Friday, August 26, 2005

Shortages and Price Controls

Catallarchy reports that Hawaii has passed price controls on gas at the wholesale level. According to some of their comments, Florida is considering following suit.

It's easy to predict that shortages will soon follow, and if the legislature doesn't backtrack on the controls, there will soon be calls for rationing. The only thing that would stop shortages would be if Hawaii's suppliers are locked into that market and can't choose to deliver marginal barrels to other markets. I doubt that this is the case, but California's experiences with local pollution regulations and an inability to get marginal barrels redirected here to deal with short-term situations makes it seem possible.

It's hard to believe that anyone could make this mistake, but I guess legislators don't know any more about economics than the general public.

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