Friday, September 09, 2005

The Federalism of Gasoline Regulations

The high gas prices that have resulted from Katrina have led to a number of people discussing the underlying causes of high gas prices. One criticism that often arises with respect to regulations is the fact that there are 18 different gasoline formulations that are required in various regions across the country (Here's a simple map showing where there is reformulated gasoline, but there is a much more detailed map of this out there somewhere on the internet- if you run across it, send me the link). Because this essentially creates different refining processes for fuel destined for different places, it ends up increasing costs and, more importantly at the moment, makes it more difficult to replace the refining capacity of those areas hit by the hurricane. Now, I agree with the fact that this type of mishmash of regulations causes higher prices and makes it more difficult to respond to catastrophes like this. But I have to offer some criticism of this argument, because it tends to come from small government libertarian-types (like myself) who, generally-speaking, point to increased federalism as something very desireable. If you're serious about the states (or perhaps even cities) having increased power over the regulatory regime in an area, rather than having this power usurped by the federal government, isn't this kind of asymmetry appealing? So...granted there are drawbacks to such a complex arrangement, but there are also some benefits - namely that states (in theory) have greater control over environmental indicators such as air quality within their immediate area, and it also enables the country as a whole to learn from the 'experiments' being conducted in the different regions.


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