Aloha to Free Market: Hawaii caps gasoline prices
Category: Economy & Business...
Posted Thursday, August 25, 2005 at 09:00 AM [GMT-6]

It was a stupid idea 35 years ago, and it's still a stupid idea. But that hasn't stopped Hawaii's legislature from placing a cap on the wholesale price of gasoline, effective September 1.

Industry and analyst reaction was swift and predictable:

Indeed, some critics said the cap may cause pump prices to rise, since it affects wholesale prices but not retail prices, and refiners and marketers have long warned that caps could spur shortages and long gas lines. "Any steps to interfere with market forces have undesirable consequences," said Chevron Corp. CEO David O'Reilly in 2002.

Fereidun Fesharaki, an energy expert at the East-West Center in Hawaii, said the index used by the state's PUC is likely to push up gasoline prices that in some cases are cheaper than on the mainland. "I think it's a really stupid idea," he said, adding that the move will create "a negative business environment" that could discourage the state's two refiners, Chevron and Tesoro Corp., from making additional large investments. "One of them may close down," he said.

In a wonderful example of economic naivety, one state senator responded to those criticisms thusly:

Sen. [Ron] Menor argued that regulating gas prices is no different than regulating the price of electricity, saying that with only two refiners, Hawaii "is not really a free market." He also dismissed concerns about gas lines or pressure on refiners and marketers as "scare tactics." Both of Hawaii's refiners have considerable investment in the state, he said, and "I doubt they would abandon it."

It might not be a bad idea to file those quotes -- especially the senator's concluding sentence -- into the "famous last words" category.

Any bets as to when we'll hear the first [Northeastern] [Democratic] congressman call for reinstatement of the Windfall Profits Tax?

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Comments

I was living in Hawaii during the "big" OPEC generated fuel crisis of the mid 70's......and driving a gas guzzling Corvette! It was a nightmare. You could only buy gas every other day and still it usually took 2+ hours waiting in line. Many stations had a 5 gallon limit on purchases.

Posted by: Wallace-Midland Texas at August 25, 2005 11:24 AM

Wallace, you didn't have to live in Hawaii to experience that. We lived in the Metroplex and went through the same things. Remember filling up based on your license plate number (odd or even)?

Posted by: Eric at August 25, 2005 12:07 PM

I don't like the cap idea either.

But I can barely afford to leave my house anymore! (Of course, some are probably glad of that.)

Posted by: Jim at August 25, 2005 12:50 PM

I can't afford an Aston-Martin, either. The government should make A-M charge less so I can get one! ;-)

Posted by: Eric at August 25, 2005 12:56 PM

I don't even know what an Aston-Martin is.

Okay, now I do -- I can't even afford to look at one of those.

Posted by: Jim at August 25, 2005 04:06 PM
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