Sunday, August 14, 2005

Analyst skeptical
of Hawaii gas cap

The oil economist says a rumor
could create a fuel shortage

An oil industry economist warns that having a gas cap in Hawaii is potentially as bad as some make it out to be.

John Felmy, an economist and director of the Washington, D.C.-based American Petroleum Institute, said depending on how people react, it could lead to a situation such as Molokai had recently.


"Everybody lined up because of a rumor and it created a shortage," he said. "The existence of this legislation is a bit uneasy. In terms of consumers ... all you need is some deejay reporting that there's a problem and it becomes one, really."

The "gas cap" is scheduled to take effect Sept. 1.

If it were in place today, regular, unleaded gasoline would increase to about $2.72 per gallon, according to a Star-Bulletin analysis of Public Utilities Commission figures.

Depending on where you buy your gas on Oahu, that price could be anywhere from 6 to 20 cents per gallon higher than what you pay now. But while gas cap supporters tout those prices will go down once mainland prices go down, those paying at the pump are somewhat wary about whether the cap will mean much in the long run.

"Personally, I don't think the gas cap will do much of anything," said Hawaii Kai resident Dave Heywood, whose Mini Cooper sucked up $35 of super unleaded gasoline at the Cooke Street Tesoro yesterday.

"If they fix our roads we'd save a lot more gas.

"I know I burn a lot just sitting in rush-hour traffic."

Supporters say the law should be given a chance to work and note that the PUC has the ability to adjust the price caps if necessary. The law also gives the governor power to suspend the caps if they are found to cause economic hardship.

"It's a fair law," said House Speaker Calvin Say.

In preparation for the first price caps, which are to be posted Aug. 24, the PUC provided preliminary calculations to the oil industry.

The baseline for the cap is calculated using the average of spot prices for wholesale gas in Los Angeles, New York and the U.S. Gulf Coast as set by the Oil Price Information Service. Various charges are then added to the baseline price to account for oil companies' operating costs in Hawaii. That then becomes the maximum pre-tax price at which gasoline can be sold at wholesale in Hawaii.

Using OPIS market figures from Aug. 3-9, the PUC calculated the price cap for regular unleaded gas on Oahu at $2.12 per gallon. The baseline is higher for neighbor islands because added costs for shipping and storage are factored in.

After factoring in taxes, the pump price was estimated by the Star-Bulletin to be $2.72 a gallon on Oahu. That is about 11 cents higher than the average reported yesterday in Honolulu by AAA's Fuel Gauge Report.

On Maui, prices would be about $2.88 a gallon, compared with $2.91 a gallon reported by AAA in Wailuku. In Hilo, prices are estimated at $2.79 a gallon, compared with $2.72 a gallon listed by AAA.

The Star-Bulletin's price estimates do not include any potential markups that retailers may charge. The law sets no limit on retail prices, but supporters say they believe lower wholesale costs will allow dealers to pass savings along to consumers. Critics say gas stations are likely to charge the maximum possible while adjusting to the new regulations.

Manoa resident John Reich said he can not even afford to put in a full tank as it is.

"I put three dollars in three times today," he said. "I used to get 1.9 gallons for five bucks and now I get 1.7 gallons for five bucks.

"I think it's highway robbery."

Waialae resident Cory Haddon is against any increase but is willing to suffer now if it means less suffering later.

"I think gas prices are out of hand to begin with," she said. "But if it will save us from being exploited in the future then do it.

"I think gas went up 5 cents in the last two weeks."

AAA Fuel Gauge Report

Public Utilities Commission

E-mail to City Desk


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