Aloha State Discovers That Price Controls Don't Work; Hawaiians Expected to Remember the Lesson for 20-30 Years; "After That We Might Need to Figure It Out Again," Says Local Man

Hawaii's experiment in gasoline price controls is over.

Comments

[Tim Cavanaugh]

"In a lot of people's minds, they thought the gas cap wasn't working," said Republican state Sen. Paul Whalen, a strong supporter of the price controls.

Nixon, this guy... Why are Republicans always the biggest commies?

[Evan]

So, they pay more than they were before, because the oil companies know they can charge up to the maximum. Why not just set the maximum at $0.12/gallon? Wouldn't that solve everything? Or why not just make it free!? Just think how much money those Hawaiians could save if gas was free!

And, hey, to the other 49 states: just because it didn't work in Hawaii, and has never worked anywhere ever, and every economist that isn't a Keynsian fool knows it won't work, doesn't mean it can't work for you! I urge the other states, excluding Virginia, of course, to follow suit, and try their own hand it this experiment.

[Jersey McJones]

Hawaii, being extremely dependent on imported resoutces, has always had the highest fuel prices. Here, in this case, it didn't work because Hawaii has no real control over the resource. If the state itself was the purveyor of fuel, they could have capped prices easily. But this was doomed from the start.

JMJ

[Evan]

"Here, in this case, it didn't work because Hawaii has no real control over the resource. If the state itself was the purveyor of fuel, they could have capped prices easily."

Very perceptive, Jersey. If the State was the owner of the fuel reserves, then the State could charge whatever it wanted. How long did it take you to come up with that in-depth case study?

You make a good point, though: why not just nationalize all resources? Then we could just cap the prices extremely low, and save everyone a bunch of money?

[Timothy]

In (minimal) defense of Keynesian fools, I think even most of them realize price caps don't work.

[Warren]

Aloha State Discovers That Price Controls Don't Work; Hawaiians Expected to Remember the Lesson for 20-30 Years; "After That We Might Need to Figure It Out Again," Says Local Man
reprinted because it makes me laugh

Tim,
You're forgetting how commie Democrats can be. Remember Universal Health Care? (The nation spared by a Republican congress).

And why has Hawaii got it grass skirt in a knot of gas prices anyway? Don't they all travel by surfboard?

[Jersey McJones]

Personally, I believe that natural recources on common ground (aquifers, oil fields, etc) should be national. But they're not. And in this case it doesn't matter because we have to import most of our oil from someone else's common ground.

JMJ

[Jersey McJones]

"Remember Universal Health Care? (The nation spared by a Republican congress)."

Warren, when was this? - or are you just lying?

JMJ

[Warren]

JMJ,
Oh sorry. It was called "managed competition."

[Another Lurker]

Warren is speaking of Hillarycare that was stopped in the early 90s.

"Personally, I believe that natural recources on common ground"

Land owned by someone is not "common ground" it is their property. I would not expect you to understand or respect this given your attitudes on other such things.

[JD]

Whoa - a Republican state senator in Hawaii? I always thought that they were one of the most staunchly Democratic states. Or was that only on a national level, or what?

[MarkV]

Hawaii is no more dependent on imported resources than any major city. How many conurbations sit on oil fields? Even L.A., which sits on several large oil fields, can't pump enough crude to feed its own refineries.

In the modern worldwide oil industry, transport of crude and refined products is very cost efficient; local areas of high price are caused by restrictions on importation and/or refining restricting supply to the end user. Just try to get a new refinery built, even near a place like Houston.

I lived in Hawaii (Oahu) from 93 to 98. They were complaining back then about the relatively high cost of gas relative to the mainland, but on the rare occasion anyone brought up building a third refinery (or even expanding port facilities) in the Islands, the NIMBYs and enviros and nativists came out in force and the idea was DOA. Somehow, the connection between making more gas and having more of it never quite made it into the public consciousness.

So if I was running an oil products company in Hawaii, why would I campaign hard to bring in more competition? Me and the other refinery owner are doing just fine with things as they are, thank you very much.

Instead, whenever the price spiked and the inevitable calls to 'do something' were raised, I'd just gently guide the system to tweak the status quo, which has the benefit of not irritating the powerful interest groups that so effectively use the public's ignorance of basic economics to keep the money flowing into their pockets, or otherwise protect non-monetary perks like land set asides, guaranteed jobs, and political influence.

Aloha.

[Thomas Paine's Goiter]

STOP IT STOP IT STOP IT! STOP FEEDING THE TROLL

[biologist]

Jesse, excellent Onion-esque headline

[Jersey McJones]

Al, you looney, no one owns ground large enough to cover an entire oil field worth drilling, you loony.

Thoman Wimp Paine, you are such a little punk.

JMJ

[Ammonium]

At least when I'm dealing with the creationism people, I can accept that there is a little bit of logic behind it. If God exists, and he did create the world in 6 days, and he is all powerful, and he put down a bunch of fossils to trick us into believing evolution occured, then maybe creationism isn't such a bad idea. One things for sure -- no evolutionist can possibly win an argument on those grounds.

On the other hand, the people with the economic fantasies like price controls are continually disproven, yet continue to believe in their fantasies. Believing in those economic fantasies takes a whole lot more blind faith than believing in creationism.

[Dave W.]

another price control scheme went down today:

http://tinyurl.com/rwaz3

What a good day!

[Rex Rhino]

Hawaii, being extremely dependent on imported resoutces, has always had the highest fuel prices. Here, in this case, it didn't work because Hawaii has no real control over the resource. If the state itself was the purveyor of fuel, they could have capped prices easily. But this was doomed from the start.

I suspect you are a troll, because you seem to be almost a stereotype of statist thinking... but heck, I will bite with this one.

If demand for fuel is 1,000,000 gallons, and the people need 2,000,000 gallons of fuel, explain to me how exactly government ownership and price caps are going to magicly increase the 1,000,000 gallons into 2,000,000.

You see, prices are not something that is invented out of the air. If only half the people can afford something, that is because there is only enough to supply it to half the people regardless of price. If there was enough to supply to everyone, it would be cheap enough so that everyone can afford it. The one exception to this rule, is when there is a monopoly - a monopoly can charge whatever it wants... ESPECIALLY a government monopoly, who can force you to pay for it's product.

I realize, that nowadays the dominate religion on the planet is state-worship, and so people thing that the government can somehow bypass the physical and economic laws of the universe with it's holy power. And because government is omnipotent and can alter the laws of the universe to solve all problems, if something DOES go wrong, like 9/11, or hurricane Katrina, it must be some conspiracy by an evil Anti-Government devil figure (like G. W. Bush)... government incompentence is un-imaginable, because government is god.

[P Brooks]

"Some complained that the restrictions actually led to higher prices, because oil companies knew they could charge up to the maximum allowed."

I'm shocked, I tell you. That must be the first time in history that a government mandated "ceiling" turned out to be a government mandated "floor."

[biologist]

If demand for fuel is 1,000,000 gallons, and the people need 2,000,000 gallons of fuel, explain to me how exactly government ownership and price caps are going to magicly increase the 1,000,000 gallons into 2,000,000.

Comment by: Rex Rhino at May 9, 2006 12:00 PM

I think you mean "if SUPPLY for fuel..."

[P Brooks]

Good thing we don't have to worry about that "ceiling: same as floor" thing happening in other areas, like health care, f'rinstance.

[Johnathan]

My favorite part:

"At the same time, the new law provides for the computation of a hypothetical gas cap to let customers know what gasoline would cost if there were price controls."

[Dave W.]

"Some complained that the restrictions actually led to higher prices, because oil companies knew they could charge up to the maximum allowed."

I'm shocked, I tell you. That must be the first time in history that a government mandated "ceiling" turned out to be a government mandated "floor."

Only happens because of lack of competition on price, that is, parallel pricing situations. That is the problem the government's intervention has allowed us to see more clearly.

Under the theory of competitive capitalism, the government's "permissions" would not matter a whit. The floor is set by the other competitor's in the market, some of whom can be expected to lower prices to try to pry customers away from the other competitor's.

Is it being a libertarian that causes one to be blind to the problems of uncompetitive markets or is it this special blindness that causes one to affiliate liber?

[MP]

Is it being a libertarian that causes one to be blind to the problems of uncompetitive markets or is it this special blindness that causes one to affiliate liber?

Hmmm...interesting question. I wonder how many libertarians are so anti-state that they reject some of the monopoly premises of classical liberalism.

[MikeP]

I wonder how many libertarians are so anti-state that they reject some of the monopoly premises of classical liberalism.

I reject them. I do think the economic theories around monopolies are sound. I simply think that in the real world most every case of potential monopoly falls into one of the many exceptions to the ability of a monopoly to wield any power from it.

In particular, I am aware of exactly zero cases where US antitrust law has been used against any free market monopoly that was actually wielding monopoly power over consumers.

[P Brooks]

Dave W-

If I interpret correctly what you are saying (a pretty big "if"), you are wondering why at least some of the gas stations don't lower their prices, and compete for a higher volume of sales. I am certain that some do. Others, so long as they are selling a "sufficient" quantity of gas, will price at the maximum. If the government sets a ceiling for prices, many station owners will treat that as a "controlled" price; ceiling=floor. This does not, in actual fact, surprise me any more than to know that some station owners quiz their customers about prices at other stations, and adjust their own prices, either up or down, accordingly.

[Dave W.]

I reject the label "monopoly premises" for three reasons: (i) it makes a fetish out the "mono" part; (ii) it is not broad enough to encompass oligopoly premises of classical liberalism; and (iii) the problem of lack of competition is not a premise -- rather it was recognized by Adam Smith starting with the premises of laissez faire capitalism and following them in his imagination to degenerate conclusions.

I reject MikeP's equating classical principles of competition with enforcement of US antitrust law. Maybe these two things are supposed to be congruent, but they have not been. Not even close.

Maybe instead of "blindness about uncompetitive markets" I should have said --being in-denial about uncompetitive markets-- That is probably a better description of the prevailing attitude.

[Rex Rhino]

Is it being a libertarian that causes one to be blind to the problems of uncompetitive markets or is it this special blindness that causes one to affiliate liber?

Government regulation virtually always results in uncompetitive markets, where as uncompetitive markets rarely exist in a free market. Most regulations exist in order to limit competition in a certain field - they are lobbied for by a certain industry, and used to limit the supply of the product and increase the market value of products for the existing producers.

Putting a gun to your head, and pulling the trigger, might remove your brain tumor and save your life - but it is very unlikely. Likewise, under some very unlikely circumstances, there might be some very unlikely scenario where the government can make a market more competitive. But offering the government as a solution to a market problem, without ofering the very unique circumstanes that would make it a viable solution, is silly. Government, in nearly every case is designed specificly to destroy a competitive market.

[Dave W.]

Others, so long as they are selling a "sufficient" quantity of gas, will price at the maximum.

There is no "sufficient quantity of gas sold" in a competitive market. In a competitive market, each competitor tries to sell all the gas it can. If there is a perceived "sufficient quantity," then that is just more evidence that the market isn't competitive.

[P Brooks]

"sufficient" is a subjective term. Hence the QUOTES

If a station owner wanted only to clear out his tanks, he could price his gas below cost. One could, with time and incentive to do so, create a gasoline pricing model which took into account variables such as marginal profit by volume, regularly scheduled deliveries, other streams of income affected by station traffic and gasoline sales....

Some station owners have been known to mark up their gas above the prevailing market price, be cause the sale of gasoline is not their highest- margin activity. They deem their sale of gas to be a courtesy service, and not a primary source of income.

[MikeP]

Maybe instead of "blindness about uncompetitive markets" I should have said --being in-denial about uncompetitive markets-- That is probably a better description of the prevailing attitude.

Have you got an example of an uncompetitive market?

I'll note that, from information offered upthread, Hawaii's gasoline market may be an oligopoly, but it is apparently not a free market.

[crimethink]

"In a lot of people's minds, they thought the gas cap wasn't working,"

It helps if you turn it past three clicks.