Paul Jacob

Pandering to the belief that "somehow" oil companies are "taking advantage" and "gouging" us with price increases, politicians hold hearings, and then "take action." What action? One word: regulation. Two words: price controls.

That's what politicians in Hawaii did the other day. They waded out into the desert of idiot economics and said "the water's fine!" And they gave their state price controls on petroleum.

Thinking themselves the greatest of sophisticates, they didn't cap gas prices at the pump, though. They capped the wholesale prices, which they'll renegotiate and fiddle with for a while. They ostensibly knew the harm that consumer price caps would cause. So they focused on the wholesale end.

I'm not an economist, so I should probably leave the economics of this well enough alone. But the whole thing stinks far worse than a vat of Texas Tea. Still, I've read their litany of complaints, and I understand that they blame the refineries. But so what if refineries are making more profits now? Their number has been artificially diminished for decades, what with the stringent environmental regulations placed on their, er, placement. (How about putting an oil refinery in your back yard!) So, a limited supply of refineries suggests to me increased prices for refinement.

But it turns out that I'd be nearly as wrong as the regulators. Actual figures from the industry tell a different story. Robert L. Bradley, Jr., president of the Institute for Energy Research, notes that though crude oil prices have increased above their historic average by a whopping 185 percent, gasoline prices have increased by only 25 percent. Increased efficiency in refining and transportation and marketing have actually decreased the margins for profits off of each barrel of oil. It looks like the increased profits of the oil refineries rest on that old principle of business: volume, volume, volume. Oh, and efficiency, too.

But those are mainland statistics. Are things different back on the distant island of Hawaii? Well, gasoline prices are higher, naturally. It's an outpost, so increased costs of transportation alone should lead to higher prices for consumers. Though the prices appear to be as natural as anything in society, Democratic politicians have been listening to the complainers. (I guess whining is natural, too.) And they've gone and done something. That's the biggest difference so far.

Scott Foster of Advocates for Consumer Rights, one of the groups that pushed the Hawaii oil cap bill, declares that his harebrained notion is "a grand experiment," and that his "hopes are very high." Looking to spread the gospel of regulation, he added, "If this bill works here, there are a lot of other states that are watching it and might do likewise."

It won't work there, of course. The real question is: will other states wait for the evidence to come in, or will they rush to consign us to long gas lines again, to suffer and fume (and breathe fumes) and tell stories that make no sense?


Paul Jacob

Paul Jacob is President of Citizens in Charge Foundation and Citizens in Charge. His daily Common Sense commentary appears on the Web and via e-mail.