Monday, June 20, 2005

Regulation keeps gas prices high

Here's a shocker: clean air rules forced competition out of California's gasoline market leaving the remaining refiners in charge of pricing, and making a pretty penny.

California refiners are simply cashing in on a system that allows a handful of players to keep prices high by carefully controlling supplies. The result is a kind of miracle market in which profits abound, outsiders can't compete and a dwindling cadre of gas station operators has little choice but go along.

Indeed, the recent history of California's fuel industry is a textbook case of how a once-competitive business can become skewed to the advantage of a few, all with the federal government's blessing.

"They don't have to collude, they don't have to form a cartel, they don't have to be monopolists," said Stanford University economist Roger Noll. "All they have to do is take advantage of the crazy rules."

OK, so the economics lesson is not suprising, but the fact that this got published in the Los Angeles Times truly is!