A Stitch in Haste

After less than one year, Hawaii is scrapping its absurd price controls on wholesale gasoline:

Under the price control legislation, Hawaii set weekly caps on wholesale gas prices. Those caps were based on the average of prices in Los Angeles and New York and on the Gulf Coast. Then allowances were added for what it costs wholesalers to ship to Hawaii and distribute gas to more remote islands. But there was no cap on the markup added by gas stations.

When the plan was announced, I promptly analyzed the politics of the proposal. Now let's perform an autopsy on the economics:

Price ceilings lead to shortages.
Oh, you want more? Okay:

Price ceilings at the wholesale level lead to shortages at the wholesale level. Meanwhile, the lack of any ceiling at the retail level simply transferred profits from the wholesalers (who could not charge a market-clearing price) to the retailers (who could). The net effects would therefore simply be: (1) lower quantities of gasoline sold at wholesale and, derivatively, at retail. (2) No reduction in the retail price of gasoline -- and perhaps even an increase. (3) A government-imposed wealth transfer from gasoline wholesalers to gasoline retailers.

There were no surprises here; no one is entitled to scratch their heads over this failed experiment. The laws of economics are akin to the laws of physics. Any college junior economics major could have seen how this would have played out.

Politicians are another matter.