If you live in Hawaii, I hope you've got a fuel efficient car or a bicycle. Your state has decided that you don't need any gasoline, so they are doing all they can to reduce the supply of gasoline to the islands. How? It's called price controls.

I did mention some time ago that Hawaii was considering these price controls. I had hoped that the economists there would talk some sense into the government officials. Clearly they did not.

Starting September 1, wholesalers may not charge more than $2.74 a gallon (including taxes) in Honolulu. Strangely enough, there's no cap on the retailer's profits -- so the retailer could, in theory, charge whatever they want for the actual sale to the consumer. It will be very interesting to see how the wholesalers respond to this -- I anticipate various truck unloading fees, dock fees, road fees, etc., so the retailer ends up with the same current cost.

The law is intended to force Hawaii's two refiners to charge less. The legislators claim "refiners were taking advantage of the small, isolated market to charge exorbitant prices." Apparently the legislators have never heard of a free market economy. The ONLY logical result will be supply shortages. I estimate by Labor day CNN will start carrying stories about gas lines and shortages in Hawaii.

The only good I can see coming of this will be that other states will see a horrible failure here and they will not try it in my state. Then again, the legislators in North Carolina can be rather dense when it comes to reality. Heck, the governor thinks it's cheaper to borrow money and pay it back with interest than to spend money you already have.

Posted by: Ogre at 11:03 AM | Comments (6) | Add Comment
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