Gas price formula faces tinkering in 2006 Legislature
The cap has gone up 25 cents in two weeks but remains lower than it was on Sept. 1
By Wednesday, when the 2006 legislative session begins, the state's price caps on wholesale gasoline will have gone up 25 cents in two weeks.
Price caps on wholesale gasoline are going up 11 cents next week -- an increase that comes on top of a 14-cent rise in this week's caps and could push the statewide average for regular gasoline to $3 a gallon.
A bad winter on the mainland could drive up demand for heating oil, which would drive up crude oil and spot wholesale gas prices, leading to further increases in the price caps.
Although that kind of timing might seem bad for Democrats who supported the law, at least one political observer says he does not expect much backlash come November.
"I can't figure out how you assess whether the gas cap is working or not," said Neal Milner, a University of Hawaii political scientist. "It's a really complicated issue, and it's hard to make arguments that are politically compelling one way or the other.
"I would be surprised if that's a very definitive issue."
Opponents of the measure say voters will ultimately decide whether they think the law has helped, by ousting those who supported it.
Supporters say they continue to believe the caps are working as intended -- keeping Hawaii's prices in line with mainland trends -- and they plan to push forward with proposals to strengthen the measure.
Senate Consumer Protection Chairman Ron Menor (D, Mililani) has said lawmakers might consider lowering the markups that wholesalers may charge or changing the benchmarks that the cap formula is tied to.
House Energy Chairwoman Hermina Morita (D, Hanalei-Kapaa) said her main concern is establishing additional profit margins for different steps in the gasoline supply chain.
Under the law, profit margins for oil companies are fixed.
Jobbers -- middlemen who buy gas at wholesale and resell it to smaller gas stations -- have said they are unable to recoup a lot of their delivery costs because wholesalers can eat up most, if not all, of the profit margin.
Morita noted that the Public Utilities Commission, which sets the weekly price caps, has the authority to adjust the cap formula to address jobbers' concerns.
The PUC asked oil companies and industry officials in November to submit proposals on how they would like to see the margins adjusted.
"We and our consultants are, at this time, still reviewing the proposals," said Lisa Kikuta, the PUC's chief researcher.
Current price caps are 7 cents below where they were when the law kicked in Sept. 1.
That was just as Hurricane Katrina made landfall and crippled Gulf Coast oil production facilities, sending gas prices well above $3 across the country.
Hawaii's price caps declined by 90 cents over a two-month period starting in mid-October.
Recent increases have come as rising crude oil prices have driven up spot wholesale gas prices in key mainland markets used for determining Hawaii's caps.
Next week, if wholesalers charged up to the maximum allowed, the price for regular gasoline is forecast to range from $2.84 a gallon on Oahu to $3.20 a gallon on Lanai. Projections include taxes and an assumed dealer markup of 16 cents, although such charges vary and are not regulated by the price cap.
Yesterday's statewide average for regular unleaded was $2.72 a gallon, 39 cents above the national average, according to AAA's Fuel Gauge Report, based on credit card transactions from the previous day at more than 85,000 self-service stations nationwide.