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Oct 23, 2007

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Rob

I've wondered the same thing about summer-mixes of gasoline. Every summer, gas prices rise in Chicago, making them highest in the nation. One of the reasons is because there is a special mixture of gas required that reduces pollution. But Chicago's mix is different than the mix of other cities. Because of this customization, gas companies can charge more since it can only be processed at certain refineries.

Michael W. Kruse

I think one of the things I've come to conclude as a general rule is that government usually functions better when it proscribes things than when it prescribes things.

Externalities like polution have to be dealt with. Businesses would otherwise be able to shift the cost of their actions on to others. But what usually works best is when mechanisms are put in place that make it costly for businesses to pollute and then lets them find the solution to reducing pollution, rather than prescribing a solution (gas mixtures) and the regulatory nightmare that often comes with such prescribed approaches. I don't know enough about the specifics of the petro industry to give an informed opinion about this specific problem.

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