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The Honolulu Advertiser
Posted on: Wednesday, October 18, 2006

VOLCANIC ASH
Hawai'i still fails to learn from its mistakes

By David Shapiro

The frustrating thing about Hawai'i's fumbling attempts to control high gasoline prices is not so much the mistakes, but that we never commit to a course of action long enough to learn anything.

A state lawsuit against the two local oil refiners for price fixing in the late 1990s produced valuable information about pricing practices, but we ended up settling for a relative pittance without effecting any changes in gasoline prices.

Legislative Democrats may have been too concerned about election-year politics when they imposed a cap on wholesale gasoline prices, but once it was done, they should have had the will to stick with it long enough to assess its effects in a variety of market conditions.

Instead, they again put politics first and repealed the price cap after only eight months, fearing an election-year backlash from consumers unhappy about volatile prices.

After such a short life span, it's difficult to assess what effect the gas cap might have had on local fuel prices in the long run.

Our price controls went into effect after Hurricane Katrina crippled Gulf Coast oil production and caused gasoline prices to surge nationwide.

Consumer grumbling about high prices escalated when we also had to contend with sharp fluctuations in fuel prices from week to week, feeding a prevailing view that the cap was causing much hassle for no clear benefit.

Since the cap was suspended, local gasoline prices have stabilized, but at a seemingly high level.

At first, Mainland prices escalated because of the conflict in Lebanon, but didn't seem to rise as quickly here. The gap between local and Mainland prices that had been 51 cents just after the cap ended was down to 39 cents in late July.

By late August, however, Advertiser reporter Sean Hao calculated that the average Hawai'i price of $3.25 a gallon would have been a quarter lower if the cap was still in effect tying Hawai'i prices to the average of three Mainland markets.

And Hao reported last week that average prices in Hawai'i are now 65 cents higher than on the Mainland despite recent local price decreases of more than 25 cents a gallon.

Mainland prices have been falling far faster than here in a time of lower crude oil prices, lighter demand and increased inventories.

The election-year politics rage on. Some Democrats who first imposed the price cap and then suspended it are now calling again for its reinstatement. Republican Gov. Linda Lingle says she'll never do so after the last experience.

It's difficult to draw useful conclusions from the shifting market and price gaps without careful analysis free of politics.

This was supposed to happen under the law suspending the gas cap, but again we haven't followed through.

The law requires the state to collect detailed financial data from local oil refiners on what it costs them to produce the gas they sell, and publish a report every six months on costs vs. prices to promote transparency and discourage gouging.

Such information could have explained why Hawai'i's summer prices didn't follow Mainland trends, but the Public Utilities Commission hasn't yet enforced the law because legislators provided only $1 to collect the data a disingenuous excuse, since ending the cap freed up $700,000 it cost to enforce that.

The PUC is now saying it won't begin collecting the data until the end of the year at the earliest, and is still in talks with oil companies about the confidentiality of the data supplied.

If a reasonable amount of information isn't made public, there will be little pressure on refiners to price transparently, and we'll have failed once more to learn from our mistakes.

David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at dave@volcanicash.net. Read his daily blog at blogs.honoluluadvertiser.com.