Products and services are usually more expensive in Hawaii. Why? Economics. Land is limited. Tourists are willing to pay more. Immigrants have money. Almost everything we use is imported. Simple, right? How did the politicians get it so wrong?

It had to do with gasoline prices. In Hawaii, they always have, and always will be, higher than the US mainland. Gasoline is refined locally, but oil is imported from Asia and Alaska.

Since costs for everything are higher in Hawaii, it’s only natural that gasoline prices would be higher here, too. After all, Hawaii taxes are gasoline are also the highest in the nation.

Somehow, the state legislature figured out that Hawaii’s two refineries and distributors were making too much money on gasoline sales and instituted a gasoline price cap.

The major oil companies were outraged. Economists said a ‘gas cap’ would only cause problems. Gasoline buyers applauded at what seemed like ‘relief’ from high gasoline prices.

Now, the small lesson in economics.

First, the gas price cap was placed on the wholesale price, the price wholesalers charge the retail gasoline stations, not the actual retail price; the price a buyer pays at the station.

Second, the gas price was fixed to a combination of the prices on the US mainland; the west coast, the east coast, and, unfortunately, the gulf coast.

Third, oil prices in the Mideast hit record levels just as Hawaii’s gas cap law went into effect. Would Hawaii gain relief, even though the state’s oil comes from Asia and Alaska, not the Mideast or the US?

Finally, mother nature intervened. Hurricane Katrina and Hurrican Rita slammed into the US gulf coast, shutting down US refineries throughout the area, driving up the US price to record levels.

Since Hawaii’s gas cap law placed the wholesale price based on US mainland prices (now at record levels), Hawaii’s gasoline prices went up nearly $1.50 a gallon almost overnight.

Worse, each Monday, the state’s Public Utilities Commission announced the new wholesale price for the state (different on each island). Since gasoline was going up 50-cents or 25-cents or 40-cents a week, and it was easy to determine which direction the price would go, what happened to gasoline sales on Thursday, Friday, Saturday, or Sunday before the announcement?

Either long lines as people stocked up on gasoline at lower prices, or no sales at all while people waited for a lower price.

Just as bad was the situation with gasoline station owners. One week they had to raise prices because the wholesalers raised prices. So, their tanks were full of high-priced gasoline, until the next week, when the price dropped 30-cents a gallon.

Suddenly, if they dropped their prices to match the new, lower, wholesale price, they’d lose money because they still had tanks of higher priced gasoline.

On the other hand, if the price went up dramatically and they still had lower-priced gasoline in the tanks, they’d make more money than ever.

What a mess. Hurricanes ravaged the gulf coast and petroleum supplies, while legislators ravaged the local economy and voters by dabbling in economics.

Who got hit with the biggest hurt? The petroleum companies? No. They were allowed to raise prices on already lower-priced oil. The gasoline station owners? No, because it all washes out over time. The legislature? No, because they’re in an upper level of the socio-economic food chain and can afford a disruption in price.

The average person who buys gasoline gets the most hurt. Again. First, they pay more money. Second, they have to be careful when they buy, otherwise, they pay even more money for a tank of gas. Third, they have to trim their driving to save money on fuel when, just weeks earlier, such inaction wasn’t a consideration.

Why? Legislators dabbled in economics to gain votes. What they gained was voter wrath. And a lesson in economics.

Additional musings and nonsense can be read on the McElfresh.org site (with photos, stories, a photo gallery, and an audio podcast). Should you require non-licorice tasting musings, try RonMcElfresh.com. No photos, no podcasts-- no holds barred musings for the thoughtful generation. Either way, it's the same price.