The Wrong Solution
I just caught
wind that Hawaii
has passed a law placing caps on wholesale gasoline. Apparently, the proponents of the bill feel
is being gouged because it is an isolated island. I say this is completely the wrong
approach. Over and over again we have
seen that attempts to regulate the supply of a scarce good in high demand ultimately
fails. The companies refining gas for Hawaii have other markets they can sell into, and they
are not obligated to supply Hawaii
with gas if they feel they cannot get a fair or profitable price. I would have loved instead to here the
legislators there implore upon their citizens to drive less, practice
economical driving habits, take public transportation, etc… One sure way of bringing the price of a good
down is to cool off the demand for it.
is choosing a path that risks the very supply of a good they absolutely
need. So, the ironic effect is that if Hawaii's complicated price cap formula fails to
appropriately compensate refiners for their product, Hawaii could see supply shortages and higher
prices as the companies back out of unprofitable markets.
This is an
event to keep an eye on because it marks one of the first truly bold steps -
albeit in the wrong direction - to getting a handle on America's
growing energy problem.
Here is an
interesting link from that article that allows you to check on the latest
average prices across the country: AAA Fuel Gauge Report.
the obsession with following every tick up and down on the price of oil
continues. I saw the following headlines
on Yahoo!Finance this morning posted back-to-back:
Move Higher As Oil Prices Drop AP
Prices Rise After U.S. Supply Report AP
folks, the trend is up, up, and up….do not let the daily or even the weekly
fluctuations fool you!
© DrDuru, 2005