Hawaii Puts Cap On Gas Prices

[Ghoulish Delight]

Originally Posted by scaeagles

I am against the minimum wage.

I also do well in terms of gas expenditures. I work from a home office, so no commute, and my wife teaches at a school only 2 miles from our house.

Wiat until the price of every product you buy goes up because of increased fuel costs.

Price controls are a bad thing. Period.

A pure free market economy is a bad thing. Period. Gasoline, right now, is as close to a purely inelastic product there is. Oil companies can increase the prices through the roof and stil make a profit. People will buy it. Sure, you can choose to ride your bike to work, or move closer, or take public transportation...but companies can't choose not to ship their products. And that's what it comes down to. There will always be a market for gasoline at any price. Left to their own devices, oil companies can keep raising prices, and the demand will be there. All well and good, hooray free market. But this doesn't happen in a vacuum. It will have a disastrous impact on the entire economy. Every product is dependent on fuel prices. And there are no natrual checks on fuel prices in the market.

[scaeagles]

Originally Posted by Ghoulish Delight

Wiat until the price of every product you buy goes up because of increased fuel costs.

A pure free market economy is a bad thing. Period.

The costs are already increasing on certain things I "consume". My post was in reference to Name's post on how he saves money on fuel because he rides a motorcycle. Not very practical in a family with three kids, but it works for him.

I didn't say anything about "pure free market" economy. Predatory and monopolostic practices are against the law and well should be. I simply said price controls are a bad idea. Period.

Let's say the cost of production of a gallon of gas goes to 2.50. That's production only. Let's say a price control in Hawaii says wholesale gas can only go for 2.40. What happens? The oil companies won't be selling gas in Hawaii.

Read the links to the Sowell columns. He explains it well.

[Ghoulish Delight]

Originally Posted by scaeagles

Let's say the cost of production of a gallon of gas goes to 2.50. That's production only. Let's say a price control in Hawaii says wholesale gas can only go for 2.40. What happens? The oil companies won't be selling gas in Hawaii.

But it won't. The price control is based on market price elsewhere and has built in allowances for shipping costs. It's simply to ensure they aren't gouging above and beyond mainland market price, it's a formula that will never allow it to drop below production cost.

[Name]

Originally Posted by scaeagles

My post was in reference to Name's post on how he saves money on fuel because he rides a motorcycle. Not very practical in a family with three kids, but it works for him.

Obviously never been to Spain, where they transport three kids, wife, groceries, and a dog on a moped (at the same time, and yes, I have seen that)

[scaeagles]

Originally Posted by Ghoulish Delight

The price control is based on market price elsewhere

Then I propose the Hawaiian government do the same thing with land costs. I believe they should put price controls on their land based on the averages of the market in Phoenix, Omaha, El Paso, Grand Rapids, and Helena.

Same principle. There is a finite amount of land available, and I don't think it's right that if someone wants to sell their land that they be able to charge more than I would pay for it on the averages from those other cities.

I admit this is a bit extreme, but it isn't really much different.

[Name]

Originally Posted by scaeagles

Then I propose the Hawaiian government do the same thing with land costs. I believe they should put price controls on their land based on the averages of the market in Phoenix, Omaha, El Paso, Grand Rapids, and Helena.

Same principle. There is a finite amount of land available, and I don't think it's right that if someone wants to sell their land that they be able to charge more than I would pay for it on the averages from those other cities.

I admit this is a bit extreme, but it isn't really much different.

And I have this bushel of apples that are X price, why can't I get the oranges for the same price?

[scaeagles]

Well, it's being said that the price controls on gas are OK because it's tied to market prices in other areas. Why not tie the price of land there to market prices in other areas as well? Or the price of whatever?

I said it was a bit extreme, but if linking the price controls of one thing to the market prices in another area of the country, why is it not OK to do that for everything?

[Name]

well for one, in my opinion, the fair market value of land is negotiated by two independant persons(in most occasions), and the supply of land in hawaii is extremely limited unlike other parts of the continental US where there are parts that have a vast supply of land. while gasoline can have a limited supply, there are unscrupulos folks out there that may desire to gouge an area like the hawaiian islands and force them to pay twice the wholesale price for gasoline, which is what this price control is aiming at preventing. is it right? who knows, is it fair, I think so. And I think it was said earlier here that this is just a wholesale control, not a retail control, so the stations can still freely mark up as they see fit to maintain a profit in accordance with their business plan.
It sounds, in all fairness, that the state of Hawaii is forcibly negotiating buying prices for importation for all the players, based on an average wholesale price at various locations in the continental US, more then outright controlling the prices at the pump.

[Alex]

Price controls rarely have the desired effect. Tagging the control to a larger geographic area should help dilute it, but I would be surprised if it is effective in the long run. The government agency responsible for administering this program is on record saying it is a bad idea.

In the face of rising global demand for oil, pockets of price caps in the United States will just divert more oil away from here. Sure, Chevron might as well send oil to Hawaii as they do to California, New Orleans or New York City since the price is allowed to be the same. But what about when New York City decides it doesn't like a free-floating oil market and caps prices to the cost in Duluth, South Dakota, and Ketchican, Alaska?

Interestingly, in the short term is likely to raise prices as much as 0.20 cents since a capped market price almost always ends up also being a minimum price. In order to hedge against the risk of future articifially low prices, current prices will almost always get pegged at the maximum.

On top of all of this, gas is still relatively cheap. As a percentage of annual household expenses it remains remarkably low, and adjusted for inflation a gallon of gas still costs less than in 1983. Gas simply isn't that expensive, we're just used to it being godawfully cheap. If we really wanted to bring down gas prices we would create a national fuel composition standard so that refineries would not have to create different finished products for dozens of different areas. Instead every state and municipality creates their own fuel standards and it drives competition out of the area and jacks up prices through reductions in economies of scale. Not to mention that refineries are constantly retrofitting to accommodate rules that change over time (MTBE in everything, no never mind let's try ethanol, but ethanol is a boondoggle let's put 2% of a prayer in every gallon).

But Hawaii is a weird place and the marketplace is manipulated in all kinds of unusual ways. Maybe it'll work as intended. But when balancing the opinions of econimists and other experts against an inflamed public certain that they're getting reamed and demanding something be done about it I'm going to tend towards the experts.

[Alex]

Originally Posted by scaeagles

Then I propose the Hawaiian government do the same thing with land costs. I believe they should put price controls on their land based on the averages of the market in Phoenix, Omaha, El Paso, Grand Rapids, and Helena.

Since much of the land you'd want to buy in Hawaii is already owned by the Bishop Estate, huge tracts of Hawaii already have price controls on the land: NOT FOR SALE.

You can, however, lease it at rates that tend to lag the marketplace by a half-decade or more.