« Workers are Wasteful! | Main | Someone Remembers Their History »
August 25, 2005
Hawaii Forgot History
Today I received proof that the leaders of Hawaii, at least, have lost the ability to think critically, or even remember it's own recent past.
I am talking about This Houston Chronicle story describing Hawaii's new plan to combat the rise of gasoline prices. That's right, they've instituted price caps! Starting September 1st, gasoline wholesalers will be forbidden to sell gasoline to retail outlets above a set price, which will be adjusted by Ye All Knowing Benevolent Gods [otherwise known as the incompetant Hawaiian government] every few days.
Why am I saying such nice things about the Hawaiian government, you ask? After all, price caps guarantee the outrageous rise of gasoline prices will stop, right? Well, yes. The prices will stop rising. But what the Hawaiian government failed to realize is that prices rise for a reason. The price of gasoline is $3.00 on Maui because there are enough people willing to buy gasoline at $3.00 so that every single drop is sold. If people weren't willing to pay $3.00, the price would fall.
If the price rose to $300.00 per gallon, there would not be enough people willing to buy, and the price would fall.
But it's more complex than that. The price of gasoline is high because oil is expensive. Oil costs about $67.00/barrel right now. Now, most oil companies sell oil, and they also sell gasoline. If they can get $67.00 for a barrel of oil without going through the expensive process of refining it and trucking it out to little corner gas stations, why would they be bother selling gasoline at all?
The answer is simple: they can charge enough for gasoline that it's worth their effort to make the stuff. If the government comes along and says "you can't charge more than $2.75 per gallon of gasoline," and meanwhile the free market says a barrel of oil is worth $67, and then $68, and eventually $75, all of a sudden it isn't worth the effort to make the gasoline. So they won't. They'll sell the crude oil to China, or to the individual speculators on the market who want to pay those high prices.
And all of a sudden there'll be even less gasoline. But the price won't go up. You know what that means? There will be a shortage... we'll get "cheap" prices for gas... but we won't be able to find any gas to buy.
And that's where the "history" part of the story comes in. I seem to remember hearing stories from the 70s about the awful oil embargo and how there were price controls. And then how shortly after the price controls were put in place, nobody had any gasoline... and there was rationing, and you had to buy gas only on certain days, and if you ran out, that was tough, 'cause you had to wait your turn again.
Now, I don't know about you, but I'd rather pay more for gasoline than have the government tell me I can't buy the gasoline I need at any price. But that's what's coming if Hawaii keeps this up. Why would anyone sell gasoline in Hawaii for $2.74 (wholesale) when they could sell it here in California for more?
People whine about "price gouging" -- but hey... if someone was willing to buy the product at that price, and someone else was willing to sell it at that price, those two people (the only two whose opinion matters) obviously thought it was a fair price. Otherwise, the transaction couldn't have occurred. Think about it. It makes sense.
— The Shelanman
Posted by andrew at August 25, 2005 09:44 AM
Comments
Post a comment
Thanks for signing in, . Now you can comment. (sign out)
(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)