Thursday, August 25, 2005

Gas Price Controls: Haven't we tried this once before?

Hawaii will shortly begin imposing price caps on wholesale gasoline in hopes of stopping the rise in retail prices. MSNBC reports that caps will take effect on Sept. 1 and will be tied to an index comprised of gas prices in five U.S. markets.

This story sounds somewhat familiar. Haven't price controls for gas been tried before? Oh that's right, in the 70's. And what a smashing success they were. Rationing, long lines, shortages. And prices still skyrocketed.

The likely result of the Hawaii policy will be the same as the country experienced 30 years ago. Shortages and less incentive for producers to refine oil in Hawaii.

When will people (especially but not exclusively left leaning legislators) finally realize that you can't repeal the laws of economics? Not every market is perfect or efficient, but things almost always get worse when you let bureaucrats control prices. The fact that oil companies are making money is not a good reason to interfere (and since when is is a bad thing that companies actually make a profit?)

Note: regardless of what the headlines may say we're still well below record high prices for gasoline when adjusted for inflation. Check out this chart for one person's experience (thanks to Glenn for the link).

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