Keep government out of gas-price business
September 6, 2005
Why isn’t the government doing anything about gas prices?
Well, in Hawaii, the government is doing something – the wrong thing.
On Thursday, Hawaii’s legislature-imposed cap on wholesale gas prices went into effect just as Hurricane Katrina was helping boost prices across the nation.
By Monday, a gallon of gas averaged $3.01 in Hawaii, placing it 35th among states. Supporters of the law, which ties the wholesale price in Hawaii to average prices in New York, Los Angeles and the Gulf Coast, applauded it as holding down prices. But critics said it may well have led to higher costs for motorists, because the mainland prices were rising so fast.
In the long run, Hawaii’s cap may lead to shortages, rationing and, eventually, even higher prices as refiners and wholesalers decide it’s not profitable to operate there.
Price controls simply aren’t the answer, as President Nixon found out in the 1970s. Even in Hawaii, where residents believe they consistently overpay for gasoline because two refineries dominate the market, the law of supply and demand eventually must catch up.
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The best thing government can do, in Hawaii or Nevada or anywhere else, is keep a rein on gas taxes. Nevada adds 23 cents to every gallon, on top of the federal 18.4-cent tax. County governments can add up to 10 cents, such as Carson City’s nickel-a-gallon to help pay for the freeway under construction.
That means, even at $3 a gallon, government is taking the biggest bite at the gas pump of anybody except OPEC.
We don’t agree with the European theory of socking people with gas taxes (the equivalent of more than $4 a gallon in England, for example) as a means to force conservation and fund mass transit.
At the tipping point, which may or may not be $3 a gallon, Americans will make their own choices for conservation or alternative transportation. Government intervention in either direction – gas caps or excessive tax – only slows the free-market process.
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