EDITORIAL
Time to move quickly to control gas prices

When it comes to dealing with Hawai'i's sky-high gasoline prices, the state House is well out in front of the Senate in picking up where the state's antitrust lawsuit left off.

The lawsuit failed as originally anticipated to demonstrate anticompetitive collusion among the seven major oil companies the state sued, and delivered only 1 percent of the money sought. More to the point, the companies have admitted no wrongdoing and have no incentive to change the behaviors that provoked the lawsuit.

The Senate, led by its Commerce, Consumer Protection and Housing chairman, Ron Menor, suggests establishing an investigative committee to study how gasoline prices in Hawai'i are set and to make recommendations on how to bring down prices.

That approach is too timid. The lawsuit has clearly demonstrated what most of us knew intuitively — that Hawai'i gasoline wholesalers charge more than almost anywhere else in the nation.

There's no point wasting time duplicating what we've learned from the lawsuit. Where the Senate is right, however, is that study is needed to decide what mechanism to use to bring down prices.

Three general approaches appear to be possible:

• The state could buy gasoline and sell it at lower-than-wholesale prices to retailers to force the wholesale price down. Few people want to see government involved in buying and selling gasoline, however.
• The Public Utilities Commission could regulate gasoline prices as it regulates prices for utilities. But what we've learned from the trial is that getting the companies to cough up the financial data needed for such regulation is like pulling teeth.
• The wholesale price could be "benchmarked" — tied to the price of similar product elsewhere. This is the approach favored in the House.

There are several variations of the benchmark idea floating around, but the one we are intrigued with — at least preliminarily — is the one advocated by antitrust lawyer Spencer Hosie. He suggests using an OPIS (Oil Price Information Service) price. This is a widely accepted number that indexes the wholesale price of gasoline for all of the West Coast.

The advantage to that number is that it reflects variations in production costs — costs that would also affect Hawai'i producers.

The real difficulty in adopting benchmark pricing in Hawai'i is the differential — the additional pennies per gallon that should be added to the benchmark to determine a fair local price.

Hosie says the lawsuit has taught us that the cost of producing gasoline in Hawai'i is no more than, and probably less than, the cost of West Coast production.

But other costs are higher: Hosie proposes adding 3 cents per gallon to the OPIS benchmark to account for transportation costs, and then another 10 or 12 cents a gallon to cover marketing and other costs.

The benchmark price, plus some kind of differential, would be the Hawai'i wholesale price. The real battle, once it is determined that benchmarking is the way to go, would be over setting the differential. It cannot be so low as to squeeze the dealers nor so high as to squeeze the customers.

Hawai'i can't afford to adopt an ineffective or unfair pricing mechanism, and if that requires another year, so be it. But the Senate is wrong if it intends to reinvent the wheel as provided by the lawsuit.