[ OUR OPINION ]

---

Gas-cap report
provides no solutions

THE ISSUE A consulting firm hired by the state has concluded that gasoline price caps won't solve Hawaii's problem of high prices.

GASOLINE price caps are scheduled to go into effect next July, but a report prepared by a California petroleum consulting firm has concluded that would be a bad idea. The extensive report cannot be easily dismissed as a byproduct of the oil industry, but neither should it be accepted as the last word on the gas cap controversy. State legislators should re-examine the issue during their next session.

Stillwater Associates, hired by the administration of former Gov. Ben Cayetano to study and report on the issue, indicated in January that price gaps were not the solution to the high cost of filling Hawaii's automobile tanks. In its more recently completed report, the firm instead calls for closer monitoring of the petroleum industry, more consumer education -- does your car really need "premium"? -- and an "integrated energy strategy" that expands the use of ethanol production, biomass and hydrogen.

The report says gas price caps have not worked in Australia or in provinces of Canada where they have been tried. In one case, it says, price caps became "targets" for gasoline dealers. Based on those attempts, it concludes, "The caps would bring volatility, market distortions and opportunities for profiteers to game the market." The firm says its survey "failed to identify any (price caps) that resulted in clear consumer advantages."

The main criticism that Stillwater, whose clients include ARCO and Mobil Oil, has of Hawaii's oil companies is bad public relations. "Whereas Tesoro seems willing to speak up for itself," it says, "ChevronTexaco especially in the past appears not to have bothered trying to reconcile perception and reality."

The company failed to defend itself against accusations that Hawaii accounted for 22 percent of its profits and only 3 percent of its sales. The figures referred only to lessee dealer gasoline revenues, the report says, and tell us "more about the dismal results for lessee dealer sales in the rest of the U.S." than about Hawaii revenues. It maintains that oil company profits in Hawaii have not been excessive. Critics will say this corporate compassion says more about Stillwater's partiality than about ChevronTexaco's behavior.

In testimony to a joint legislative committee in January, Jerry Ellig of the Federal Trade Commission also questioned the effectiveness of a gasoline price cap. "Price controls usually create shortages, reduce quality and generate inconvenience for consumers when they are imposed in markets that could be competitive," he said.

That is the problem: Industry officials admit that an "oligopoly" -- a description acknowledged by the Stillwater report -- controls Hawaii's petroleum market. Stillwater's recommendation for close monitoring of a more "transparent" petroleum industry will not by itself create the competition needed to bring gasoline prices under control.