Uniform Gasoline Price Regulation: Consequences for Consumer Welfare

In this paper, we assess the long-run implications for consumer welfare of proposed uniform gasoline price regulation. Such regulation would allow lessee dealers to ignore the terms of their lease agreements and purchase gasoline at the 'rack' (i.e., a wholesale distribution terminal) or from whomever and wherever they choose (most typically a 'jobber', i.e., an independent distributor). We show that such regulation would harm consumer welfare by raising wholesale and retail prices without benefiting lessee dealers. Prices would increase because the proposed regulation would prohibit efficient pricing that reflects differences in costs and demand that vary by geographic area and by type of distribution. We also show that even under the assumption that price differences result solely from price discrimination, uniform price regulation will not necessarily benefit consumers or all lessee dealers.