NCPA - National Center for Policy Analysis

Gas Price Controls Would be a Disaster

September 3, 2003

Last week, California Lt. Gov. Cruz Bustamante (D) proposed amending the California state constitution to allow the Public Utilities Commission to regulate gasoline prices. "Californians are being gouged," he charged. His proposal would require oil companies to justify price increases and regulate their profits in the state. The price control plan has universally been condemned on economic and legal grounds, says Bruce Bartlett.

"It's a terrible idea," says energy expert Philip Verleger.

  • He warned that it will lead to gas lines as oil companies export gasoline production from California refineries to other states and reduce imports of gasoline from Canada, the Caribbean and others places that now serve the California market.
  • The state would have no power, even if the constitutional amendment were adopted, to compel oil companies to keep supplies in the state or bring gasoline in from elsewhere.
  • Any effort to do so would be a violation of the commerce clause of the U.S. Constitution and would surely be thwarted.

Says law professor Anthony Sabino, "Gasoline and the business of selling gasoline is part of interstate commerce that belongs to Congress to regulate, if at all." He added that Bustamante "is either very ignorant of the law or he's getting incredibly bad advice from his advisers or it's a publicity stunt."

The last is a definite possibility. Susan Estrich, a Democratic consultant, believes that Bustamante is trying to shore-up the party's left-wing base going into the election to recall Gov. Gray Davis. "Bustamante is running as some would say a '60s or '70s Democrat," she says.

Source: Bruce Bartlett, "Gas Price Controls Would Be a Disaster," National Center for Policy Analysis, September 3, 2003.


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