Backers say gas price drop will prove law is working
The PUC is studying pricing data to gauge industry compliance
With the possibility of next week's Oahu gas prices going below $3 a gallon for the first time in more than a month, supporters of the state's one-of-a-kind gas price cap law are hailing it as a success.
Critics, meanwhile, point out that Hawaii's average retail prices still lead the nation.
The Public Utilities Commission, which sets the weekly maximum at which wholesalers can sell gasoline, set next week's caps 44 cents lower than current price ceilings.
The decrease coincides with the first deadline for oil companies, jobbers and others in the industry to supply pricing information to the Public Utilities Commission to help the agency determine if they are in compliance with the law that began Sept. 1.
Supporters of the price cap say the upcoming decline indicates the law is working.
"I'm really encouraged by the fact that our gas pricing law is finally beginning to work and generate the kinds of savings that the supporters felt the law could provide to consumers," said Senate Consumer Protection Chairman Ron Menor (D, Mililani).
"The law was designed to ensure that when mainland prices fall that the oil companies are also going to be required to lower Hawaii prices as well," he added. "I don't think that the substantial price decreases that Hawaii consumers will see over the next few weeks would have been possible if not for the fact that we have this gas pricing law in place."
Opponents have argued that without the cap -- which ties Hawaii's prices to three mainland markets -- island prices would not have risen so high in the first place, because Hawaii's refiners get their oil from Alaska and Asia.
Senate Minority Leader Fred Hemmings called the law "political shibai" and said it was premature for Democrats to declare success.
"People of Hawaii have been misled by a political price cap," said Hemmings (R, Lanikai-Waimanalo). "The purpose of it was to try and demonize gas prices for their political benefit.
"Retail prices are still among the highest in the nation."
Prices next week
A look at how much gasoline is projected to cost when new wholesale price caps by the Public Utilities Commission take effect Monday. Estimates include taxes and assume wholesalers charge the maximum allowed by law. Projections also include an assumed 12-cent markup by dealers, although such charges vary among stations and are not regulated by the price cap law.
» Oahu: $2.93, $2.98, $3.02
» Kauai: $3.04, $3.09, $3.14
» Maui*: $3.09, $3.14, $3.18
» Hana: $3.17, $3.23, $3.27
» Molokai: $3.20, $3.25, $3.30
» Lanai: $3.30, $3.35, $3.39
» Hilo: $3.01, $3.06, $3.10
» Kona: $3.03, $3.08, $3.12
* Does not include Hana
Hawaii's prices have been the highest in the country since mid-September, according to AAA's Fuel Gauge Report. Yesterday's statewide average of $3.48 a gallon for regular unleaded was 41 cents higher than runner-up Washington, D.C., and 63 cents above the national average, AAA said.
Caps are based on an average of spot wholesale prices in the Gulf Coast, New York and Los Angeles, where prices have declined steadily as production facilities in the Gulf Coast have recovered from hurricanes Katrina and Rita.
Island prices have lagged about a week behind mainland trends because of the pricing schedule. Price caps for each week are published the preceding Wednesday using data from the five business days leading up to the publishing date.
Next week, if wholesalers charge up to the maximum allowed, the price for regular unleaded on Oahu is projected to cost about $2.93 a gallon after taxes. Prices would be about $3.04 on Kauai, $3.09 on Maui, $3.01 in Hilo and $3.03 in Kona.
Estimates include a dealer mark-up of 12 cents, which is not governed by the price cap, leading to wide variances in prices among gas stations even within a few blocks of each other.
Menor said the PUC should get a better handle on how retailers, wholesalers and others are adapting to the price caps once it receives the compliance reports.
Oil companies have pledged compliance, and there is no indication that any are breaking the law. The legislation allows the PUC to request information to help in its continuing administration of the price cap law.
"That information will provide the PUC with the means by which they can determine whether or not the oil companies are fully complying with the law," Menor said. "The PUC will also have the ability to determine the extent to which the retailers are passing on the wholesale price savings to consumers in the form of lower pump prices."
The PUC is requesting reports with information such as prices charged for each grade of gasoline, volumes of gas sold, any and all charges included in transactions, the pre-tax price per gallon and total transaction amounts.
Reports originally were due Sept. 19, but oil companies asked for and received an extension, saying they needed more time to gather data and to take steps to ensure that proprietary information would remain confidential.
In a separate development yesterday, state Attorney General Mark Bennett released a copy of a letter sent to the Federal Trade Commission voicing Hawaii's support for an investigation into allegations of gouging by oil companies that might have driven up gasoline prices following Hurricanes Katrina and Rita.
The letter addressed to FTC Chairwoman Deborah Platt Majoras also was signed by Oregon Attorney General Hardy Myers, who along with Bennett is co-chairman of the National Association of Attorneys General Antitrust Committee.