States tackle gas cost

"If we see $100 a barrel, Congress will reappraise everything it's doing, and very likely you will see it reevaluating its opposition to CAFE [gas mileage] standards," says Rep. Christopher Shays (R) of Connecticut.

Because prices are remaining high, some politicians are worried that they need to act sooner rather than later. "We're all suffering from the high price of gasoline, but you have no option about heating your home," says Mr. Galvin. "We need a comprehensive effort within 90 days because once heating season begins, you have to heat your house 24 hours a day."

His appeal may get some traction in Massachusetts. State Sen. Michael Morrissey, a Democrat from Quincy and chairman of the Telecommunications, Utilities, and Energy committee, says there will be hearings and possibly action. "I think there will be increased state financial assistance, as much as we can afford," he says, adding that he supports Galvin's idea of a tax holiday on winterization efforts.

So far, the most extreme effort has come from Hawaii, which this week will cap the wholesale price of gasoline at $2.74 a gallon, including taxes. The cap itself would be indexed to average wholesale prices in other parts of the United States. According to wire reports, for consumers this would mean retail prices of about $2.86 a gallon in Honolulu.

"Hawaii is an unusual market situation, an isolated market with no competition," says state Sen. Ron Menor (D), sponsor of the legislation. "Legislators generally support the free market, but Hawaii is not the free market in the traditional sense where there is lots of competition out there. The gas market is dysfunctional."

The state Public Utility Commission will oversee the Hawaii caps. However, some wonder if the PUC will have the expertise. "One of the problems with regulation is that regulators must have an in-depth knowledge of the industry they are regulating. Otherwise, they can cause much harm," says Don Mason, chairman of the gas committee of the National Association of Regulatory Utility Commissioners.

The energy industry says it has warned Hawaii against the move. "There could be a lot of unintended consequences," says John Felmy, chief economist at the American Petroleum Industry in Washington. "One of my concerns is that if Hawaii's economy continues to grow and needs to import gasoline, their price will be too low and they won't be able to get it," he says. "The last thing Hawaii needs is pictures of gasoline lines."

The sudden interest in regulating energy products harks back to the 1970s when President Nixon started wage and price controls. Gas lines blossomed as government bureaucracies tried to send gasoline to where it was needed. President Reagan finally eliminated price controls on petroleum in the early 1980s.

"Our experience then shows price controls all backfire," says Gregg Easterbrook, a fellow at the Brookings Institution. "And attempts at rationing are not the answer either."

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