House votes to
regulate gas prices

Galen Fox argues that increased
competition is a better solution

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By Bruce Dunford
Associated Press

The state House voted yesterday to regulate gasoline prices in Hawaii, a practice endorsed by Gov. Ben Cayetano.

The move comes just after the state reached a settlement in its $2 billion antitrust action against several major oil companies doing business in the islands. Details of the settlement have yet to be disclosed, but it is believed the state will net only a little more than $20 million after attorneys fees and court costs.

Cayetano said he was disappointed the state was pushed into the settlement conference because he feels the state could have prevailed before a jury with its strong circumstantial evidence.

"Maybe the good thing that will come out of this is, it will be a signal to the oil companies that they need to be judicious in the way they do business in this state," he said. "And perhaps it'll be an opening for the Legislature to consider by law imposing caps on the kinds of profits that these folks can make.

"When they talk about competition at the dealer level, that's not where the action is. The action is at the refinery level. People like Chevron, they are the ones who set the rule of the game," he said.

The governor said the state had little choice but to settle.

"When you have a motion for a summary judgment before a judge, and the judge sends signals to you that you had better settle this case or otherwise I'm going to grant the motion, then you have to make a decision as to whether you settle the case and take what's available" or appeal it, Cayetano said.

In floor debate on the House bill, several Republicans opposed it. Minority Leader Galen Fox said the solution is for the state to encourage more competition instead of fixing prices.

"When you fix the price, you drive competitors out of the market rather than bringing in new competitors into the market," said Fox (R, Waikiki-Ala Wai).

Rep. Joe Gomes (D, Kailua-Lanikai-Waimanalo) said one way to reduce Hawaii's high gasoline prices would be to lower the state's gasoline tax.

House Consumer Protection Chairman Ken Hiraki (D, Kakaako-Downtown Honolulu) said the measure provides state oversight in a situation where two major suppliers control a market that sees Hawaii with the nation's highest gasoline prices.

"Most of us have great faith in the marvel of the free competitive market. However, where there is little or no competition in a specific market, it then becomes the Legislature's duty to serve as a watchdog to protect against companies using their unchallenged status to excessively price their product," he said.

The House bill goes to the Senate for further consideration.

The state filed the lawsuit in 1998, accusing divisions of Chevron, Shell, Texaco, Unocal and Tosco of fixing gas prices and allocating market share among themselves as early as 1987. BHP Hawaii and Tesoro, named in the original suit, were dismissed from the case as part of a $15 million settlement in November 1999.

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