Gas-deal opponents
petition Cayetano

An economist hired by isle
Shell and Texaco dealers says the
consent decree will hurt competition

By Rob Perez
Star-Bulletin

Forcing Shell or Texaco to leave Oahu's retail gas market likely will harm competition, even though another competitor is supposed to take the departing company's place, an economist says.

Walter Miklius, retired University of Hawaii economics professor, said the pending consent decree requiring Shell or Texaco to divest its marketing assets on Oahu probably will result in a marginal competitor picking up those assets.

Miklius, who has studied Hawaii's gas market in the past, was hired by Shell and Texaco dealers in Hawaii to help in their lobbying effort against the agreement.

The dealers today are scheduled to deliver to Gov. Ben Cayetano's office a petition with more than 6,000 signatures of people opposed to the consent decree.

Shell Oil Co. and Texaco Inc. agreed to the Oahu divestiture to secure state and federal approval for their planned $17 billion joint venture of refining and marketing operations nationally.

The Oahu assets of either Shell or Texaco are to be sold within six months after a final order takes effect. Without the divestiture conditions, state regulators opposed the joint venture in Hawaii, saying the resulting Texaco-Shell entity would have had too much market clout.

The Federal Trade Commission had estimated that the combination would cost Hawaii consumers more than $2 million a year in higher gasoline prices.

But Miklius questioned that number and said a combined Texaco-Shell would have had more economic leverage to bring in gasoline from outside the state or to bargain with one of Hawaii's two refineries.

Because national oil companies are not expanding into new markets and because of Hawaii's ailing economy, Miklius said he doesn't expect a major industry player to purchase the assets required to be sold by the consent decree.

"They'll get some marginal player in the market," he said.

But Ted Clause, deputy attorney general, disputed Miklius' contentions.

"There just isn't any factual backup," he said.

The consent decree will not only minimize anti-competitive effects of the Shell-Texaco combination but create conditions to bring about genuine price competition in the local market, Clause said.

The agreement opens the possibility that a new competitor would bring in gasoline from outside the state.

As it is now, Clause said, Hawaii consumers are missing out on the benefits of low crude oil prices and the lowest pump prices in more than a decade.

While regular unleaded gas has fallen to below $1 a gallon in some places on the mainland, Hawaii motorists are paying prices more than 50 percent higher.

With the consent decree pending, local Texaco and Shell dealers say they are in limbo, not even knowing whether they'll still be with the same gas supplier a year from now.

That is affecting hiring and planning, dealers say.

"Nobody knows what their future is," said Bill Green, who operates a Kahala Shell station.

Green said Shell and Texaco collectively have about 75 to 85 dealers in Hawaii.

The consent decree still needs final approval from the FTC and federal court in Hawaii.