ISLAND VOICES
Should Hawai'i keep gas price caps?

By Rep. Ed Case

U.S. Rep. Ed Case was a co-introducer of Act 77 as a state representative.

The only practical option for the state of Hawai'i to control sky-high gas prices, especially for rural O'ahu and Neighbor Island consumers, is to implement the pending state price cap legislation (Act 77, 2002) as soon as possible.

CASE

The Stillwater Report obviously started with the conclusion that Act 77 should be repealed, and then proceeded to try to justify that result. Its basic premise — that Hawai'i's gasoline market is not broken and will self-adjust through the operation of normal market forces assisted by a little corrective legislation — is not borne out by either the facts or the admissions of oil company executives under oath in the recent antitrust action.

And the Federal Trade Commission's conclusion that all we need is better education on using regular gas instead of premium demonstrates a total ignorance of Hawai'i's situation.

For decades, we were all told that the reasons for our highest-in-the-country gas prices were the high cost of doing business in Hawai'i, high taxes, high shipping costs and high Neighbor Island transport costs. But now we know that none of that accounts for our outrageous pump prices. Now we know that the actual cost of all of that, in today's prices, including a standard profit to the retail gas stations, is only about $1.60 to $1.70 per gallon for regular on O'ahu and 4 to 5 cents a gallon more for premium. And we also know that shipping to the Neighbor Islands is only about another 3 to 5 cents a gallon, regular or premium.

Compare that against actual pump prices today of $2 to $2.10 per regular gallon and $2.20 to $2.30 per premium gallon on O'ahu, and prices ranging from $2.25 to $2.50-plus per regular gallon and $2.45 to $2.70-plus per premium gallon for the rural parts of our state. You can be sure we have been sold, and are still being sold, one incredible bill of goods.

The difference between actual cost and pump price is the most consistent highest profit margin to Chevron and the other refiners in the country, and the reason is very simple: They control the market.

Act 77 said we're not going to take this anymore. It's crippling to our consumers and our businesses to export hundreds of millions of our hard-earned dollars in outrageous excess profits to the multinationals that happen to have captured our isolated and vulnerable market.

Even after Act 77 takes effect, they will be able to continue to take profits out of Hawai'i comparable to, if not in excess of, those in virtually all other domestic markets, so this sky-will-fall strategy carried out through Stillwater to scare us into submission must be recognized for what it is and rejected.

We also must see this as part of a larger effort to free Hawai'i's businesses and consumers from control of our lifelines by large entities. As a small island state in the middle of the Pacific, we are especially vulnerable.

We have seen a new "Big Four" develop in recent decades in four key areas: shipping, healthcare, gas and electricity. Over the long run, our economic vitality will depend on both increasing competition and protecting consumers.Ê

It is also increasingly clear that the gas price situation countrywide cannot be explained by normal competitive market operations, and it is clearly time for us to discuss on a national scale the issues we have grappled with here.

I am drafting legislation that would impose a federal excess profits tax on gas refiners, with proceeds payable back to the states for reinvestment in transportation-related efforts, the expectation being that they would be applied toward state and county highway taxes.