Regulation of
gas prices gains
state support

Attorneys say the lack of
competition works against consumers

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By Tim Ruel
truel@starbulletin.com

Price regulation is needed to fix a badly broken isle gasoline market, says the state's lead attorney in its recently settled lawsuit against Hawaii's oil companies, and a group of House members, including Rep. Ed Case, is heeding the call.

"This is a profoundly un-competitive gasoline market," said Spencer Hosie, who spoke yesterday before a briefing at the Capitol, along with state Attorney General Earl Anzai.

There is no good economic reason for Hawaii consumers to pay the highest gas prices in the nation, Anzai said.

The oil companies' cost to make gasoline is no higher here than on the West Coast, he said.

While the state faced losing its nearly 4-year-old antitrust lawsuit against the oil companies, the information the state found during the suit gives the Legislature a framework for regulating gas prices, Hosie said.

His main proposal is for the Legislature to establish a price control by tying Hawaii's gas prices to a mixture of different West Coast prices reported from the Oil Price Information Service, which monitors the market. The result would be a 20-cent reduction in local gas prices, on average, while giving the oil companies a profit of 10 to 12 cents per gallon, which would remain among the top profits in the nation, Hosie said.

Gov. Ben Cayetano "agrees with the concept," Anzai said after the briefing.

Hosie's remarks have drawn moral support from a bipartisan group of House members including Reps. Paul Whalen, Hermina Morita, Kenneth Hiraki and Case, a Democratic candidate for governor.

"I've already crossed the bridge that we've got to do something," Case said during the briefing.

The group, which has been attempting to pass some form of regulation of gas prices during this year's session, will speak at a press conference this afternoon at the Capitol to renew the call for relief for consumers, Hiraki said.

In an interview after the briefing, Case said: "I have been a convert to the absolute conviction that Hosie is right, that the market is seriously broken and that the market will not remedy itself without state action.

"Business has a dark side, and that dark side has reared its ugly head."

For years the oil companies told the Legislature and the public that the market for gasoline in Hawaii was competitive. "The blatant truth is, that's totally false," said Case. When the firms went to summary judgment hearings on the lawsuit in November, they told U.S. District Judge Samuel King that a lack of competition -- not conspiracy -- was responsible for gas prices in the state.

While Case would not say what specific proposal he and the other representatives would support, he indicated that price controls would be necessary.

"Yeah, we're talking about price controls, but so we're talking about price controls. What's the alternative?" Case said.

Chevron had no immediate comment on the proposal, but has said it is generally opposed to price controls.

Hosie noted that the oil companies will fight any legislation and will probably sue over any regulation that is passed.

It is not clear how regulation would fare in the Senate, where one bill to regulate gas prices recently died. Senate President Robert Bunda (D, Wahiawa) said he thinks most legislators do not have enough information yet to change the laws.

"I don't think it's that easy," he said. Passage of a bill this year depends on whether the House and Senate can agree on a proposal and whether it would help the public, Bunda said.

When told of the press conference to be held by House members, Bunda questioned whether they were going to make an election issue out of gas price regulation. He then said, "It's something we should pursue."

During the legislative briefing, critical questions were mainly raised by state Rep. Colleen Meyer (R, Laie), who asked if regulation were partly responsible for Hawaii's high price of gasoline. Hosie said the cost of regulation would amount to just a few cents a gallon, information that he attributed to testimony of industry experts.