Friday, May 12, 2006
Hawaii's Broken Gas Cap. A Failed Experiment in Government Regulation.
You may not have heard, but Hawaii's recent experiment with regulating the gas industry, also known as the "gas cap," has failed. After about 8 months, the program just didn't work out...or did it? Public opinion seemed to overwhelmingly favor getting rid of it, which is what brought about its demise, but in actuality, it favored the consumer. A lot. Why then was it repealed you ask? Because it "looked" like it didn't work. Before I go on, let me say that I am against government regulation of any business, for the most part, because free enterprise is what drives the US economy. But back to topic, the reason public sentiment was so against the gas cap was purely timing. As gas prices increased, so did the gas cap. This led to the false belief that the gas cap would reduce prices, but didn't. There were a few instances where gas prices dropped, and this was good. But sadly, not enough for the public to accept it. Hawaii is unique in that there are only two refiners. These two refiners control wholesale gas prices in Hawaii. This is one of those instances where maybe government regulation can help, but even then it's still questionable and, in my opinion, a "last resort" action. Regulation makes sense if the companies are not going to be honest. This is the part that pushes me towards regulation, because I believe the two wholesalers in Hawaii are taking advantage of the situation. Pre-gas cap Hawaii often saw price increases, but rarely saw decreases. And if they decreased, it would be a small fraction of what it increased, while the rest of the US saw dramatic decreases. Odd isn't it? As a consumer, I'm sad. But as a US citizen, I'm glad...it is better off that this experiment failed even if it might have meant a few more dollars in my pocket.