Amended bill tweaks gasoline price-cap law
By Sean Hao
Advertiser Staff Writer
State legislators yesterday pushed forward an amended gasoline price-cap bill that alters the formula for figuring the top price but lets controls take effect in July as planned.
Measures that would have delayed or repealed the gas-cap law, were shelved. While it's still early in the legislative process, the moves indicate that lawmakers appear intent on implementing gasoline price caps despite a state-financed report that concluded price controls would lead to shortages and higher prices.
The Legislature passed price caps in 2002 to artificially limit local oil-industry profits in the absence of Mainland-type competition. The law included a two-year delay to allow for a report on price caps, which ultimately recommended alternatives such as stepped-up monitoring of the industry, and eliminating laws that restrict where refiners can build gas stations and govern the rent that can be charged dealer-operated stations.
Instead, Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the gasoline price-cap law, is proposing changes to the law that alter the price-cap formula, impose caps on all major grades of gasoline and diesel fuel, and increase a retail margin for Neighbor Island dealers. Menor and other proponents for price caps disagree with the findings of the report done for the state by Irvine, Calif.-based Stillwater Associates.
Menor maintains price caps are the only way to provide relief from Hawai'i's historically high gasoline prices. Gasoline prices have hovered around $2 a gallon or higher statewide for about a year, despite dips in Mainland prices.
"The critics have an obligation to come up with meaningful alternatives and thus far they have not come up with meaningful and reasonable alternatives," Menor said. "Until such alternatives are presented to the Legislature, I'll continue to support our gas price-cap proposal.
"The reason why the Legislature needs to take action now is because consumers need immediate or near-term relief from high gasoline prices."
The bill would need approval of both houses of the Legislature and Lingle before becoming law. However, if the new formula were currently in effect, the maximum price for a gallon of self-serve regular gasoline on O'ahu this week would be about $2.01. That's slightly higher than Friday's average of $1.998 a gallon, according to AAA travel club.
While price caps could mean lower prices for consumers today, oil industry representatives maintain that over the long run they would drive up prices. That would appear to bode well for the industry, however, Chevron Hawai'i and other local oil companies remain opposed to price controls.
"It's just an added government regulation that may have unintended consequences," said Melissa Pavlicek, a lobbyist for the Western States Petroleum Association, which represents Chevron, Shell and other oil companies that operate in the state. "It's surprising that the Stillwater report said caps would not work and we're still talking about a price-cap law."
Oil companies operating in the state maintain gasoline prices remain high because of the cost of doing business in Hawai'i and the state's high taxes. Hawai'i's high gas prices are the result of a number of other factors including the state's low-tech, small-volume refineries that process expensive forms of crude oil. Local refiners also charge higher prices for gasoline to compensate for lower-margin products such as jet fuel and fuel oil used to generate electricity. Shipping crude oil to the middle of the Pacific Ocean also increases prices.
Among its findings the Stillwater report stated the current price-cap law is flawed because it only caps regular gasoline prices and bases Hawai'i prices on the volatile West Coast gasoline market.
The report also found that oil companies operating in Hawai'i reap profits not possible in more competitive Mainland markets. However Stillwater said those profits were not excessive. Critics contend Stillwater ignored expert testimony to the contrary during the state's now settled anti-trust lawsuit against local oil companies.
Menor's changes to the price-cap law include capping regular, mid-grade and premium gasoline along with diesel fuel based on national average of gasoline prices. The bill also would tighten up a provision in the current law that gives the governor discretion over whether to implement price caps. Gov. Linda Lingle opposes gasoline price controls.
A House bill that would have imposed a one-year delay on a gasoline price-control law on O'ahu was effectively killed Friday when its introducer, Rep. Ken Hiraki, D-28th (Iwilei, Downtown, Makiki), failed to attend a hearing on his own bill.
"The Senate is moving out their bill so we'll just deal with the Senate bill when it comes over," Hiraki explained.
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
