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On Hawaiian Gasoline

Posted By Don Boudreaux On January 24, 2006 @ 3:33 pm In Prices | Comments Disabled

Spencer recently posted the following comment on this blog-post [1]:

Last August when Hawaii imposed price controls on gasoline you said
you were looking forward to getting picture of people waiting in line
to buy gasoline to use in your introductory class.

Did you ever get the pictures?

Can you post them so we can see them?

The gasoline-price post that Spencer refers to is here [2].

Spencer’s question and request are fair.

Alas, though, in my original post I misconstrued the nature of Hawaii’s price cap.  It is a cap not on retail gasoline prices; it is, instead, a cap on wholesale gasoline prices.  This report [3] from the San Francisco Chronicle explains.

Because Hawaii’s new regulation (adoped in late August 2005) doesn’t cap retail prices, such prices can rise high enough to keep people from waiting in long lines to buy gasoline.  But this absence of queues at gasoline pumps doesn’t mean that Hawaiian drivers are well-served by the wholesale-price cap.

The wholesale-price cap reduces the supply of gasoline available at retail, causing the retail price to rise to heights higher than it would otherwise reach.  Queues might not emerge, but the quantity of gasoline available to drivers surely is lower than otherwise, and the price consumers pay for each gallon they buy is higher than otherwise.

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[1] this blog-post: http://cafehayek.com/2006/01/should_we_worry.html

[2] here: http://cafehayek.com/2005/08/hawiian_pols_do.html

[3] This report: http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/08/25/HAWAII.TMP

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