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The Honolulu Advertiser
Posted on: Tuesday, April 18, 2006

As oil soars, you’ll feel the pain

By Greg Wiles
Advertiser Staff Writer

The container ship Mokihana looms in the background as shipping containers await loading at the Matson yard on the Honolulu waterfront. Hawai'i shipping operators already have imposed fuel surcharges. They may be imposing even more of them soon.

BRUCE ASATO | The Honolulu Advertiser

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Hawai'i consumers could see a rise in shipping and other prices if high crude-oil prices stick or continue to rise over the next few months.

"It hits everyone, but it really hits transportation companies," said Matson Navigation Co. spokesman Jeff Hull. He said Matson incurs $2 million of added operating costs annually for every $1 increase per barrel of oil.

Crude-oil futures rose $1.08 to a record $70.40 a barrel yesterday on the New York Mercantile Exchange. Higher oil prices boost the cost of doing business for shippers as well as other companies, many of whom pass along the increases to consumers.

Matson has raised its fuel surcharge for customers five times over the past 13 months because of higher oil prices. The most recent increase was April 2, when Matson raised the surcharge 3.5 percentage points to 18.5 percent. The increase added 2.6 cents to the cost of a 20-pound bag of rice, according to the shipping line.

While local residents could face higher prices for groceries and other items shipped from the Mainland, the added transportation costs are relatively minor compared to an item's total costs, which typically don't change dramatically or quickly, said state economist Pearl Imada Iboshi. She said a bigger threat is whether higher energy costs slow the U.S. economy, dragging down Hawai'i's also.

"The major worry is how it impacts the national economy and overall growth," she said. Tourism to Hawai'i hasn't seemed to suffer from the higher oil costs.

"If you're going to take your big vacation, you're going to take your big vacation."

Motorists may feel the pinch sooner as gasoline prices increase, though the fuel remains a relatively small share of people's spending, Imada said.

It could be months before local companies react to higher oil costs with higher prices. Matson reviews its surcharge every three months. Matson competitor Horizon Lines said it also looks at fuel surcharges every quarter. Horizon last raised its fuel surcharge, matching Matson's, on April 3.

Young Brothers, operator of interisland barge services, said the state Public Utilities Commission doesn't allow it to bill customers for fuel surcharges.

Hawaiian Electric Co. is keenly aware of swings in oil prices, although it said a spike in costs doesn't mean an immediate jump in fuel surcharges customers pay.

"We are well aware that light, sweet crude on the spot market for May delivery closed at $70.40 a barrel," said HECO spokesman Peter Rosegg.

He said the utility, which buys fuel on long-term contracts, doesn't use that type of fuel and couldn't say if the price rise would lead to higher electricity costs.

While oil prices go up, the "fuel adjustment charge" on customers' bills can go up or down depending on what the utility paid for the fuel and how much was used.

The typical O'ahu customer using 600 kilowatt hours in April paid $122.78, according to HECO figures. That was about 25 percent higher than what they shelled out a year earlier.

Of the $24.29 increase, $19.36 was because of increased fuel costs, HECO said.

As oil soars, you'll feel the pain

Reach Greg Wiles at gwiles@honoluluadvertiser.com.