COMMENTARY
Higher gas prices are not all we'll pay
By Kymberly Pine
As in everything we do, the making of laws is subject to the unpredictability of human nature. Thus emotions sometimes compete with facts even in making decisions that affect the lives of an entire community.
This is just what has happened with the so-called "gas cap" law. Controversial from its birth during the Legislature's 2002 session, the law, significantly amended in 2004, will finally take effect on Thursday. Although touted by proponents as a way to lower the price at the pump, from the beginning experts have been telling anyone who would listen that the law was as likely to raise prices as to lower them.
It could also bring a number of unintended consequences, including possible shortages.
Virtually all the research and experts have come to the same conclusion — that while the gas cap may have been created with the best of intentions, it would probably backfire:
Perhaps it would be helpful to understand how we got to this point. The Legislature passed the law in 2002. Because it was controversial, the law's effective date was delayed two years till July 2004. In the interim, the law called for the Department of Business, Economic Development and Tourism to evaluate its impact.
DBEDT picked Stillwater Associates, a reputable firm with great expertise in the petroleum industry, to do a study.
Additional studies were also conducted by the National Conference of State Legislatures and by the U.S. Federal Trade Commission, whose mandate is to ensure fair competition for the benefit of consumers.
The unanimous conclusion of all three studies, arrived at independently: The gas cap would not work. It would have unintended, harmful consequences. It should be repealed.
The studies and the experts also explained the real reasons for the high price of gas in Hawai'i — high taxes, the high cost of doing business in our state, other well-intentioned laws that backfired, and a small, geographically isolated market.
Allowing for variations in the taxes levied by the various counties, the taxes on a gallon of gasoline in Hawai'i average about 60 cents. That's 16 cents higher than the U.S. average.
So at current price levels, taxes account for about one-fourth of the bill every time we fill up. If the Legislature is sincere about lowering gas prices, it should lower the gas tax on the people of Hawai'i.
Earlier this month the media reported the latest study of the cost of doing business in Hawai'i. In its annual survey, the Milken Institute found that Hawai'i is the most expensive place to do business in the entire country. It should be no surprise that experts point out that those high costs add to the price of gasoline.
In an effort to protect independent service station operators, the Legislature has enacted a "divorcement" law — which prohibits building new service stations near existing dealer-operated stations — and other laws that actually restrict competition. According to several conclusive studies, divorcement increases the price consumers pay at the pump.
Fifteen years ago, a report by the East-West Center pointed out that Hawai'i's small market requires terminals and other facilities that would be unnecessary for a community that was not geographically isolated and spread over a chain of islands.
A study prepared for the state (Stillwater) found that Hawai'i's small refineries are of a very simple design tailored to the demands of a small market. As a result, they are not able to capture economies of scale like the bigger refineries on the Mainland.
They also noted that the low-sulfur or "sweet" crude that these simple local refineries must use is available only at a premium, which alone adds another 7 cents a gallon at the pump.
As July 2004 approached, the Legislature decided to postpone the gas cap's implementation date to Sept. 1, 2005, despite the recommendations of experts to simply repeal the law. Now, as the law is about to take effect and the PUC says prices might go up, more people are finally taking note of the experts' advice, given at the Legislature's request and the taxpayers' expense.
With the gas cap almost upon us, the debate is now shifting from "Should we implement it?" to "How do we stop it?"
A growing number of legislators see a "train wreck" taking shape, yet would prefer that the governor quash the law rather than risk voter backlash by repealing it themselves. Gov. Linda Lingle, who opposes the gas cap because of the harm it will bring, is unable to suspend the law without direct proof that the law would cause lasting economic damage.
To her credit, she continues to say publicly she will do just that if needed. I believe the best way to avoid the gas cap's unintended consequences is for the Legislature to repeal it in special session.
That would effectively answer the questions I am getting from dozens of constituents, who say they don't understand how a "cap" on gas prices could make gas more expensive, rather than cheaper.
The bottom line for the people of this state must be "Do no harm, fix the oversight and next time, pay attention to the experts."
