Thursday, August 25, 2005

Hawaii Caps Gas Price - Deadly Move For Tourism

Hawaii has taken steps to cap gas prices starting next week, so you might want to hold off on booking that trip to the islands:

Hawaii Gas Cap

As the AP article points out, this runs contrary to every free market principles of economics. Capping prices is what happens in socialist and communist countries like China and the old Eastern Europe block. Long lines and a shortage of supply will soon follow in Hawaii. It won't be pretty...........

Why would sellers of oil want to incur the expense of shipping their product all the way to Hawaii so that they could sell it at less of a profit then it takes to cover their cost of delivery? They won't and will simply redirect the product to other markets where they can make a profit instead of gaining a margin that is so small that they can't cover the cost of delivery.

This will be very damaging to the Hawaiian economy that is primarily based on tourism and the transportation infrastructure that moves all those tourist around the islands. Long lines waiting for gas or transportation options wasting your precise vacation hours is not a sound or profitable model for Hawaii.