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The Honolulu Advertiser
Posted on: Wednesday, October 11, 2006

Island oil companies still scrutiny-free

 •  Convergence of issues brings gas prices down

By Sean Hao
Advertiser Staff Writer

When state lawmakers suspended Hawai'i's gasoline price cap on May 5, they promised to keep an eye out for consumers by requiring local oil companies to disclose financial details that would, hopefully, discourage unfair pricing.

It's been five months, and the state still hasn't enforced the new law.

"It takes time to build up a new program — to hire the people and a contractor and all that," explained Lisa Kikuta, spokeswoman for the Public Utilities Commission, which was charged with collecting the information.

Meanwhile, the gap between Hawai'i pump prices and the national average has widened to the highest level in years.

Between February 2003 and September 2006 Honolulu gasoline prices were an average of 36 cents a gallon higher than the national average. As of Monday, the average price of regular gasoline in Honolulu was $2.92 a gallon, versus a national average of $2.27 — a 65-cent gap, according to the AAA Daily Fuel Gauge Report.

Lawmakers created the price cap law, which was in effect for nine months, to address concerns that the oil industry charged inflated prices and earned excessive profits in Hawai'i. However, the state does not actually know how much money oil companies make.

It should have a better idea once the new disclosure law is enforced.

Under the new Petroleum Industry Monitoring, Analysis, and Reporting Program, the state is supposed to collect and publish every six months oil company crude oil costs and sources, refinery operating expenses, marketing and distribution expenses and corporate overhead expenses.

According to the new law, the state will "require true transparency by the oil industry to increase competition and provide the public and elected officials with the necessary monitoring capability to discourage the industry from using price maintenance schemes or other anti-competitive practices that artificially raise consumer prices."

MAYBE BY END OF YEAR

Local oil industry officials have said they are willing to cooperate with the new law but are concerned about keeping their information confidential. The oil companies are waiting for the state to publish the forms for companies to fill out and to determine what information will be made public.

The disclosure program isn't expected to start until the end of the year at the earliest. In the meantime, consumer frustration over Hawai'i's high gasoline prices is likely to continue.

"If we can't tell them we're doing something significant, or that we're gathering information, there's going to be an increase in the level of frustration," said Rep. Kirk Caldwell, D-24th (Manoa), who pushed for suspending the price cap. "There's going to be public pressure brought to bear on everybody from the governor to the Legislature to do something."

HAWAI'I-MAINLAND GAP

The state's failure to address high gasoline prices could cause the public to push for re-implementing gasoline caps, said Caldwell.

Drivers welcomed the recent drop in the price of regular gas on O'ahu below $3, but their relief is tempered by the knowledge that prices have dropped much more on the Mainland.

The national average price for regular has fallen 40 cents a gallon during the past month, versus a 26-cents-a-gallon drop in the Honolulu price, according to AAA. If the gap between Honolulu's price for self-serve regular and the national average were to return to the historical figure of 36 cents, the average pump price on O'ahu today would be about $2.63 a gallon.

The oil company disclosures under the new law might help explain the price gap.

Department of Economic Development Director Ted Liu and Public Utilities Commission Chairman Carlito Caliboso have blamed the Legislature for the delay in implementing the new disclosure law, saying it only appropriated $1 to implement it. While it is true the Legislature only appropriated $1 in new money for the program, the PUC has $700,000 available from a previous oil industry program that's being replaced with the new law, according to the commission.

'DOING OUR BEST'

Linda Smith, Gov. Linda Lingle's senior policy adviser, said the state will "do its best" with the $700,000, but she believes the Legislature is at fault for only appropriating $1 in new money.

"It's had an impact," she said.

"In the heat of the last minutes of the legislative process, they didn't make the money available," Smith said. "It doesn't mean we aren't doing our best with current resources."

Hawai'i's high prices are caused by several factors including the state's isolated, small market, which isn't subject to the same fluctuations in supply and demand that force Mainland prices to move. That means Hawai'i prices tend to remain stable and lag the Mainland — both up and down. The high cost of doing business and high taxes also play roles.

Reach Sean Hao at shao@honoluluadvertiser.com.