Gas still costly in Hawai'i, despite drop on Mainland
| • | Chart: Gas price comparisons |
By Frank Cho
Advertiser Staff Writer
As gas prices plummet to less than $1 a gallon in some areas on the Mainland, Hawai'i's gasoline prices remain the highest in the nation.
Cory Lum • The Honolulu Advertiser
Despite a dramatic drop in crude oil costs and reduced demand by consumers since the Sept. 11 terrorist attacks, the price of a gallon of self-serve regular unleaded gas in Hawai'i has stubbornly hovered near $1.91 for the past year.
The signs at a local gas station reflect the higher prices consumers are paying in Hawai'i, compared with Mainland costs.
The average national pump price has fallen about 32 cents in that same time. Nationwide, a gallon of regular unleaded cost $1.24 Monday, according to a weekly AAA survey that monitors about 60,000 retail outlets across the country.
Prices are low because "the supply of fuel is plentiful right now, and it's that way all over the country," said Ruben Baca, executive director of the New Mexico Petroleum Marketers Association.
But although supply is plentiful and oil prices have fallen 30 percent in the past year to below $19 a barrel — a two-year low — Hawai'i drivers would not know it by looking at most gas station prices. According to industry surveys, Hawai'i gas prices have dropped barely four cents in that same period.
But local oil companies say Hawai'i's unique market makes it difficult to draw comparisons and conclusions on pricing.
"Primarily, gas prices are set by local competition," said Nathan Hokama, a spokesman for Tesoro Hawaii, which owns and operates dozens of gas stations in the state as well as one of the state's two oil refineries, a 95,000-barrel-a-day facility at Campbell Industrial Park on O'ahu. "The market here is different from the Mainland and the demand is different from Mainland cities."
That difference — mainly being an island in the middle of the Pacific with little chance of fierce competition for consumers' driving dollars — has led to huge profits for oil companies, some analysts say.
"Hawai'i is a victim of the Pacific Ocean, merger mania and raw corporate greed," said Tim Hamilton, an Olympia, Wash., gasoline industry consultant for independent dealers.
Hamilton said oil companies in Hawai'i are reaping huge profits by not passing on the cheaper oil costs to consumers.
"I have never seen a marketplace act like Hawai'i's without some understanding between the oil companies, either through observation (of one another's pricing) or some other means," Hamilton said.
Albert Chee, a spokesman for Chevron, which owns the second refinery in the Islands, said gas prices in Hawai'i are dropping, just more slowly than those on the Mainland.
"The supply and demand picture has not changed as dramatically in Hawai'i as it has on the Mainland. They are trying to rid themselves of the excess (gasoline) inventory and that is why you see the drop in prices," Chee said.
Chee said the price of crude oil is an important factor in the price of gasoline in Hawai'i, but not necessarily the most important.
When crude oil increased nearly 300 percent from $11 a barrel in 1998 to more than $30 a barrel two years later, gas prices rose less than 30 percent, Chee said.
"So just because we are in a falling-crude market, it does not mean gas prices are going to move in lock-step with it," Chee said.
One reason Hawai'i drivers pay the highest pump prices in the nation is taxes, Chee said.
According to the American Petroleum Institute, Hawai'i motorists pay 36 cents in state and local taxes for each gallon of gas, more than in any other state.
"I know a lot of people are not going to feel sorry for us, but when they look at why the gas is so high they have to know these things," Chee said.
Pat Perez of the California Energy Commission, which tracks gasoline prices around the country, said Hawai'i is caught up in the "West Coast phenomena" — magnified several times.
He said California gas prices also are dropping, but at a slower pace than the national average. He said in areas of the west where competition is limited, prices tend to move less no matter what crude oil, taxes or anything else is doing at the time.
Jeffrey Spring, a spokesman for AAA in California, said it this way: "It has more to do with distribution than it has with the price of oil. When you have refiners that control 95 percent of the market, as we do here in California, you are not going to have much elasticity in the price of gasoline."
A 1998 state lawsuit against Chevron and other oil companies that alleges the refiners and wholesalers agreed to keep prices artificially high and, as a result, make enormous profits at the expense of Hawai'i consumers, is scheduled to go to trial in Honolulu Feb. 5.
Reach Frank Cho at 525-8088, or at fcho@honoluluadvertiser.com
