State to sue
gasoline companies

The state is seeking
$500 million in damages for
allegedly overcharging gas
stations and consumers
for years

By Rob Perez
Star-Bulletin

The state today filed a lawsuit against Hawaii's two refineries and major gasoline wholesalers, seeking as much as $500 million in damages for allegedly overcharging local consumers for years.

The lawsuit alleges the refineries and wholesalers agreed to keep prices artificially high and, as a result, reaped enormous profits at the expense of Hawaii gas station dealers and consumers.

The suit was filed with the help of a San Francisco law firm -- Hosie, Wes, Sacks & Brelsford -- which is known for its antitrust expertise and has taken on the oil industry elsewhere.

One of the principals of the firm said Hawaii's case, which could take years to resolve, was very strong.

"This is the cleanest, strongest case I've ever seen," said Spencer Hosie.

Hosie said Hawaii gas station dealers typically have been overcharged as much as 30 cents to 40 cents a gallon.

The industry contends that Hawaii has the highest prices in the nation because of the high cost of doing business here and the need to provide a reasonable rate of return. But Hosie called that contention a myth.

Named in the lawsuit are 13 corporations, including Chevron Corp., BHP Hawaii Inc, Shell Oil Co., Texaco Inc., Tesoro Petroleum Corp., Tosco Corp. and Unocal Corp.

Mike Neeley, Hawaii pricing manger for Chevron, denied that the company overpriced its product. Neeley said the company's local prices are driven by a competitive market.

"We don't believe that there's anything that we're doing wrong," he said.

Nathan Hokama, communications manager for Tesoro Hawaii Corp. which recently bought BHP's retail operations in Hawaii, declined immediate comment, saying the company hasn't seen the detail of the state's suit.

The lawsuit, filed in U.S. District Court this morning, seeks to recover more than $150 million in compensatory damages, civil penalties of at least $70 million and a permanent injunction to prohibit future illegal conduct. The overall compensation sought totals roughly $500 million because the state is asking the court to triple the damages.

The lawsuit was announced this morning in a news conference that included Gov. Ben Cayetano, Attorney General Margery Bronster and Hosie.

Cayetano said he has taken on the Bishop Estate, the tobacco companies and now the oil industry.

The lawsuit was filed in the wake of a Star-Bulletin investigation over the past several months showing that Hawaii's major oil companies appear to have been making tremendous profits as the cost of crude oil has plunged during the past year and a half.

Without mentioning the Star-Bulletin reports, Hosie made many of the same points raised in the stories.

He referred to the dramatic declines in oil prices and noted that mainland consumers have benefited from that. He said Hawaii consumers should have seen similar benefits. He also noted that the other products that Hawaii's two refineries make, such as jet fuel and fuel oil, have dropped dramatically as the price of crude has shot down.

Yet Hosie said Hawaii's wholesale gasoline prices are the most profitable in the country, with wholesalers making as much as 40 cents a gallon.

In the oil business, even a 1 cent a gallon profit "can make a difference," Hosie said.