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Gasoline price cap
faces real test

THE ISSUE The Public Utilities Commission has ordered a 50-cent reduction of maximum wholesale oil prices next week.

OIL companies' window of opportunism to increase gasoline prices in Hawaii is about to close, as mainland prices are headed back to normal. Motorists soon should be able to determine whether the new gasoline price cap can work as intended.

The cap is pegged to the average wholesale price along the Gulf Coast and in New York and Los Angeles for the five days leading up to every Wednesday, when Hawaii's Public Utilities Commission sets the lid for the following week. The baseline price next week for a gallon of regular is down a whopping 50 cents from this week.

The commission's lowering of the cap by that amount should reduce the average price at the pump on Oahu to less than $3. According to the U.S. Department of Energy, prices should travel further south during the months ahead.

Up to this point, the pricing in Hawaii has reflected the warnings by Stillwater Associates, hired by the administration of former Gov. Ben Cayetano to study and report on the original legislation, which called for prices to be pegged to those in California. After that state's prices soared, the bill was rewritten so it would be pegged to a more national level.

Stillwater reported that caps had not worked in Australia or Canadian provinces where they had been tried. It cited one case where the price lids had become "targets" for gasoline dealers, and concluded that price caps "would bring volatility, market distortions and opportunities for profiteers to game the market."

That has been proved correct, as oil companies have raised wholesale prices in Hawaii, even though their sources of crude oil in Asia and Alaska were not directly affected by Katrina's ravaging of Gulf Coast production and refining facilities.

Clearly, Hawaii's oil oligopoly has gamed the market. As mainland prices subside and Hawaii's are forced down, that capability should end.

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Stay on path toward
resolving Korea issues

THE ISSUE Talks resumed in Beijing over North Korea's claimed possession of nuclear weapons.

NO agreement is expected to result from the current round of six-party talks with North Korea, but the apparent stalemate is discouraging. The Beijing talks should result in a statement of principles for future negotiations, focusing on North Korea's insistence on peaceful nuclear power with repercussions if it turns to nuclear weapons production.

China, Russia and South Korea agree that Pyongyang should be allowed civilian nuclear plants, while Japan is the only participant in the talks backing the U.S. position that they be absolutely forbidden. North Korea further distanced itself from an agreement this week, insisting that the U.S. supply it with light-water nuclear reactors.

In a 1994 pact, the Clinton administration promised to supply the North with two such reactors for electricity but never fulfilled the promise. North Korea then expelled United Nations nuclear inspectors in 2002 and boasted that it was building nuclear bombs. It now claims to have working nuclear weapons.

The White House has supported South Korea's offer to build several nuclear or conventional power plants near its border with North Korea to provide energy to its neighbor but refuses to countenance a nuclear facility in the North. "North Korea has trouble keeping its peaceful programs peaceful," said Christopher Hill, the chief U.S. envoy at the talks.

Pyongyang is not likely to accept such an offer. The country is experiencing a severe shortage of electricity. It has no oil resources and can claim a legitimate need of nuclear power. Half its electricity is now produced by hydroelectric power plants and half from thermal electric plants.

Any nuclear activity in the North would need safeguards to ensure that nuclear weapons have not been hidden in tunnels and that international inspections be conducted on a regular basis. Expulsion of inspectors cannot be repeated.

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