Honolulu gas at record high
By Sean Hao
Advertiser Staff Writer
The average cost of gasoline in Honolulu reached a record high yesterday, as state bureaucrats worked on the details of a gas price-cap law to take effect in a year.
Takes effect: Sept. 1, 2005. What it does: Caps wholesale prices based on prices in several Mainland markets. Enforced by: state Public Utilities Commission
Honolulu prices rose nearly 2 cents, to a record $2.273 a gallon, according to a survey released yesterday by the AAA travel club. The peak comes on the heels of a spike in global crude oil prices, including Indonesia, a major source of Hawai'i's oil.
Gas price cap
On Tuesday the price of Minas crude, a benchmark for the Asia-Pacific region, hit a high of $45.44 a barrel — $18 more than in September 2003, according to Bloomberg News Service. Higher prices that reflect increased demand and concern about supplies translate into Honolulu retail prices that are more than 22 cents a gallon higher for regular gas than they were a year ago.
Hawai'i often has the highest gas prices in the nation because of its geographic isolation, high cost of doing business, lack of wholesale-level competition and relatively small market.
The state Legislature passed a price-cap law in 2002 scheduled to take effect last July, but it was delayed in May until Sept. 1, 2005.
The state Public Utilities Commission is working on rules to implement the price ceiling, using a $500,000 budget provided by the Legislature to hire additional staff and review the price caps for possible changes.
Whether the price controls will benefit or hurt consumers is a matter of great debate. And it's still unclear whether the PUC will be ready to implement and enforce the regulations in time.
"We may be able to get the price cap up by September of next year, but we probably won't have the appropriate staffing in place, realistically," said Kris Nakagawa, chief legal counsel for the commission. Staff will be needed to enforce the regulations.
The new price-cap formula is based on spot gasoline prices in several markets nationwide, rather than just the West Coast, as originally conceived. It covers all grades except diesel, capping prices at the wholesale level only.
A state-funded study of the first version of the law concluded it would lead to higher prices and potential shortages. The
report, prepared by Stillwater Associates in Irvine, Calif., recommended alternatives such as stepped-up monitoring of the industry and eliminating laws that restrict where refiners can build gas stations or how much rent can be charged to dealer-operated stations.
Stillwater president David Hackett said yesterday consumers shouldn't expect major relief from high prices until at least the summer of 2005, since demand isn't expected to fall anytime soon and supplies are expected to remain tight.
"You just can't make a case for prices to come down before then," Hackett said. "That's because demand is not going to come off."
Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.
