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The Honolulu Advertiser
Posted on: Friday, February 3, 2006

Gas-price fall slower than rise under cap

By Sean Hao
Advertiser Staff Writer

Retail gasoline prices don't fall as quickly as wholesale prices under Hawai'i's price cap law, according to a preliminary report released late yesterday by the state Public Utilities Commission.

That finding, which is based on oil industry data gathered between Sept. 1 and Nov. 27, seems to confirm what some consumers may have noticed: That since the controversial law took effect Sept. 1 retail gasoline prices rise faster than they fall.

The state caps the price that wholesalers can charge for gasoline, but retail prices remain unregulated. Between the initial week of the caps, Sept. 1-4, and the final week of the survey period, Nov. 21-27, the average wholesale price for regular gasoline in Honolulu fell nearly 39 cents a gallon, according to the PUC. However, during the same period the average retail price fell by just about 32 cents a gallon.

However, on Maui the difference was less pronounced. Retail regular prices fell 35 cents a gallon on Maui (excluding Hana), as average wholesale prices fell by about 39 cents a gallon.

Some of the disparity between wholesale and retail price declines could be a result of lag-time between when retailers purchased gasoline and when the gasoline was sold. It also could be a result of retailers lowering prices more slowly than they raise prices in response to changing wholesale prices.

The PUC warned that any conclusions based on the data may be premature, since the law has only been in effect since September.

The regulatory agency said its study showed that no one knowingly violated the price cap law by overcharging for gasoline. However, there was one incident when a company inadvertently overcharged for gasoline.

The gas cap is on the agenda in the current session of the state Legislature. Senate leaders are proposing amendments to the law that they contend could shave retail prices by as much as 16 cents a gallon. At the same time, a group of Democrats in the House has called for repeal of the cap.

Reach Sean Hao at shao@honoluluadvertiser.com.