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The Honolulu Advertiser
Posted on: Wednesday, December 28, 2005

5¢ drop in gas price expected

By Sean Hao
Advertiser Staff Writer

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Hawai'i's gasoline price cap law could push pump prices down a nickel a gallon next week.

The estimated drop follows a dip in Mainland prices that serve as the basis for a Hawai'i's maximum wholesale price for gasoline.

The state today will announce the pre-tax wholesale price cap that will take effect Monday. Based on recent market activity next week's wholesale cap is expected to be $1.81 a gallon for regular on O'ahu, excluding taxes, according to Advertiser calculations.

In addition to about 62 cents a gallon in taxes retail prices for regular include a dealer mark-up, which ranges between 12 cents and 20 cents a gallon for regular on O'ahu.

Based on current Honolulu and Mainland retail prices it's unclear whether the caps are helping or hurting local drivers.

For example, on Monday the average price for regular gasoline on O'ahu was $2.628 a gallon, which was nearly 23 cents below the price just before the cap took effect Sept. 1, according to the AAA Daily Fuel Gauge Report.

Meanwhile the nationwide average price for regular Monday was $2.181 a gallon — nearly 50 cents a gallon below the national average of $2.68 on Aug. 31.

Under Hawai'i's gas cap law, which took effect in September, the state's historically stable but high gasoline prices are supposed to mimic Mainland price swings. Price cap proponents say the law results in a healthier, more competitive retail gasoline market.

Under the Democrat-backed law, retailers are free to charge whatever prices they choose. That means pump prices won't go down unless gasoline retailers pass along a drop in wholesale prices resulting from the cap.

Since the caps took effect prices seem to have risen faster than they've fallen, said Jack Suyderhoud, a business economics professor at the University of Hawai'i-Manoa.

"Prices continue to go up faster than they go down," he said. "And they consistently haven't gone down as much as they've gone up."

Reach Sean Hao at shao@honoluluadvertiser.com.