Hawai'i's lofty gasoline prices typically are blamed on high taxes, the relatively small size of the state's gas market and the high cost of doing business in Hawai'i, among other things.

But they also are a result of the oil industry's ability to manage the state's gasoline supply to an extent that's not possible in more competitive, less-isolated markets, according to industry experts. Managing the supply prevents price spikes experienced in markets such as California, but also limits downward pressure on prices.

Under normal circumstances the state's two refineries — ChevronTexaco and Tesoro — can produce more gasoline than the Hawai'i market consumes.

However, they choose not to pump that excess gasoline into the local market. Because demand for gasoline in Hawai'i is relatively stable, the oil industry would have to slash prices to generate enough demand for the excess supply to be consumed, said David Hackett, president of Irvine, Calif., oil industry consultant Stillwater Associates.

"From a practical matter, prices would have to be cut in half to increase demand dramatically," Hackett said. "I think (the refiners) figured out a long time ago they'd rather export than do that. Basically what you have to do is create more demand."

Tesoro said that during the first three months of this year, it shipped 63 million gallons of gasoline and gasoline blend stocks to California from several out-of-state refineries, including Honolulu.

Although Tesoro wouldn't specify how much of that came from Honolulu, it did say exports to California were a positive factor in the financial results of its Hawai'i refinery, which during the first quarter posted its highest gross refining margin since the fourth quarter of 2002.

Still, from a business standpoint, both ChevronTexaco and Tesoro said their plans are to make and sell gasoline in Hawai'i, and export only when needed because of a lack of local demand. Excess gasoline production sometimes comes as a byproduct of meeting demands for other petroleum products needed in Hawai'i, the companies said.

"It's not what you plan to do looking forward, but occasionally that's the situation you find yourself in," said Elizabeth Fitzgerald, a business manager for Tesoro. "It doesn't make sense to buy crude and bring crude into Hawai'i and have to pay money to ship products out of Hawai'i.

ChevronTexaco, which said it shipped only about 30,000 gallons out of Honolulu during the first six months of the year, agreed.

"The economics don't always work out to your favor because of the shipping costs," said spokesman Albert Chee. However, in Hawai'i, "you can only sell as much as the market demands."

The practice of exporting gasoline isn't unusual or illegal. It's simply a means of keeping supplies tight and prices high, said Esa Ramasamy, an editorial manager in the Singapore office of the price-reporting agency Platts.

"This is a common practice among refiners to maintain tight supply balances," he said. "All these movements are either to support or maintain existing prices in their respective locations."

So, instead of selling excess gasoline in Hawai'i — where retail prices have been among the highest, if not the highest, in the nation — the gas was sent offshore. In February 10.1 million gallons were sent to New Zealand followed by 9.2 million gallons exported to Australia in March, according to federal records.

Tesoro wouldn't comment on the profitability of those transactions. However, based on regional gasoline prices at the time, it doesn't appear that the transactions were particularly lucrative.

In February and March, gasoline imported into Australia from Singapore cost an average of $1.03 and $1.12 a gallon, respectively, including shipping and insurance costs, according to price-reporting agency Platts. Ramasamy said that's about what any Hawai'i gasoline of similar grade would have sold for in Australia during those periods.

However, in February and March Hawai'i refiners would have been charging about $1 and $1.10 a gallon, respectively, for regular gasoline in Honolulu, according to various sources. Tack on anywhere from 5 cents to 10 cents a gallon to cover shipping costs and on the surface, Tesoro's sales in Australia may not have made financial sense, Ramasamy said.

In contrast, exporting gasoline from Hawai'i to California may have made the greatest economic sense. That's because on the West Coast the spot market price for gasoline was an average of $1.24 in February and $1.22 in March, according to Platts.

However, exporting to California was not an option because the gas did not meet the state's clean-air requirements, according to Tesoro.

"That could be it, but to be honest, I think the Hawai'i spec (gasoline) could be sold anywhere else at a higher price (than in Australia) so why not move it to the states?" Ramasamy said.

"It's very simple: Do you want to maintain the supply-and-demand balance? Do you want to tilt the market in favor of supply?

"In order to maintain higher market value to maintain a better margin on gasoline, you export to markets where you don't mind losing it because you can make it up.

"Whatever loss is minimal."