13-day gas cap? It's moot

By Sean Hao
Advertiser Staff Writer

Paying $2.299 a gallon for regular gasoline in Kahala, Brandon Nishiki pumps $40 worth into his truck. Regular gasoline averaged $2.24 in Honolulu yesterday and $2.328 statewide. Gregory Yamamoto • The Honolulu Advertiser

By a quirk of legislative scheduling, gasoline price caps created under Act 77 of 2002 take effect today, but will be amended and delayed under a new bill that will become law without Gov. Linda Lingle's signature July 13.

The price of regular gasoline in Honolulu would be capped at $2.33 a gallon under the law if it were enforced. However, no money was provided by the Legislature to implement or enforce the caps.

Gasoline dealers are not likely to raise the price of regular — which averaged $2.24 a gallon in Honolulu — to the maximum allowed under the cap because it is temporary.

A key concern of those opposed to gasoline price caps was that dealers would be compelled to charge the maximum price allowed under the cap to offset periods when the ceilings cut into profits.

"There's no question because you have to be prepared for the time when it's not in your favor," said Bill Green, owner of Kahala Shell across from Kahala Mall. His price for regular yesterday was $2.299 a gallon.

The caps, which also set ceilings on leases and rents at dealer-run stations, were created as a means of artificially imposing Mainland-type prices in the Islands. However, last year a state-financed report concluded that the current gasoline price-cap law would lead to higher prices and potential shortages.

Just what will happen if a gasoline price cap law is enforced won't be known at least until September 2005. That's when Act 77's replacement is slated to take effect.

The new law attempts to fix flaws in the current caps by tying Hawai'i's prices to spot prices in several markets across the nation. It also would expand the caps to cover all gasoline grades except diesel and eliminate a cap on retail prices.

Another aspect of Act 77 that also takes effect today are regulations designed to keep oil companies from offsetting profits lost on gasoline sales by raising rents on dealers. However, that law remains unenforceable, state Deputy Attorney General Rod Kimura said yesterday.

That's because federal courts have ruled that a similar rent cap law violates a constitutional prohibition against taking someone's property without benefit to society. Ron Menor, chairman of the Senate Consumer Protection Committee, said the new rent cap law should be better able to weather a constitutional challenge.

Because the new rent cap in Act 77 is paired with gasoline price caps, it should result in lower prices and meet the constitutional requirement that there is a benefit to society, according to advocates.

Menor said the rent caps should be enforced even though gasoline price caps won't take effect for more than a year.

"We don't want them to jack up the rents now," Menor said. "The rent cap was designed to prevent the oil companies from circumventing the price cap."

In the absence of price caps consumers yesterday were left to their own means of coping with expensive gasoline.

"I don't do anything different except try to drive a little less, if I can," said Adam Lockwood of Kahala after pumping $47.04 of regular into his truck at Kahala Shell. "I think the less government gets involved, the better off we are."

Brandon Nishiki of Mililani said he fills up at Costco when possible.

"It's not bad, but last time I had to wait for 20 minutes," said Nishiki, who has switched from supreme grade gasoline to regular.

Nishiki, who pumped $40 worth into his truck at Kahala Shell, said prices were about as high as he could stomach. Statewide the average for regular yesterday was $2.328 a gallon — the highest average among all states, according to AAA travel club.

"Any more expensive and it would be ridiculous," Nishiki said.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.