Hawaii's new gas cap
On September 1st Hawaii will become the first state in the U.S. to apply a cap to the wholesale price of gasoline. Hawaii's gas prices are the highest in the nation at an average of $2.84/gallon for regular unleaded. The cap is meant to prevent the state's two refineries from taking advantage of the islands' small, isolated market by charging inflated prices. It's based on an index calculated from the three large mainland markets of L.A., New York harbor and the U.S., and then allowances for shipping costs are added. The retail price of gas will not be capped, however, so if these measures adversely affect the supply chain that supplies Hawaii then the price of gas at the consumer level could end up rising anyway.
Reader Comments (Page 1 of 1)
Brian 11:06PM (12/18/2005)
This type of regulation is pretty risky. This is very similar to what California did with their electricity markets back in the late 90s and early 2000s. Yes, it took a company like Enron to bring about the rolling blackouts, but Hawaii had better have learned from California or they may suffer a similar fate. Oil companies are not exactly known for their consumer-friendly actions.
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brownopher 11:06PM (12/18/2005)
I find this very surprising. The gas price is not rising because the oil company is making more money, gas price is rising because oil COSTS MORE. It's a another commidity and subject to commodity pricing. Furthermore, let's not forget that second to oil prices, taxes are the second largest thing you pay for at the pump.
The only thing I can see this doing is hurting their supply.
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Al Bundy 11:06PM (12/18/2005)
oh, and let me add that capping the wholesale price will lead to shortages because as the wholesale price rises, why would someone sell the gas at a loss?
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Darren 11:06PM (12/18/2005)
Perhaps your right Brian. But, seeing as most of the power companies actions in California have been found to be illeagl, the oil compaines should be wary also.
Not sure if it will help, but a stand needs to be made somewhere. The vast majority of the recent rise is not supported by supply/demand issues. It is just plain profits
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Al Bundy 11:06PM (12/18/2005)
watch for gas rationing and long lines in Hawaii (and possible riots and increased crime to steal gas). This is just like what carter did in the late 70's. This irrational socialist idea is typical of Hawaii, even though it has it's first republican governor in it's history. She would be smart to veto this if she can.
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Mal Fuller 11:06PM (12/18/2005)
Price controls were tried on a large scale in this country.
Price controls failed on an equally large scale in this country. While "Reaganomics" wern't a long term answer, Reagan's quick deregulation proved that a free market was a better bet than were price controls.
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Fred 11:06PM (12/18/2005)
I find it curious that the National Media isn't reporting yet that the current formula will actually raise the price of gasoline here. Currently the wholesale cost is going to be set at 2.76 a gallon with another 12 cents or so added by retailers. So, prices are going to go UP. Looking back over the past year prices will also be higher, not by much (a couple of cents). The supporters of this gas cap are counting on mainland prices to go down, which I think is wishfull thinking.
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mr634 11:06PM (12/18/2005)
Hawaii's governor is an idiot for inking this deal.
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Glenn Arlt 11:06PM (12/18/2005)
The state of Hawaii could "curb the pain at the pump" by giving up some of its gasoline taxes to help out the populace, since taxes make up a majority of the retail price. Of course, "that'll happen" (NOT). Idiots.
So much for living in "paradise" huh?
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Steve 11:06PM (12/18/2005)
ahh, government, here to kill free markets.
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Joseph Willemssen 11:06PM (12/18/2005)
"The gas price is not rising because the oil company is making more money, gas price is rising because oil COSTS MORE."
What an ignorant comment.
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Joseph Willemssen 11:06PM (12/18/2005)
"ahh, government, here to kill free markets."
Free markets don't exist. And you're out of your mind if you think a smart capitalist wants free markets. Nothing makes more money than a monopoly or controlling a resource that is price inelastic.
Also, free markets don't build parks, set clean air standards, protect the quality of the food and drug supply, etc etc.
As with most things, ideals rarely make their way in the world. Instead, it's a patchwork of solutions depending on the problem or opportunity. Demonizing government is the same as demonizing capitalism or the *move* towards freer markets -- equally asinine.
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iQuack 11:06PM (12/18/2005)
Joseph,
If you really think that price controls on gasoline are a good idea, someone should hold your head up to the light.
Price controls, for anyone who remembers the '70s, were a flat failure.
If Hawaii's gas prices are higher than elsewhere, it's because their gas taxes are high. Maybe Hawaii should consider lowering taxes rather than controlling prices.
Seems to me that those of us not living in Hawaii should be glad that dopes who run the government there want to re-live one of the mistakes of the 1970s so the rest of the country will take note of the consequences and not do likewise.
iQuack');">Reply
Joseph Willemssen 11:06PM (12/18/2005)
Still trolling, Quack?
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iQuack 11:06PM (12/18/2005)
No, Joseph.
In your case, it's not trolling, it's correcting.
iQuack');">Reply
iTroll 11:06PM (12/18/2005)
Whee!
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cxvargas 11:06PM (12/18/2005)
I believe the US territory of Puerto Rico took a similar approach. The only difference is they designated zones where the retailer set market prices and the other zones prices are controlled by the government.
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Josh 11:06PM (12/18/2005)
iquack...Hawaii's gas tax (16cpg) is about as middle of the raod as you can find in a state gas tax. Just check out Idaho's 25cpg or Maryland's 23.5cpg. In fact it is lower than the federal tax of 18.4cpg. (http://www.gaspricewatch.com/usgastaxes.asp)
Gas prices are higher in Hawaii because of their small market and isolation. It's pretty hard to tap into another state's refining products (imagine a tanker full of gas being sent a couple thousand miles) or oil production(last time I checked there wasn't a pipeline running from CA to HI).
Pricing caps are a very risky business. Then again so are predertimined interest rates to help regulate an economy. The fact is, economics is a pain to decipher. Having lived in and having family currentyl live in Hawaii the prices there are horrible!! Remember paying $1.10 for gas?! At that time it was $1.50+ on oahu and even higher on neighbor islands.
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