Friday, August 26, 2005

Economics of scarcity, Hawaii-style 

Hawaii has become the first state in the nation to set limits on gasoline prices.

The state Public Utilities Commission is setting the wholesale price ceiling for gasoline in Honolulu at just under $2.16 a gallon.

With taxes, the wholesale price would be $2.74. If wholesalers charge that price and retailers keep their typical 12-cent markup, then the price of a gallon of regular unleaded in Honolulu could rise to $2.86 per gallon.

The caps apply as of next week, when a new law goes into effect allowing Hawaii to set a maximum wholesale price at which gasoline can be sold. The limit is based on the weekly average of spot prices in Los Angeles and New York, and on the U.S. Gulf Coast.
Something tells me there might be a tiny problem in the future, should the actual, "real world" wholesale price of gas increase above $2.74. We all know that gas wholesalers are generous souls that would continue selling gas to retailers for less than they paid for it to refineries. Well, at least they would in fairy tales. But we can't count on such generosity forever, can we?

When I came to live in Australia in 1988, the price of gas (or petrol, as we call it down under) hovered just above 50 cents, and the Australian dollar around 90 US cents. A few years ago, it reversed. Now, our dollar is around 75 US cents, and gas in Queensland around 1.15 - and that's still the cheapest in Australia.

I'm somewhat mystified whether the "war for oil" was meant to secure the Iraqi oil for American companies or to ensure that oil prices stay low. If it was the latter, America should have bombed China instead. Or maybe it was to drive up the price of oil, in order to increase profits for American oil companies. The beauty of a crap conspiracy theory (or, for so many, conspiracy fact) like this one is that no matter what happens, you're always right.


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