Lessons from Gas Price Controls in Hawaii

John Fund in today's OpinionJournal's Political Diary writes:

. . . Late last month, legislators quietly agreed on a bill to rescind Hawaii's eight-month-old experiment with gasoline price caps. While every Democrat in the legislature had voted in favor of the caps in 2005, all but one now voted to scrap the idea as unworkable. . . .

Hawaii's legislation capped the wholesale price of gasoline last September just as Hurricane Katrina caused oil prices to soar. Far from restraining prices, the regulations led to spot shortages, panic buying and general confusion. The law's main motivation appears to have been an attempt to retaliate against big oil companies, namely Chevron. But legislators two weeks ago finally surrendered to political reality. According to The Honolulu Advertiser: "Several lawmakers privately believed the cap would work over time but the risk was too great if they left it in place and gas prices skyrocketed over the summer when they were out of session and campaigning for re-election."

But even though the gas cap regulations are going away, the damage they caused will linger. "Oil companies will be leery of investing capital into their Hawaii operations, knowing that all that stands between them and a new lower Gas Cap, which might order them to sell gasoline below their cost of production, is a few bad poll numbers in an election year or a majority of bad apples in the new legislature," notes HawaiiReporter.com. . . .

One always hopes that these lessons don't have to be learned again and again.