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Oahu gas
price soars

Fueled by rising oil costs,
the average price for gasoline
leaps 27 percent to set
all-time records

---

By Rob Perez
Star-Bulletin

Fueled by rising oil costs, the average price for regular unleaded gasoline on Oahu has jumped 27 percent this year, easily setting all-time records for the island's highest pump prices.

Not only that, gas prices locally are increasing at a faster clip than on the mainland, where regular unleaded has jumped 17 percent since the beginning of the year, according to industry data.

Prices at some Arco stations on Oahu have jumped 10 cents or more a gallon in just the past week or two -- something rarely seen in a market more noted for gradual, incremental price changes. B.C. Oil Ventures, which oversees the Arco stations, did not respond to a request for comment yesterday.

Heightening consumer angst, some Oahu stations are fast approaching the once unthinkable mark of $2 for a gallon of regular unleaded. Prices for top-grade, premium gas surpassed that mark earlier this summer at some stations. Neighbor island markets reached that milestone months ago.

"Things are getting a little crazy," said Jill Romma, as she filled her car with $1.959-a-gallon regular unleaded in Kalihi last night.

Although Oahu dealers said their pump prices today are by far the highest they've ever charged, that isn't the case when adjustments are made for inflation.

On that basis, pump prices from late 1990 -- when the Persian Gulf War created fears of international gas shortages -- would have been higher. Regular unleaded at the time surged to an average of between $1.50 and $1.53 a gallon, or the equivalent of roughly $1.90 to $1.93 in today's dollars, according to Star-Bulletin data.

Still, the upward trend this year has more than doubled the gap between Honolulu and U.S. average prices, though some mainland markets, particularly in Northern California, still are more expensive than Oahu's.

In Honolulu, a gallon of regular unleaded on Monday sold for an average of $1.82, up 39 cents from the beginning of the year, according to the Star-Bulletin's weekly survey of six stations in the urban core.

At $1.82 a gallon, the local average was 31 cents higher than the U.S. average. At the beginning of the year, the difference was only 14 cents.

The widening spread is returning Honolulu to levels more in line with what motorists experienced for much of the 1990s, when local prices typically topped the national average by roughly 25 to 50 cents.

Last year, however, Oahu consumers got an unprecedented break. While mainland prices soared 40 percent, Honolulu's average fell 4 percent -- the first time in at least a decade the local market did not move in the same direction as the national one, according to Star-Bulletin research.

The diverging trends resulted in Oahu prices falling to within 6 cents of the national average by December.

State's lawsuit cited

Some analysts attributed last year's anomaly to the heightened scrutiny of local gas prices, especially since the state filed a $2 billion antitrust lawsuit in late 1998 against the major oil companies here.

The state accused the defendants of conspiring to keep wholesale prices artificially high, a charge the companies denied. The lawsuit is pending.

Whatever the reason, Honolulu prices -- retail and wholesale -- fell last year even as crude oil prices more than doubled.

John Mayo, president of Lex Brodie's Tire Co., which operates two gas stations on Oahu, said this year's increases in pump prices, due entirely to rising wholesale levels, were not unexpected.

He said retail prices eventually had to catch up with oil prices, which have tripled over the past year-and-a-half.

"You can only defy gravity for so long," Mayo said. "At some point, there has to be a reconciliation. Ultimately, what drives our fuel prices is the cost of the raw materials."

Albert Chee Jr., a spokesman for Chevron Corp., Hawaii's market leader, said in a voice mail message to the Star-Bulletin last night that gas prices are set by market forces and competition.

He did not elaborate and wasn't available to answer questions.

Aloha Petroleum Ltd., which supplies gasoline to its service stations and other companies, did not respond to a request for comment. Tesoro Petroleum Corp., which operates an Oahu refinery and has gas stations throughout the state, declined comment.

Chevron prices up 47 percent

While oil prices have risen more than 30 percent this year, Chevron has raised its dealer wholesale price on Oahu by 47 percent. The company has said in the past that the cost of oil is just one factor in setting wholesale prices.

Fereidun Fesharaki, a petroleum expert at the East-West Center, said the rise in local gas prices has been due in part to a dramatic spike in prices for Indonesian crude, the type most commonly used here currently.

He also said the cost to ship oil has risen substantially in recent months, and that affects an isolated state like Hawaii more than most other places.

Those and other factors have contributed to upward pressure on gas prices, Fesharaki said.

"There has been a sea-change in the past three months," he said.

Not everyone, though, has raised prices in such a changing environment.

Costco, which opened its first gas station in Hawaii in July at its new Waipio store, has actually lowered its members-only price for regular unleaded by a penny, to $1.659. A Costco official wasn't available yesterday to explain how the company has been able to buck the upward price trend.

Costco buys its gas from Aloha, which has been raising prices at its Aloha stations.