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The Honolulu Advertiser
Posted on: Sunday, May 25, 2008

Cost of gas likely to hit $5 on Lana'i

By Edwin Tanji
The Maui News

Gas prices at Lanai City Service, already the highest in Maui County, are expected to go higher soon, possibly over the weekend, and top $5 a gallon.

Several Lana'i residents on Friday reported a "rumor" that the price of gasoline on the island will be going up.

But officials of Lanai Oil Co., the fuel distributor that ships gasoline and diesel to Lana'i, said it is not just a rumor.

A new shipment of fuel was being unloaded at the Kaumalapau Harbor on Friday to replenish storage tanks that were last filled three months ago, said Alec McBarnet, Lanai Oil Co. vice president.

When that new fuel is hauled up to supply Lanai City Service — Lana'i's only retail gas station — it will be priced at today's rate, which is significantly higher than the price of gas three months ago.

It's the nature of the fuel supply on Lana'i, which is a low-demand market with a population of just over 3,000. Maui Oil needs to ship to Lana'i every 12 weeks, with some leeway for weather and ocean conditions.

When a shipment of fuel is delivered, the price for the gas is set for three months. But with the price of gas in Hawai'i steadily increasing, sometimes almost daily, the three-month lag can lead to a sticker-shock spike on Lana'i.

"They don't see a change in the price for a while, and then 10, 12 weeks later, it's suddenly up," McBarnet said.

Terry McBarnet, Lanai Oil president, said he was at Lanai City Service on Thursday to advise the gas retailer to expect the increase.

There still is some gas in the tanks delivered 12 weeks ago and priced at the old level. But once the last gallon is gone, Lanai Oil will be billing Lanai City Service at the current rate.

"I just want people to know what they can expect, so it's not like a kind of hidden IED that just explodes in their face," Terry McBarnet said.

The McBarnets, who operate Maui Oil Co. and Lanai Oil as separate businesses, would not disclose their wholesale price or the quantities of gas they deliver — or the price they are charged at the Chevron refinery where they pick up the gas and diesel going to Lana'i.

But Alec McBarnet said the price over the past three months "has gone up more than 10 to 20 cents."

Maui Oil acquired its own fuel barge to provide deliveries to Lana'i nine years ago, after damage to Kaumalapau Harbor caused Chevron to cease making deliveries to the island. The Kahului-based company also supplies fuel to smaller retail stations on Maui, including Hana Gas, where the price on Friday was $4.74 for a gallon of regular-grade gasoline.

The McBarnets said they deliver to Hana Gas up to twice a week, with their price dictated by what they're charged to pick up the fuel from the Chevron tanks at Kahului Harbor.

Moloka'i gets its fuel directly from O'ahu, and, like Lana'i, is subject to the price at time of shipping. At Rawlins Chevron Service in Kaunakakai, the price for regular was $4.59 on Friday.

On Maui, the price for a gallon of regular in Wailuku was $4.39 on Friday.

On O'ahu, the average price was $3.90.