"They've got the prices down," said Leslie Weston, from Kuli'ou'ou, as he pumped about nine gallons of Costco regular into his car last week. At $1.84 a gallon that's about 15 cents less — or $1.35 for Weston's nine gallons — than the average price of nearby stations.

The discount retail club's new gasoline station in Iwilei was seen by many as a market-based solution to Hawai'i's historically high gasoline prices. If Costco's low price could touch off a gas-price war, maybe the state wouldn't need to impose a controversial gasoline price cap set to take effect this July.

But so far the price war hasn't materialized. Costco's Iwilei station opened in November and last week the average price for regular at 22 gasoline stations within a 1.5-mile radius was $1.99 a gallon.

"I'm surprised the other stations haven't come down," said state Sen. Gordon Trimble, R-12th (Waikiki, Ala Moana, Downtown), who advocates taxing excess oil-company profits rather than setting price caps.

State legislators passed the only gasoline price-cap law in the nation in 2002 in hopes of driving down prices in the absence of Mainland-type oil industry competition.

Some dealers near the new Costco station, who acknowledge losing customers, said they're in a bind because they just can't match Costco's low prices.

"We can't go down that much," said Hiram Kugiyama, owner of Hiram's Chevron on School Street. "We buy gasoline for more than (what Costco is charging customers)."

Rather than increasing competition, the big-box retailer's low price could result in less competition as dealers that can't compete exit the market, said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the gasoline price-cap law.

Costco "is having a negative impact on dealers," he said. "Having more competition and dealers that can compete is beneficial to consumers.

"I just think that just the presence of Costco isn't going to alleviate consumer concerns about high gas prices."

Such small operators as Marshall's Shell and Hiram's Chevron are relying on their auto-repair business and full-service pumps to help offset the loss of gasoline sales to Costco.

"We check the tires, we check the oil the old-fashioned way," said Kugiyama at Hiram's Chevron.

But there is little they can do about the price.

"If the price of gas goes down, we'll pass that on to customers, and if the price goes up, it goes to the customer," said Sharleen Revilla, a manager at Marshall's Shell. "The price hasn't gone down."

Given more time, Costco may spur a price war, said Trimble, the Republican state senator. However, that ultimately may force consolidation, leading to fewer stations, he said.

"I think what we may find over time are larger stations that can run on lower margins," Trimble said.

One reason often cited for the high gasoline prices in Hawai'i is that the state has only two oil refineries — run by Tesoro and ChevronTexaco. Other factors commonly cited include the state's geographic isolation, the high cost of doing business in Hawai'i and the state's high taxes.

Proponents of the gasoline price cap argue that the two refineries, which produce most of the state's gasoline, have no incentive to lower prices and therefore the government needs to force prices down.

•	"If the price of gas goes down, we'll pass that on to customers, and if the price goes up, it goes to the customer. The price hasn't gone down." — Sharleen Revilla, Marshall's Shell gas station manager

One thing Costco has proved is that lower gasoline prices will draw a crowd.

"It's exceeded expectations to the point where we're extremely happy," said Iwilei Costco manager Robert Loomis.

For Costco, which also sells gasoline at locations in Waipi'o and Kona, the idea is to offer low-priced gasoline to bring added traffic into the store. Costco only sells gasoline to customers who have bought the $45 dollar annual membership card, which allows them to shop in the store as well.

Bernadette Kalua, from Waimanalo, figures she saves $4 to $5 a week by filling her minivan at the new Costco station.

"I try to plan things, so when I come to Costco, I fill up," she said.

Not far away at Marshall's Shell on Houghtailing Street, the feeling was markedly different.

"Definitely it has affected us," said manager Revilla. "We can't compete with them."

Staff writer Andrew Gomes contributed to this story.