Isle drivers resigned to see rise in prices

Topping off the tank of her Toyota coupe with $34 worth of premium gasoline, Nina Song took a pragmatic approach to life under the nation's only gasoline price regulations.

"It is what it is, so I just accept it," said Song, 32, a sales representative from Makiki.

Since the state's "gas cap" took effect Sept. 1, motorists have seen larger-than-usual swings in prices from week to week, a wide variance in prices among gas stations even within a few blocks of each other and a consistent lag time before island prices match trends of those on the mainland.

Consumers have reacted by shopping around and timing purchases to take advantage of times when the cap numbers indicate prices will drop.

Whether that is good or bad depends on whom you ask.

Supporters of the law say it empowers consumers by giving them more choice than ever before. They add that the law was intended to bring about fairness to Hawaii prices, arguing that oil companies have gouged consumers in such an isolated market and kept prices artificially high during times when mainland prices were lower.

Opponents say Hawaii's high tax burdens and barriers to competition have kept prices high and that the price cap has only introduced volatility and uncertainty to a market that was once predictable and relatively stable.

At least one analyst gives the law a grade of "incomplete."

"I think it's going to be a while before we kind of see what the true impact is going to be," said Jack Suyderhoud, a business economics professor at the University of Hawaii.

Timing has been a key factor in how island prices have been affected by the price caps.

The law requires the Public Utilities Commission to set a weekly maximum at which gas can be sold at wholesale in the state. The price ceilings are based on an average of spot prices in the Gulf Coast, New York and Los Angeles, with fixed costs added to account for storing and delivering fuel to other islands.

Implementation of the law coincided with the disruption to major oil refining facilities in the Gulf Coast by Hurricanes Katrina and Rita, which sent fuel costs soaring on the mainland. The rise in prices in the three target markets was reflected in Hawaii's prices, which have been the highest in the country since about mid-September.

Hawaii's statewide average for regular unleaded was $3.43 a gallon on Friday, 31 cents higher than runner-up Washington, D.C., and 50 cents higher than the national average, according to AAA's Fuel Gauge Report.

While the national average has started to go down, Hawaii's prices are set to increase by 9 cents when new caps take effect Monday. Prices here are likely to start going down next week, when new price caps are calculated and take into account the recent decline in spot prices.

Cap critics say that because Hawaii's refiners get their oil from Alaska and Asia, prices would not have been as affected as they were under the price caps. Supporters argue that prices in Hawaii have historically gone up whenever the mainland's oil supply has been affected.

Paul Brewbaker, chief economist at Bank of Hawaii, said he recently began comparing current prices with trends last year.

"I remember a year ago there were four hurricanes in Florida, and I don't remember a dispersion of up to maybe 10 or 15 percent from one retail outlet to another," Brewbaker said.

He said supporters of the gas cap were "half true" in their characterization of Hawaii's market keeping prices high when mainland prices declined.

"It's half true because we were also not being penalized in those periods when gasoline prices were rising on the mainland," he said. "It was much smoother here, and it was on average higher -- it was always higher -- but it wasn't bouncing around."

While there is plenty of anecdotal evidence that motorists are shopping around and timing fuel purchases, Brewbaker said that behavior might change if the wide price swings continue from week to week.

"People may find that it's just better to get burned one week and luck out another, on average, and stop searching," he said. "So they could, in fact, reduce their search costs by just buying when the needle goes to E.

"But it seems pretty clear they're for sure going to get burned more often."

Supporters say the law must be given a chance to work and in the long term will bring about fairer prices to Hawaii motorists.