Friday, September 09, 2005

Gasoline Price Controls

from The League: Reassembled

The Baltimore Sun recently reported that "Senate President Thomas V. Mike Miller ordered an examination yesterday of whether the state should emulate a law passed in Hawaii that limits the price gasoline distributors can charge." Miller is interested in figuring out if the Hawaiian law (Act 77), which limits the price middle-men distributors can charge and passes on savings to consumers, would provide a feasible response to high gasoline prices. Mid-grade averaged $3.46 on Thursday in the Baltimore market, according to AAA's Fuel Gauge Report.

A google search of studies on the Hawaii law reveals that there is no consensus on the wisdom of such price control measures.

Some groups found the tactic absolutely ineffective. The Federal Trade Commission, for example, produced a report which stated that, beyond being simply ineffective, "price controls tend to create shortages, reduce quality, and generate other inefficiencies."

Other economists support the measure as beneficial for consumers. A study commissioned by the Hawaiian state legislature concluded that the mechanism acts to "ensure lower gasoline prices for Hawaii’s consumers."

Basically, the results of any study on the topic are largely dependent on who is doing the studying. If the legislature appoints laissez-faire oriented economists who are not fond of price controls in general, the conclusion will most likely be that such a measure would be harmful for Maryland. If, as is more probable, the legislative leadership staffs the panel with liberal economists predisposed towards price controls, they will most likely recommend a law similar to Hawaii's. According to the Sun article, such a recommendation could translate into legislation as early as next session.

from The League: Reassembled with revisions


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11/10/2005 08:54:00 AM  
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