The Associated Press reports that Hawaii has become the first state in the U.S. to set caps on the wholesale price of gasoline:
The state's Public Utilities Commission said Wednesday that, beginning Sept. 1, wholesalers in Honolulu may not charge more than $2.1578 a gallon for regular unleaded, or about $2.74 a gallon when taxes are included. The commission set the caps, which will fluctuate from week to week, at different levels for other islands.
According to the AP, the Hawaii law does not establish a cap at the retail level. But if retailers keep their usual 12-cent-per-gallon markup, prices for regular unleaded in Honolulu could in theory rise to about $2.86 per gallon.
I don't see how capping wholesale prices will accomplish anything other than reducing supply which will drive up prices.
At The Eclectic Econoclast, John Palmer posts that gasoline is expensive in Hawaii because transportation and refining costs are higher there. A price ceiling will cause nothing but confusion, anger, and inefficiencies.
At A Stitch in Haste, KipEsquire has more and agrees that a wholesale price ceiling can actually lead to higher retail price.
At Knowledge Problem, Lynne Kiesling refers to this Forbes article explaining that Hawaii's law requires the price ceiling to be set based on an average index of prices in New York, the U.S. Gulf Coast and Los Angeles markets. Because the pricing mechanism is market-related the hope is that it reduces the risk of a physical shortage.
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