Apparently the State Senate of Hawaii skipped Economics 101 when they were in high school:
“Oil companies have been able to earn super-competitive profits at the expense of Hawaii’s consumers,” said State Sen. Ron Menor (search), who helped pass the nation’s first state cap on gas prices set to go into effect Sept. 1.
The law mandates the state Public Utilities Commission (search) “impose a price ceiling on wholesale gasoline prices that reflects competitive market conditions” and to foster “the opportunity for prices to reflect and correlate with competitive market conditions,” reads the statement by the Division of Consumer Advocacy, available on its Web site.
Are you kidding me? A price ceiling?? Did the State Senate ever stop and wonder why gas prices may be so high in Hawaii? The price of oil is one reason, but how about the fact that Hawaii is a series of islands in the middle of nowhere? Market forces determine a price and the government should NEVER have a hand meddling with them.
Here’s a smart woman:
But oil industry lobbyist Melissa Pavlecik disagrees with the idea of capping prices.
“Every expert who has looked at the industry has concluded that the price is higher here because of taxes, the remote location and other market forces. No one has ever found price gouging in Hawaii,” she says.
Exactly. The price of gas will be higher in Hawaii then say, Delaware for instance, if they charge a ridiculously high gas tax, not even taking into account the costs incurred to get the gas to the islands. More:
Economists also warn that, unless companies can make a profit, they won’t send their gas to Hawaii. And even if it doesn’t affect the main islands, critics say oil companies may stop sending gas to outer islands — where delivery costs are higher.
Gas station owners have their own objections. The new law is meant to control prices by putting a cap on what wholesalers can charge, but station owners fear they’ll be squeezed as the oil giants raise rents to make up for lost profits.
“They’re playing a shell game. They’re lowering my price of gas, but then they’ve increased my cost of doing business. So I have to recover that cost somehow,” gas station owner Barney Robinson said.
Textbook economics! Gas producers will have to make up profits somewhere, and if the cost of business raises too much for gas station owners they will be firing employees and going out of business. Price ceilings and price floors (like the government mandated minimum wage for example) are dangerous statist economic planning tools that should be avoided because of the harm they cause. When the Hawaii lawmakers start seeing gas stations close because of the squeeze from gas wholesalers and producers and unemployment raising maybe they will see what a completely boneheaded move they are undertaking.
How stupid is this idea? The article’s conclusion, referring to gas stations closing their doors:
If that happens, Hawaii’s revolutionary gas cap could result in even higher prices at the pump.
Which would totally defeat the point of the gas cap anyway. What a complete waste of time and taxpayer money. Getting a high school Econ teacher to lead a session on supply and demand for the Hawaii state Senate would probably have been cheaper and possibly wouldn’t have resulted in a plan destined to hurt rather then help Hawaiians.
