Gasoline prices plummet to 2-year low in Hawai'i

By Scott Ishikawa
Advertiser Staff Writer

Gas prices in Hawai'i have dropped drastically in the past month, finally following a Mainland trend that began soon after the Sept. 11 terrorist attacks.

Although Hawai'i gas prices have hovered in the $1.90 to $2 a gallon range for much of the year, a dramatic drop in crude oil costs, an oversupply of fuel, and reduced demand by consumers have sent local prices plummeting recently. Cory Lum • The Honolulu Advertiser

Although Hawai'i gas prices have hovered in the $1.90 to $2 a gallon range for much of the year, a dramatic drop in crude oil costs, an oversupply of fuel, and reduced demand by consumers have sent local prices plummeting recently.

At some O'ahu gas stations, prices for all grades of gasoline have dropped between 25 and 30 cents a gallon, particularly in the past month. That's small compared with price decreases of 80 to 90 cents a gallon on the Mainland since Sept. 11, but it still brings prices here to their lowest in two years.

Prices as low as $1.47 per gallon for self-serve, regular unleaded have been noted here, but overall, Hawai'i's per-gallon prices remain the nation's highest.

The latest AAA report derived from credit-card transactions at more than 60,000 stations around the country lists Hawai'i's average prices for regular unleaded at $1.72, medium at $1.82 and premium at $1.86.

The Honolulu market average is priced at $1.66, $1.75 and $1.78, respectively, for the same gasoline grades.

"Hawai'i has somewhat caught up with the rest of the nation," said Jeff Spring, a spokesman for AAA in California. "How long that price drop will last remains to be seen."

But Hawai'i's gas prices are still the country's highest and a far cry from the national average ($1.09 for regular unleaded), or the nation's lowest (Georgia averages 95 cents a gallon for the same grade).

About 55 cents is tacked onto each gallon of gas in Hawai'i for state and federal taxes — about 30 percent of the average price of a gallon of gas.

Nathan Hokama, spokesman for Tesoro Hawai'i Corp., which owns and operates dozens of gas stations in the state as well as one of the state's two oil refineries, said Hawai'i's distance from the Mainland makes it harder to compare with national price trends.

"The local marketplace made up of gas station owners and retailers determines the prices," Hokama said.

But Spring also believes the lack of competition, with only two oil refineries here, will continue to keep local gas prices higher than the rest of the nation.

"Up here in California we have six refiners that own about 92 percent of the market, where in Hawai'i you have two refineries that pretty much own the whole market," Spring said.

Some may find it hard to believe that a commodity such as gasoline in an auto-dependent state would be affected by the post Sept. 11 economy, but gas station owners say otherwise.

Experts and gas station owners say numerous factors determine a change in gas prices but agree that three intertwining factors have recently come into play:

• A stagnant economy since Sept. 11 — Some O'ahu gas station owners said gas purchase volume at their stations has dropped 15 percent to 20 percent since Sept. 11.

"Think about it," said one Kane'ohe station owner. "If you got laid off or are worried about losing your job, you're not going to eat out as much or head into town to shop. All that adds up to less gas consumption."

"I've seen less traffic coming through here," said another Kane'ohe station owner. "And instead of purchasing a full tank of gas, they're only buying $5 to $10 worth. That's not a positive indicator."

Less demand also means ...

• An abundance of fuel: Prices for all types of fuel — from gasoline to jet fuel to heating oil — usually rise when consumption is greatest, during summer and the winter holidays when people travel more and when winter increases the need for heat. But with travel down following the terrorist attacks, supply nationwide is much greater than demand.

"People are not flying as much, so there is less demand for jet fuel," Spring said. "In turn, rental car companies are not renting out as many cars. Manufacturers are not producing as much, meaning they're spending less on fuel costs for shipping."

OPEC didn't immediately reduce its oil production after the Sept. 11 attacks, and other countries such as Russia and Norway continue to produce oil, leading to the glut.

• Local station competition: With gas sales already down, one gas station's decision to lower prices will usually force others nearby to follow.

"I think in some neighborhoods, it's local competition more than anything else" that has led to lower prices, said Barney Griggs, who manages Lex Brodie's Tire Co. Waipahu tire and gas service station.

With Central O'ahu a competitive battleground for gas stations — Costco in Waipio-Gentry and Freedom Gasoline in Mililani are advertising $1.47 a gallon for regular unleaded — Griggs said his company does weekly price surveys to keep track of the area competition.

Local stations in the Nanakuli-Ma'ili area are also trying to match each other's prices, currently averaging $1.58 per gallon.

"The station down the road lowers its gas by 2, 3 cents a gallon, everyone is going to follow to stay in the same price ballpark," Griggs said. "The question is how low can dealers go and still actually make a profit?"

Spring believes the gas euphoria may be short-lived, with Mainland prices bottoming out and likely on their way back up soon.

"We've been tracking the drop over the last 12 weeks, and last week's decrease was only 2 cents a gallon, compared to the previous 4 to 5 cents drop the previous weeks," Spring said. "We knew there had to be a bottom. Prices will probably turn around sometime in the new year."

Meanwhile, 18-year-old driver Chantelle DeJesus — who regularly spends about $20 each week on gas for her Ford Escape — said she will enjoy the lower prices as long as she can.

"Before this, I used to drive to whichever gas station was having a special promotion for the week," said DeJesus, while pumping gas last week at the Sugar Mill Shell station in Waipahu. "I can pretty much go to any station I want now, now that it's so cheap."

Reach Scott Ishikawa at sishikawa@honoluluadvertiser.com or 535-2429.