Hawaii Caps Gas Prices - Receives "F" on Economics Test

The government of Hawaii, raising its level of stupidity, has declared war on the economic law of supply and demand by fixing limits on gasoline prices in that state. It is under the delusion that refineries will be willing to ship them gasoline at a loss even though they can more easily sell at a profit in other states. Can you say gas lines and shortages?

Two years ago, the Federal Trade Commission issued a report on this issue, which was specifically directed at Hawaii and included this statement, "Price controls usually create shortages, reduce quality, and generate inconvenience for consumers when they are imposed in markets that could be competitive."

Nevertheless, the Public Utilities Commission placed a cap on wholesale gas prices from producers, who are out-of-state and must deliver the gasoline in tankers. The Commission expects that move will stop rises in prices at the pump, which are not capped for the retailers in the state. The order becomes effective next week. Governor Linda Lingle can repeal the gas cap if motorists start paying more for gas or if there are shortages. Why wait? Will someone rush a pen to her before too much damage is done?

This article says that Hawaii is the first state to cap gas prices. If the other states pay attention, then Hawaii will also be the last state. There are some economic lessons that I would rather read about than experience.