Cap is a bad idea that will bring us only more grief
By Rep. Lynn Finnegan
Reading Ben Cayetano's recent commentary, "Without gas-price cap, sky would be the limit" (The Honolulu Advertiser, Sept. 11), I was surprised by how often the commentary touched on the politics of the gas cap, as opposed to the merits of the policy.
The former governor makes the point I would make: Politics can lead to bad policy.
In the 1970s through the late 1990s, it seemed oil companies were making huge profits at the expense of Hawai'i consumers, who had no choice but to pay high gas prices. In 1998, two very significant events affected the oil industry in Hawai'i. The first was the opening of a new import terminal by Aloha/Texaco, allowing Aloha/Texaco to negotiate lower gas prices due to their new ability to import.
The second was the filing of a $2 billion lawsuit for price-fixing against Chevron, Tesoro, and other oil companies operating in Hawai'i.
While Cayetano's commentary mentions the 1998 lawsuit against the oil companies, the bottom line was the state could not prove its price-fixing case against the oil companies, and settled in 2002 for 1 percent of the amount originally sought.
It seems that while the state could not prove the oil companies did anything illegal, politicians found a convenient villain to rail against.
The Legislature, led by then-Rep. Ken Hiraki and Sen. Ron Menor, next turned the failed lawsuit into legislation, and in 2002, the Legislature passed Act 77. This law imposed caps on retail and wholesale gasoline prices in an effort to continue the fight against "Big Oil." Twenty-one representatives — Republicans and Democrats — voted against final passage of the measure, questioning the economic wisdom of the bill.
Act 77 did one thing right: it appropriated $250,000 to the Department of Business, Economic Development and Tourism to hire experts to review the impact of Act 77.
In the 2002 election, the Democrat Party equated opposition to the gas cap to being puppets of Big Oil, and put out political "hit pieces" stating just that. The pieces incorrectly attacked Republicans who voted for the cap. The hit pieces helped to defeat five Republican incumbents.
Then in September 2003, DBEDT's experts produced the Stillwater report. Much to the chagrin of gas-cap supporters, the report advised that the gas cap be repealed, in addition to repealing other roadblocks to competition including divorcement laws, and forcing the oil companies to open their books. After viewing all lawsuit records, Stillwater concluded there was no evidence of oil company price gouging or excessive profits.
By the 2004 legislative session, efforts were under way to amend the gas-cap law, but none used the suggestions offered by Stillwater. Even though Stillwater offered policy changes that it said would lower gas prices, none would punish oil companies. Never mind that oil companies hated having their financial data published, Democrats still had to "punk" as well as punish the oil companies. Supporting Stillwater, Republicans forced a floor vote to repeal the gas cap. All Democrats opposed the repeal.
In 2005, Democrats continued to ignore gas-cap alternatives. These included Gov. Linda Lingle's House Bill 605, which required oil companies to open their books, showing how much they are actually paying and making, and the Republican caucus' House Bill 187, calling for the repeal of lease rent controls — a proposal suggested by Stillwater.
We ended the 2005 session with experts such as Fereidun Fesharaki, senior fellow at the East-West Center and expert in energy and oil planning; Paul Brewbaker, chief economist at Bank of Hawaii; and Jack Suyderhoud, professor of business economics at UH, opining that the gas cap is bad for Hawai'i for a number of reasons: a negative business climate, higher prices, volatility, costs to implement and achieving nothing.
Their predictions appear to have come true.
We could say the gas cap is working as drafted, and we can see the effects: higher gas prices for consumers, volatility that will cause retailers to lose money, abnormal driving patterns, gridlock near gas stations.
The bottom line is people suffer — commuters, business owners, you and me. No policy that causes this many people to suffer needlessly can be good policy. It could be — and has been — good politics for some.