At 5 cents a gallon, the savings won't necessarily be a windfall to consumers when the nation's first gasoline price cap takes effect Sept. 1. Still, many would welcome the lower price, which works out to about $21.35 per year per vehicle.

"For starters I'd be satisfied with that," said Ted Gibson, a retired engineer in Kailua, who drives about 100 miles each week.

Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the price cap law, said a 5-cent-per-gallon savings illustrates the effectiveness of the law.

"I think the potential savings could be even larger over the long-term, especially if crude oil prices fall substantially," said Menor.

The 5 cents per gallon estimated savings is based on Advertiser calculations and could be on the high end.

The new law caps wholesale gasoline prices only. There is no guarantee that retailers would pass on the savings.

The 5-cent-per-gallon saving last year assumes retailers maintain the same margin — the difference between what they pay the wholesaler and what they charge the consumer — they had prior to the law. The highest margin O'ahu dealers make is about 12-cents-per-gallon, according to various industry experts.

"If we could get more margin, we'd keep it," said Bill Green, a former owner and current consultant to Kahala Shell. "I know that's not a good public thing to say. (But) there'd be no reason for us to lower a price because we're already on the ragged edge."

O'ahu retailers contend margins on gasoline are low relative to high land, labor and tax costs. Profits on car washes, service bays and convenience-store sales typically are higher, Green said.

Lawmakers intended for the gas cap —Êwhich applies to all grades of gasoline — to force Hawai'i prices to react more closely to changes in crude oil.

The law prevents Hawai'i wholesalers from charging more than 22 cents above the five-day average spot price for regular gasoline in Los Angeles, the Gulf Coast and New York. The law also provides for an added adjustment for Neighbor Island sales, though those rates have not yet been set. That makes it impossible to estimate what Neighbor Island prices would be under the cap.

Steady price increase

During the past two years, gasoline prices in Hawai'i have generally risen, despite periodic drops in crude oil prices. Mainland prices for gasoline typically fluctuate with crude oil prices. Hawai'i's sticky gasoline prices are typically attributed to the market's small size, geographic isolation and lack of competition.

"I think that Hawai'i consumers would be better off in an environment where their gasoline prices would be linked to pricing trends on the Mainland," said Menor, chairman of the Senate Consumer Protection and Housing Committee. "I just don't think Hawai'i consumers are being well served by the current market in which gasoline prices always tend to rise when Mainland prices rise, but never seem to drop."

Whether Hawai'i consumers would be better off with more volatile prices is unclear.

"There's some benefit (from the cap) when crude oil prices go down, but there's a disbenefit when crude oil prices go up," said David Hackett, president of Stillwater Associates, which has produced a report critical of gasoline price caps. "Prices in Hawai'i are high and non-volatile. So when you introduce a price cap formula you make them high and volatile. Is that a good thing?"

A look at prices last May illustrates Hackett's point. That was a month when crude prices rose on security concerns in the Middle East, but prices in Hawai'i remained relatively flat. If the price cap had been in effect last May, retail prices might have been as much as 25 cents a gallon higher for regular than they actually were.

Crude prices critical

The flip side occurred in December. Crude prices fell on easing supply concerns, but gasoline prices in Hawai'i stayed high. Under the price cap law, the price of regular could have plunged as much as 34 cents a gallon in December.

"The big difference is that the prices the refiners are allowed to charge will go up and down like a yo-yo," said Green. "How that will affect the retail price is anybody's guess."

Hackett, who urged lawmakers to step up monitoring of the oil industry rather than institute price caps, said it's reasonable to suggest prices could have been lower for consumers last year, if the caps had been in place. However, one year is not a long enough period to gauge their effectiveness, nor how oil companies would react to reduced profits.

If gas prices were forced down, refiners would lose money and leave the state, lowering competition, according to Hackett's report on an earlier version of the price cap. He estimated that the loss of Hawai'i's two refineries would cost 1,400 jobs and $405 million a year in economic benefits.

"When governments set market prices all kinds of unintended consequences happen," Hackett said. "If caps allow the market principals to make money, then they'll stay in the market. If they can't they'll leave the market."

Tesoro Petroleum Corp. said it will wait to see the final version of price-cap rules, which are scheduled for release in August, before commenting on their potential impact. Hawai'i's second oil refiner, ChevronTexaco, also declined to detail what actions it might take in relation to the caps. Company spokesman Albert Chee said it's impossible to predict that price caps will result in lower retail prices.

"I don't know if this law will do anything for consumers," he said. "There's no mechanism to assure that."

An earlier version of the gasoline price cap, which was never implemented, attempted to cap retail prices, but was met with stiff opposition from gasoline retailers. Those retailers are less leery of the cap on wholesale prices, Green said.

"I think generally speaking, they've bought into Menor's philosophy that as long as they aren't affected, they'll be better off," he said. "The question is what are oil companies going to do?"