Thursday, January 28, 1999

Gasoline-Paying the Price

Isle lawmaker
seeks to regulate
gas prices

The precedent-setting bills,
however, are considered unlikely
to pass this session

By Rob Perez


Hawaii would become the first state in the nation to regulate gas prices if either of two proposals at the Legislature becomes law.

But the two bills introduced by Rep. Terry Yoshinaga (D, Liliha-Nuuanu) face tough odds and aren't likely to pass this session.

Some key lawmakers, while acknowledging that something must be done about Hawaii's high gas prices, question whether the Legislature should take such a far-reaching step before seeing how the state's antitrust lawsuit against the major oil companies progresses.

Rep. Hermina Morita, (D, Haiku-Hana) head of the House energy committee, one of three panels that must approve the measures before they can go to the full House for a vote, said the likelihood of either bill passing this session isn't good because they're "a little premature."

While Morita and Rep. Ron Menor, (D, Mililani) chairman of the consumer protection committee, said their respective panels will hold hearings on the bills to gain a better understanding of the complex issues involved, they wondered whether price regulation would do more harm than good -- a concern voiced by others.

Proponents, however, say government intervention is needed because the marketplace is not working as it should. Instead of aggressively competing at the wholesale level, Hawaii's oil companies have agreed to divvy up the market and keep prices artificially high, even as crude prices and mainland pump prices have fallen dramatically, the regulation proponents say. That conspiracy allegation -- vigorously disputed by the oil companies -- is the basis of the state's lawsuit.

"Even though regulation is not the most efficient way to go, it may be the only way," said Chevron dealer Frank Young, an outspoken critic of the oil companies. "The market is so out of line. It's very evident the oil companies aren't behaving" as true competitors.

One of Yoshinaga's proposals would require the state Public Utilities Commission to establish a benchmark for wholesale gas prices that could not be exceeded by local suppliers. It specifies using the Oil Price Information Service, a price-tracking service widely used on the mainland and in some federal contracts here to determine pricing for bulk purchases of fuel. The bill also says a set amount may be included in the benchmark to cover supplier profit margins.

Yoshinaga's alternative proposal calls for establishment of a new commission to regulate the refining and sale of petroleum products in Hawaii. It likewise calls for the setting of a benchmark and says the commission would restrict price increases once prices rise a certain percentage over the benchmark.

Yoshinaga said she usually is hesitant to call for government intervention in a marketplace. But Hawaii consumers aren't getting nearly the same benefits that consumers elsewhere are getting from the steep decline in crude prices, she said.

What's more, the military and other federal agencies in Hawaii are able to get much better wholesale prices than local dealers buying from some of the same suppliers, raising the issue of fairness, Yoshinaga added. Her proposals, she said, are intended to ensure fair prices for consumers while maintaining the oil companies' ability to earn a profit.

Spokesmen for Chevron Corp. and Tesoro Hawaii, the two local manufacturers of gasoline, declined comment, saying the bills were still under review.

If the objective is to get lower prices, however, some question whether additional regulation is the route to go.

"I'm a small entrepreneur, and I believe in the free marketplace," said Barnaby Robinson, a Chevron dealer. "The more government intervenes and gets in the way, I think it'll do the exact opposite of what they're trying to do."

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