantity
that is sold domestically
5. Where a country or a region in a country has a surplus of a product that is
exported, the EPP or the export price is determined by considering the IPP
of the commodity and other trade factors