I was browsing other blocs when I found
this.
Hawaii has become the first state to impose price ceilings on the sale of gasoline. Their statewide average is about $0.30 cents more than the national average(Does someone know the exact figures?), and the ceiling has been set at exceptionally cheap $2.1578/gallon for regular unleaded gasoline from wholesalers.
I wasn't ever planning to discuss economics in this journal because, honestly, I don't know that much. However, I did just take an introductory economics course in which we discussed price ceilings. The example in class was rent-controlled apartments. It was sufficiently demonstrated (to me anyway) that with the imposition of price ceilings, the demand for apartments goes up and the supply goes down - I even remember all the diagrams.
Anyway, the effect of this change in the supply and demand curve was homelessness because more people need homes than there are homes for rent. However, as hard as I try I can't get the analogy to transfer to this gasoline example of price ceilings. Ok, so gas is cheaper which means that people can afford to drive more places - they buy more gas. They're on Hawaii however so it's not like there are a whole lot of places to go. "I guess we can finally afford our road trip to Mookoohakaliki Beach instead of being forced to walk 5 minutes." Doesn't it seem like demand really won't go up as much? I'm guessing that the demand curve for gasoline in Hawaii is relatively inelastic.
At the same time as the demand goes up, gas companies do not make as much money selling gas to Hawaii, but I can't imagine that means they send less gas. Would supply really go down that much? Like the demand curve, I'm thinking the supply curve is also inelastic. Unlike apartments which can run out and despite all the oil problems today, I still think that gas companies will be able to make enough of a profit to warrant sending that precious oil to Hawaii. I can't imagine that they'd strike or anything just to prove a point. The article above also does mention that the governor of Hawaii, Linda Lingle "said she would suspend the price cap if either or both of the state's refineries indicated plans to close" so I guess there are some protections in there in case I'm wrong.
My opinion, and I base this on absolutely nothing except my own logic (man I wish I could do this for essays in my politics classes), is that oil companies will be far from broke after the introduction of this price ceiling. Therefore, unless any of the refineries want to bluff and claim to be closing down, the effect of this legislation will only serve to save the public some money and lessen the profits of the already wealthy oil companies.
By the way, if anyone reads this and thinks that I'm way off base, I really want to hear about it. If anything, I'm only interested in learning more about this or any topic. Comments are definitely welcome.