Price Controls and Nancy Pelosi

Democrats will propose a bill on gasoline price gouging next week, according to US House Speaker Nancy Pelosi. The law will allow the president to declare an emergency, making it illegal to raise fuel prices.

Well, I suppose this was inevitable.

Bloomberg’s Javier Blas tweets:

US House Speaker Nancy Pelosi says Democrats will next week present a bill on gasoline price gouging. The bill will enable the president to issue emergency declaration making it illegal to increase the price of gasoline. “Price gouging needs to be stopped.”

US House Speaker Nancy Pelosi says Democrats will next week present a bill on gasoline price gouging.

The bill will enable the president to issue emergency declaration making it illegal to increase the price of gasoline. "Price gouging needs to be stopped."#OOTT #NoJoke

— Javier Blas (@JavierBlas) May 12, 2022

This is a complete waste of money. It would simply be something else that inhibits consumers from investing in new oil and gas production.

This plan is likely to be explained (for the first time) not by climate conflicts (if it is, it would exacerbate the greenflationary ratchet), but by political calculations that make sense in a way that its economic logic does not. To begin with, it allows Democrats to demonstrate that they are trying to "do something" about rising gas costs before of the November elections. The issues it may cause in the long run will have to wait for another day. Second, if Republicans oppose the bill (as they should), it allows them to be painted as "big oil's" puppets and consumer adversaries. Third, it contributes to Warren and (sometimes) Biden's narrative that the present inflationary rise is the result of corporate greed. And it will (for the time being) "encourage" oil companies to stay in the good graces of senior Democrats.

Not awful at all.

What about the rest of us?

Hugh Rockoff has a small reminder for you:

Because controls prevent the price system from rationing the available supply, some other mechanism must take its place. A queue, once a familiar sight in the controlled economies of Eastern Europe, is one possibility. When the United States set maximum prices for gasoline in 1973 and 1979, dealers sold gas on a first-come-first-served basis, and drivers had to wait in long lines to buy gasoline, receiving in the process a taste of life in the Soviet Union. The true price of gasoline, which included both the cash paid and the time spent waiting in line, was often higher than it would have been if the price had not been controlled. In 1979, for example, the United States fixed the price of gasoline at about $1.00 per gallon. If the market price had been $1.20, a driver who bought ten gallons would apparently have saved $.20 per gallon, or $2.00. But if the driver had to wait in line for thirty minutes to buy gasoline, and if her time was worth $8.00 per hour, the real cost to her was $10.00 for the gas and $4.00 for the time, an overall cost of $1.40 per gallon. Some gasoline, of course, was held for friends, longtime customers, the politically well connected, and those who were willing to pay a little cash on the side.

That’s the price Pelosi would have consumers pay.

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