Modified state gasoline price cap offered
By Kelly Yamanouchi
Advertiser Staff Writer
The state gasoline price-cap law that takes effect in July would tie the maximum price for gasoline to prices nationwide, rather than just in California, under an amendment proposed by legislators yesterday.
A citizens group told legislators the proposal for an amended price cap would set the ceiling for regular unleaded on O'ahu to roughly $1.87 a gallon, instead of about $2.02 a gallon if in effect today.
"Our state's gasoline prices, which are the highest in the nation, continue to defy logic or normal market forces and remain high even when Mainland prices are falling," said Sen. Ron Menor, D-17th (Mililani, Waipi'o), chairman of the Senate Committee on Commerce, Consumer Protection and Housing.
Menor said he and other lawmakers would propose a new gas price-cap formula developed with the community group Citizens Against Gasoline Price Gouging that uses the national Oil Price Information Service average spot price for gasoline, which is less volatile than California prices, to which the Hawai'i cap currently would be pegged.
The citizens group said Hawai'i consumers could save anywhere from $92 million to $125 million a year under the proposed price cap.
But the proposal is almost certain to run into opposition from price-cap opponents, including Gov. Linda Lingle, who wants to do away with the ceiling before it is implemented.
The proposal for an amended formula also goes against the advice of a state-commissioned consultants report released in September. The $250,000 report concluded a price cap could lead to higher prices and should be repealed. Stillwater Associates LLC also concluded that oil industry profits are not excessive, a finding questioned by industry critics.
Constant pressure
The discussion on price caps came during an informational briefing before Menor's committee as the average price statewide for regular gasoline came to $2.091 a gallon yesterday. That was less than the record $2.132 in October, but it kept Hawai'i's at the top of the nation for gas prices.
High prices are putting pressure on officials to address the complex, long-standing question of how and whether to control fuel prices.
Menor's proposal calls for price caps on all grades of gasoline and diesel fuel, not just for regular unleaded, as currently provided. Supporters say the amended price cap generally would be lower than the existing ceiling.
Taxes, shipping and marketing costs, and retail margins would be added to the national average spot price to determine the price cap under Menor's proposal. The ceilings would be higher for Neighbor Island retail gasoline dealers to account for higher shipping and business costs.
Objections stand
Stillwater President David Hackett said yesterday his firm stood by its report, and his position against price caps had not changed.
"When we did our evaluation, we looked at different formulas — and one certainly can come up with a formula that's less volatile than the West Coast. But at the end of the day, we don't think price caps are going to work in the Hawai'i market," Hackett said.
Melissa Pavlicek, a lobbyist for the Western States Petroleum Association, said any price control would create problems, including shortages and increased price volatility.
Officials with the state Department of Business, Economic Development and Tourism, which helped compile the Stillwater report, said yesterday they continued to support its findings. The conclusion that price caps could lead to higher prices or shortages "would still be of concern to us," said Maurice Kaya, department energy branch administrator.
Critics of the gasoline price cap have suggested the regulation would make the Hawai'i market less profitable and lead to the closing of local refineries.
But Frank Young, chairman of the citizens group and president of the Hawaii Automotive Repair and Gasoline Dealers Association, challenged that theory, saying other suppliers want to enter the Hawaii market.
Young acknowledged that suppliers might close refineries eventually because of high costs, or perhaps just to make a point. He noted that Citizens Against Gasoline Price Gouging was working with limited information, and while its testimony was "basically accurate," it could include mistakes.
Conclusions questioned
The citizens group and legislators questioned Stillwater's calculation of oil company profits and its assertion that 1,400 jobs could be lost because of price caps.
"I've got questions about the validity of the (Stillwater) data," Menor said. "I think the report is flawed." The senator said he was open to a state investigation of oil company operations if money were available to pay for it.
Menor said yesterday's briefing at the Legislature was the first of many to come. He said he also was considering adding a sunset date to the gas price-cap law to allow for a more effective long-term solution to the problem of high gas prices, such as the creation of a state fuel authority to sell and deliver gas.
Menor also plans to introduce legislation to increase financing for the state Public Utilities Commission to monitor the price cap and allow the attorney general's office or a citizens group to petition the PUC to adjust the ceiling.
Reach Kelly Yamanouchi at 535-2470 or kyamanouchi@honoluluadvertiser.com.
