COMMENTARY
Let truth be told about gas prices
By Sen. Ron Menor
A headline on Sean Hao's Dec. 20 article "Why gas price spike in Isles?" stated, "Law was supposed to make Hawai'i industry transparent, but it isn't." I agree wholeheartedly.
As the past chairman of the Senate Commerce, Consumer Protection and Housing Committee, I helped to pass Act 78 of 2006, creating the Petroleum Industry Monitoring, Analysis and Reporting program under the state Public Utilities Commission.
The intent of this legislation was to allow Hawai'i consumers to see the average weekly prices and costs for each level of the gasoline industry — oil company refiners; distributors or jobbers; and dealers — so that consumers could determine for themselves how gas prices are set and if anyone in the industry is making unfair profits. This is true transparency.
Last session, I introduced Senate Bill 990 to provide funding for the state PUC to implement the PIMAR program. Unfortunately, the PUC succeeded in getting House and Senate conferees to accept its proposed amendments to the bill that greatly weakened the transparency goals of PIMAR, thus rendering it impotent and toothless.
The PUC's weekly PIMAR reports are practically useless because, as Sean Hao notes, the PUC keeps most of the information that it collects about the petroleum industry's pricing practices confidential.
For example, we don't know what each company's crude oil and other operating costs are and so cannot assess their claims that such costs, instead of profits, are the primary contributors to high gas prices in Hawai'i.
We also don't know what prices the oil companies are charging their dealers, so the public cannot determine whether those prices are excessive.
Representatives of the petroleum industry have alleged that such information is proprietary and should not be made public. However, this contention ignores the realities of our unique gasoline market, which, according to industry experts, is an oligopoly without the competition existing in Mainland markets.
In this regard, there is a compelling need for a strong reporting law that provides the public with the information to hold petroleum companies more accountable for their pricing practices. This is especially so because my legislative colleagues decided to suspend the maximum price law, which means oil companies are currently free to charge whatever the market will bear.
The weekly PIMAR reports are also misleading in that the public would assume that the wholesale price listed in the report is the actual price that the dealers pay to the distributor. Not so.
There are several classes of trade in the gasoline industry:
In its reports, the PUC combined the prices for all classes of trade and reported the aggregate price as the wholesale price. The method of calculation and terminology chosen by the PUC disguise the profits captured by the oil companies by implying that the local dealers have average margins in the range of 50 cents per gallon, when their margin is typically 20 cents per gallon or less. It is not surprising that the PUC reports have startled and outraged local dealers.
Consequently, I will be introducing legislation this session to give the people of Hawai'i a clear and accurate view of the gasoline industry in this state.
While the House majority leader has stated that he believes improvements to the law are needed, House leadership to this date has chosen not to endorse any specific legislative measure to remedy these problems.
However, I am gratified that the Senate majority has endorsed conceptually my legislative proposals to strengthen PIMAR's transparency. I am hopeful that the House will soon follow so that the people of Hawai'i can finally see with their own eyes whether or not they are being gouged at the pump and by whom. It is time for the truth to come out.
Sen. Ron Menor, D-17th (Mililani, Waipi'o) is chairman of the Senate Energy and Environment Committee. He wrote this article for The Advertiser.
