An article in the Honolulu Star-Bulletin on Wednesday July 12, 2006 demonstrates the principle of the result of unintended consequences far greater than any economist’s musings. The CEO of Tesoro acknowledged that gas prices in Hawaii were higher because the gas cap forced the company to move product from Hawaii to the Pacific Northwest.

The high price of ethanol which is at $4.00 a gallon, which must now be blended in with 85 percent of the gasoline sold in the state, also serves to drive up the price.

So much for elected officials knowing better than the free-market.

The central focus of the article was that Tesoro held back on improvements to its refinery because of the unstable market conditions, (read: profit margins) that would be available under that gas cap scheme. This is precisely what economists and free-market advocates said would happen and, sadly, it did.

They myriad of considerations and conditions that go into making a single product are not subject to the whims of a handful of legislators. They simply cannot do enough research to reach a rational conclusion. This is why capitalism is now, and will always be, superior to socialist/communist planning. It may pain State Senator Ron Menor to learn so but he doesn’t know more than the marketplace.

As so many classic liberal economists have demonstrated again and again, prices are a signal, are the communication of demand versus supply, that responds moment by moment to changing conditions. The high price of gasoline in Hawaii isn’t due to some form of collusion but the exorbitant number of regulations that control all aspects of business and economics here.

The admission by CEO of Tesoro that Hawaii lost out on improvements to the refinery that would have made producing gasoline here more efficient, therefore cheaper, is just another example of the misguided policies of our elected officials who don’t understand the fundamentals of economics.

So when you go to the gas station and get all riled up about the high price of gasoline don’t blame “big oil.” Blame your elected officials for passing laws that violate the laws of economics and blame yourself for voting them in, in the first place.

Don Newman, senior policy analyst for the Grassroot Institute of Hawaii can be reached at: mailto:don@grassrootinstitute.org