Gas cap has been costly for consumers
THE gasoline price cap cost consumers as much as $54.9 million between September 1, (2005), through January 2006." This is the sobering conclusion of Hawaii's Department of Business Economic Development and Tourism as reported to the Legislature in a recently issued study of the effects of the state's controversial price-control law. That's an average of about $11 million out of consumers' pockets for every month since the measure took effect last September.
Other experts have pointed to increased market volatility and reported supply crunches at some gas stations as other unintended consequences of the cap.
These outcomes are consistent with the type of effects predicted by experts who evaluated the cap prior to its implementation. The state's own independent energy consultant, Stillwater Associates, warned: "The price caps are not expected to have any significant beneficial effect for Hawaii's gasoline consumers. In fact, recent analysis suggests they would increase consumer costs." Stillwater further found that "price caps are likely to bring unwanted volatility and seasonality to the Hawaii market.
The irreparable flaw in the gas cap, then as now, is the fact that it fails to address the real reasons why gas prices in Hawaii are on average higher than those on the mainland. Those reasons are, according to the state's experts and other analysts:
» High taxes. Hawaii consumers pay almost the highest taxes on gasoline in the nation.
» Overall high cost of living. Hawaii's geographic isolation and relatively small population contribute to the generally higher cost of living and of doing business here, which is reflected in not just the price of gasoline but food, clothing, furniture, real estate and other necessities. The higher intrinsic costs of refining and distribution are additional factors specific to gasoline here.
» State regulations. The Federal Trade Commission has pointed to government-imposed regulations such as station rent caps and restrictions on the opening of new gas stations as anti-competitive laws that "tend to reduce retail supply and increase retail prices."
WHILE MANY states have considered some sort of price controls on gasoline over the years, none have actually adopted any -- largely because of expert testimony by the FTC and others that such laws tend to have negative effects on consumers and competition. Hawaii's experiment with the gas cap seems to validate those concerns.
The DBEDT study shows the cap has cost Hawaii consumers as much as $54.9 million already. And Automobile Club figures indicate that Hawaii consumers were typically paying the nation's highest average gas prices before the cap, and according to its data that situation appears to remain unchanged even with the cap in place.
To its credit, the Legislature studied the Hawaii gasoline market extensively while considering the gas cap as originally proposed, and based on its findings amended the law substantially before finally adopting and implementing it last year.
With the actual consequences now becoming known, the Legislature is considering repealing the gas cap and exploring other ways of monitoring and analyzing the petroleum market and prices here. Given the cap's performance thus far, this review can't come soon enough.
Melissa Pavlicek is the Hawaii advocate for the Western States Petroleum Association, a nonprofit trade organization representing petroleum companies in the western United States.