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The Honolulu Advertiser
Posted on: Thursday, August 18, 2005

Gas cap would allow 30¢ hike, state says

Poll: Are rising gas prices making you change your driving habits?

By Sean Hao
Advertiser Staff Writer

The state’s new gas cap law could mean more prices like these at this Big Island gas station, where a refill costs more than $3 a gallon.

TIM WRIGHT | Special to The Honolulu Advertiser

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Drivers looking for a bargain jammed the Costco lot in Iwilei yesterday, where regular gas was selling for $2.47 a gallon. That price could rise if gasoline wholesalers seek to maximize their profits when a new state gas cap law takes effect in two weeks.

DEBORAH BOOKER | The Honolulu Advertiser

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The Public Utility Commission took the state's new gasoline price cap out for a test run yesterday and arrived at a number that suggests the cost for regular unleaded gas on O'ahu could rise to nearly $3 a gallon under the price controls.

In two weeks, Hawai'i will be the only state in the nation with a gasoline price cap, and it may lead to higher prices. Because the gas cap is based on Mainland rates, which are at record highs, the price limit initially will be set higher than current costs.

The PUC posted on its Web site yesterday a sample of the "weekly maximum pre-tax wholesale price of gasoline" which will become the upper limit on wholesale gas prices in the state once the law takes effect. The PUC calculated the wholesale cap for regular unleaded on O'ahu at $2.27, or $2.85 a gallon, including taxes.

If wholesalers charge the maximum $2.85 and retailers keep their usual 12 cent per gallon markup, prices could approach $3 a gallon.

"What's the point of having a cap if the price can still go up?" asked Michelle Sologuren, an accountant from Hawai'i Kai, as she filled up her Mazda MPV van yesterday.

The average retail price for regular was $2.668 a gallon island-wide, according to the AAA Daily Fuel Gauge Report released yesterday.

Chris Sallas, a hotel doorman from Papakolea who paid $20 for 7.2 gallons of "supreme" gas for his 1984 Toyota Tercel, said he worries about the possible rise in gas prices under the cap.

"Maybe with the gas cap, we'll just be stuck" with higher prices, Sallas said.

The state's major wholesalers, Chevron Corp. and Tesoro Petroleum Corp., have not said whether they plan to charge the maximum allowed under the cap, but economists and state consultants speculate they will. The wholesalers may want to get as much as they can for their gas when the cap is high to help offset weeks when the cap is lower.

The irony of a price cap leading to higher prices has not been lost on critics of the new law.

"It's a ridiculous law and the rest of the nation is looking at Hawai'i and laughing," said Senate Minority Leader Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai).

Hemmings said he wasn't surprised by the PUC's figures released yesterday.

"Even if the numbers were a little more favorable, the principle is still entirely wrong," he said. "You don't come into a marketplace and have politicians set prices on consumer products."

House Speaker Calvin Say, D-20th (St. Louis Heights, Palolo, Wilhelmina Rise), said despite the possible rise in prices, the gas cap legislation should go forward.

"We should give it a chance to see how it goes," Say said.

But he added, "If (prices are) at a higher level than what is happening throughout the country, it should be a warning for the governor to maybe consider suspending it."

Under the law, Gov. Linda Lingle can suspend the cap if there is a major adverse impact on the economy, public welfare or the health and safety of people.

Hemmings dismissed the notion of Lingle suspending the gas cap, saying lawmakers are "passing the buck" to the governor. He said the majority Democrats in the Legislature should instead call a special session to rescind the law entirely.

The PUC won't officially begin setting wholesale prices until Wednesday. The prices set on that day will be effective from Sept. 1 until Sept. 5. The estimated wholesale prices released yesterday by the PUC were part of a "dry run" in preparation for implementing the caps.

The commission is gearing up for implementing the law.

"We plan to proactively gather data from wholesalers in order to confirm they are complying," said Lisa Kikuta, the PUC's chief researcher. "That's our plan eventually down the road once we have staff resources in place."

The PUC was provided $390,000 to pay the costs of administering the price caps during this fiscal year. That includes salary and benefit costs for four new positions that have yet to be filled.

Matthew Yim hopes the gas cap eventually will bring prices down.

Yim sells smoothie beverage mixes to bars and restaurants and estimated that he spends $60 a week on fuel for his 2000 Nissan Quest van.

"I like the idea (of a cap), definitely," Yim said yesterday. "We pay too much already. Here in Hawai'i, we just have to take it. But hopefully this'll work."

Advertiser staff writers Dan Nakaso and Lynda Arakawa contributed to this report. Reach Sean Hao at shao@honolulu advertiser.com or 525-8093.

Reach Sean Hao at shao@honoluluadvertiser.com.