Gas cap law is forcing isle prices to fluctuate
In response to the Star-Bulletin's Sept. 29 story "Hawaii's gas cap: Is it working?" I say, "Yes, it is." And it's working in three ways: creating a market that behaves like a competitive market, increasing the choices consumers have in their range of purchasing decisions and raising awareness of how the national gasoline pricing markets operate.
Since the gasoline price law went into effect, Hawaii gas prices have reacted to events like prices would in a normal market. Not only did Hawaii prices go up with mainland prices after Hurricane Katrina, but they also went down along with those on the mainland after the effects of Katrina subsided. And they will go down during the following weeks, just like prices in the rest of the nation will as Hurricane Rita's effects subside.
The decrease in gas prices IS the intent of the gas price law. In the past, when mainland costs went down, Hawaii prices stayed the same or even increased. Historically, the price of gas in Hawaii has always gone up with national and international events, but almost never came down after the effect of the event subsided.
"What's interesting is Hawaii's gas prices failed to drop from record territory after the start of the war (in Iraq), when crude prices and national prices fell. I've been scratching my head over this," said Dave Hackett, president of Stillwater Associates and a state consultant on the gas price law (Star-Bulletin, Aug. 29, 2003).
Hawaii gasoline prices soared with the Gulf War (1991), prices soared again when California switched to CARB GAS (1996), prices soared with the Iraq war (2002), prices soared with Hurricane Ivan (2004), prices soared with the BP refinery explosion in Texas that led to shortages (2005), likewise with Hurricane Katrina and then Hurricane Rita. In all the events prior to Katrina, when gasoline prices climbed on the mainland, they came down rather quickly. But in Hawaii, after each event, gas prices remained high for months or years after the national market normalized.
Immediately following Hurricane Katrina, Tesoro President Bruce Smith stated to KITV4, "Hawaii gas prices would have gone up with or with out a gas cap."
You want more proof the gas price law is working? Then look at the wide range of retail prices that the Hawaii consumers can now choose from. Oahu drivers can purchase their gasoline for far less than the state average, and they are no longer limited to Costco to get a good price. Many retailers are now within a few pennies of Costco, and this only occurred after the implementation of the gas price law.
Some critics of the gas price law say that shopping for the best price is a bad thing. But in a normal marketplace, it is typical consumer behavior to shop for the best price in every product, from laundry detergent and cars to clothing and food. Why should the gasoline market be any different?
The biggest benefit of the gas price law is the public awareness of Hawaii gas prices compared with prices on the mainland. Rep. Galen Fox's claim about the gas price law, "It's killing us," is again way off the mark. While Hawaii prices are now 46 cents above the national average, where were House Republicans this past January when Hawaii was 62 cents above the national average -- and there was no gas price law then! If they can set aside ideology and look at the facts, even the Republicans will soon be grateful for gas price regulation.
Frank Young is former chairman of the Petroleum Advisory Council under the Hawaii Department of Business, Economic Development and Tourism. Jim Wheeler is professor emeritus of accounting at the University of Michigan.