On September 1, 2005 Hawaii will be the first state to impose gasoline price ceilings in an attempt to lower the state's higher than average gas prices.
When I first heard this story on NPR today, the economic commentator correctly pointed out that this will lead to shortages as people will want to buy more and sell less. But there are two interesting facets of the law that the commentator left out.
The first is that it's wholesale--not market--price that's capped. Thus it will be the gas stations that will bear the shortage and since they are free to set their prices, they will increase them to compensate for the lower supply. The law bent on making gas at the pump cheaper will make it more expensive.
The second little bit of info is that the government will adjust the cap weekly. Since they are trying to make it closer to the continental US, as the local market price goes up, the goverment will lower the wholesale cap, encouraging the market price to go yet higher.
I'm very interested in how this will play out over the next couple of months.