Price Controls Needed for Gasoline

by wisdomhunt

Gas has risen to $3.79 nationally and it is time to seriously consider price controls.

This is likely a temporary spike due to refinery issues out west limiting the supply of gasoline, so putting a temporary cap on the price would temporarily be a good quick fix (especially for a politician looking to get re-elected soon…hint hint).

But I have to admit that I’m torn on this one. The current higher price per gallon makes dirty gasoline less price competitive against cleaner options like ethanol, which is a great thing because it should decrease consumption of gasoline.

Typically, it is better for the government to increase the cost of fossil fuels via taxation (pigouvian taxes). This gives them the flexibility to choose just the right price that can maximize revenue collection that can be used efficiently by government.

So like many progressives in the country, I’m torn. Price controls will help the underprivileged most hurt by higher prices. It will also increase the use of fossil fuels due to the lower cost.

The answer is not so obvious but yet so simple if you think about it.

That answer is: Price controls PLUS a gas tax.

The price controls will help the poor by reducing the cost per gallon. The gas tax will then push the price back up and  reduce the use of fossil fuels overall. The resulting tax windfall to the government can be used for a number of productive government programs.

Perhaps a portion of the taxes could even be used to compensate the poor for what they are paying in new gas taxes. I’m thinking that they pay the normal price at the pump, save their receipts, mail them into the government and then get reimbursed if their income is below some threshold, but I’m open to suggestions! I’m sure the government can come up with something efficient (as usual).

This idea is a winner. We might need another government agency for this one…