An economist takes a detailed look at Hawaii's gasoline price-fixing plan. Link. Excerpt:
Like the federal government's disastrous central planning of 30 years ago, the Hawaiian government has attempted to build in some alleged market mechanisms into its scheme. As noted earlier, wholesalers will be permitted to charge administered "prices" based upon average prices elsewhere. Of course, with this scheme, prices no longer serve their function, but are just data points. Any adjustments that wholesalers would naturally make when the market so dictates are verboten. Instead, they must wait for the government's permission, or be guilty of committing "economic crimes."
As long as the market remains relatively calm, Hawaii won't have any real glitches, just as during most of the 1970s, there were no long gas lines. However, as soon as there is a disturbance in the market, whether it be a crude oil price shock, wars, rumor of wars, bad weather, or trouble at the refineries, the government "pricing" scheme quickly will fall apart.
If gasoline shortages develop at the wholesale level, then it is almost certain that pump prices will shoot up quickly. Thus, it is very possible that Hawaii's wholesale pricing policies will cause retail prices to be higher than they would be in a free market. When this happens – and it almost certainly will – then we surely can expect the Hawaiian government to come down hard on retailers and blame them for the troubles. At that point, the legislature will slap price controls at the pump, and the shortages will continue, accompanied by gas lines and angry motorists demanding that the government "do something."
