GAS PRICE TURNABOUT:

Hawaii gas is
cheaper off-base

Prices have surged since
March, turning the tables on
the armed services

Jump in gas prices draws scrutiny in Western states

By Rob Perez
Star-Bulletin

Gasoline prices on Oahu's military bases have risen so much in recent weeks that motorists can get better deals outside the bases - if they look hard enough.

The military's gas stations historically have had the state's lowest prices.

But for a brief period last week, many of the island's nonmilitary stations offered lower prices - the first time people in the industry can recall that happening.

At a Kaneohe Marine Corps station, the price for regular unleaded jumped to $1.589 a gallon early last week, well above the rate at most nonmilitary stations. At other military stations, the price got as high as $1.429, a few cents above the best deals available off base.

Since then, most military stations have dropped their regular unleaded to $1.389 a gallon.

Only two stations outside the bases still offer better deals, according to industry officials. Lex Brodie's Tire Co. facilities in Kakaako and Waipahu sell regular unleaded for $1.369.

The military prices have surged since early March - and especially since the beginning of this month - because of huge jumps in West Coast pricing.

The amount the federal government pays Tesoro Hawaii to supply Oahu's military stations is pegged to a West Coast average of Los Angeles and San Francisco wholesale prices. Those prices have soared in recent weeks because of rising oil prices and production-limiting refinery problems in California. West Coast retail prices recently have surpassed Hawaii's traditional highest-in-the-nation levels.

In mid-March, the federal government was paying Tesoro Hawaii 54.52 cents a gallon (excluding taxes) for regular unleaded, according to Fred Bluhm, a spokesman for the federal agency in Texas that purchases the gas.

The Tesoro price for Oahu is adjusted weekly.

By April 6, that price had jumped to $1.052 - nearly twice what the government was paying a few weeks earlier.

The price increase was so steep that Oahu gas station dealers, who usually pay higher wholesale rates than the military, were getting bargains by comparison. In early April, local oil companies were charging their Oahu dealers close to 85 cents a gallon for regular unleaded.

A year ago the situation was reversed. The military was paying 46 cents a gallon while dealers were charged nearly 93 cents.

The military was able to lower prices recently after its fuel buyer negotiated a lower payment to Tesoro that was more in line with local pricing, Bluhm said.

West Coast petroleum analyst Tim Hamilton, who has long claimed that Hawaii residents were being gouged by the oil companies, said mainland motorists now know what it's like.

"Those higher prices were always reserved for Hawaii, but now it's hit the West Coast," Hamilton said. "We're getting the good old Hawaiian treatment."

Oil companies on the mainland and in Hawaii deny any price gouging.

But the state of California has begun an antitrust investigation and a U.S. senator from Oregon is urging the Justice Department to look into the rapid jump in West Coast prices.

For its part, the state of Hawaii in October filed an antitrust lawsuit against the major oil companies here, claiming they conspired to keep prices artificially high. The state is seeking $1.8 billion in damages and penalties.

The case is not expected to go to trial until 2001.