Gas Trouble in Maui

Gas prices have always been an issue with our economy. Some people complain about the high costs and believe that the government should intervene and set a price limit. Others look at the gas companies and think that is capitalism at its best. Hawaii is the most dependent state of oil and therefore is one of the highest paying states for gas. This is mainly due to the fact that it has to import more than 90% of its oil. Another major factor is that Hawaii is dependent on ships and planes to get most of its goods.

Of the islands in Hawaii, Maui is the most affected, having roughly 50 cents higher prices than the other islands. Maui also lacks a major transit system which makes it harder for the residents to get around. Many businesses such as taxis and limousine services are now having low profits and are close to having to shut down because of the high prices. Many of the locals that have their families routed in Maui are now having trouble to make ends meet. With gas prices going to $4 it is making it very hard to survive.

Should the government help the Maui residents out? Or should we allow the free market to work, which may cause some current residents to have to either go on welfare or relocate to another state?


Lily said...

Theoretically speaking what if the government just said we will pick up the bill today. Everyone in Maui gets one free tank of gas today. Would gas stations close? Many pumps could be emptied, but gas stations still sell at their desired four dollar price. What would be the economic repercussions of this random act of kindness?

Isaac said...

I agree with Lily, I dont believe the government can do anything for Maui. We have to let the market be free without government intervention on this one. One positive thing to look at is on average everything in Maui is in a close proximity to one another and resorting to riding your bike isn't very far fetched.

Gavin said...

Maui's size makes other forms of travel like walking or riding a bike feasible. Additionally, I don't believe that a tourist economy would have any trouble pricing the increased costs into their rates. Tourism is up because of the weak dollar, and foreigners should easily be able to soak up a 50 cent increase in taxi fare.

Matthew said...

I agree with Gavin. The small location increases the effectiveness of substitutes like walking and riding scooters, bikes and buses. Hawaii's biggest industry is tourism and it wouldn't surprise me if they are hiking up the price even more to get more money out of the tourists who want to drive around and see the whole island.

Dr. Tufte said...

-1 on William for poor sentence structure.

In economics we talk about hedonic price indices: these capture how much less you have to be paid to live in a desirable location, or more to live in an undesirable location. Hedonically, it seems to me that Maui residents can probably put up with quite a bit more burden.

I like Matthew's point that higher gas prices reflect, in part, higher inelasticity in Maui.