Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

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. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Thursday, August 25, 2005

Gas Price Ceilings Again --
at least she knows about shortages

Hawaii has just set a price ceiling for the wholesale price of gasoline.

Gas prices in Hawaii are the highest in the country. The statewide average of the retail price of a gallon of regular unleaded Wednesday reached a record-high of $2.84. The AAA said that's 4 cents higher than in California.

... The law doesn't put a cap on retail prices.
I.e., go after the "big" distributors and producers but not the owners or managers of the gasoline stations, who are still free to charge a demand-determined price. What if the wholesale price ceiling actually leads to a reduction in supply? If retailers are free to charge whatever price they choose, won't this lead to even higher gasoline prices in Hawaii?

Apparently the Governor recognizes there might be problems:

Hawaii Gov. Linda Lingle said she's poised to repeal the gas cap if it somehow ends up costing motorists more. The governor said she would be checking gas price points to see if there are any gas shortages before she makes up her mind about repealing it.
Gasoline is expensive in Hawaii because transportation and refining costs are higher there. This setting of a price ceiling will cause nothing but confusion, anger, and inefficiencies.

Update: Kip Esquire has more.

Thanks to MA for the link.
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