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The Honolulu Advertiser
Posted on: Tuesday, November 1, 2005

No clear answers yet on Hawai'i gas cap law

There's no question the Hawai'i gas cap law has created as much controversy and confusion as it has clarity in the Island gasoline market.

As staff writer Greg Wiles reported Sunday, the price cap has indeed worked to link Hawai'i prices to a broad Mainland index.

But it has not worked to eliminate the gap between our prices and those on the Mainland. We still have higher average prices than the rest of the country.

The problem is, most drivers are not that interested in whether our prices track Mainland averages. What they want is cheaper gas, and that's what they thought a gas price "cap" was all about.

Unfortunately, a fair test of the gas cap has been difficult because of the volatility in the market after Hurricane Katrina, since our "cap" is based on a "basket" of oil prices that includes Gulf Coast prices.

In addition, local retailers and consumers have had to come to grips with a market in which the price can, and does, change from week to week.

This creates scenarios in which drivers hold back buying gas in anticipation of lower prices, then they flood the stations and drain the pumps.

Gov. Linda Lingle, a critic of the law, has said she will use her powers to suspend it if the cap causes serious disruptions to the local economy or threatens health and safety.

To date, that argument would be difficult to make. Yes, there has been confusion and uncertainty, but hardly anything that rises to the level of serious disruption.

In fact, the margin between Hawai'i per-gallon prices and the Mainland for regular unleaded in late September was actually smaller than the gap a year ago, before the law went into effect.

So supporters of the cap might argue that it is beginning to reduce, if not eliminate, the price differential between the Islands and the Mainland.

The bottom line is that unusual conditions on the Mainland and the volatility that came with a new pricing scheme has left us without a true test, yet, of whether the gas cap law works for Island consumers.

To date, it has not caused a level of disruption that would meet the governor's test for suspension of the law. That day may come, but more time and experience are needed first.