Prices at the pump

Gas price patterns raise questions
for state attorney general

---

By Tim Ruel
truel@starbulletin.com

While this year's Legislature wrangled over whether to regulate the high retail cost of gasoline, Chevron's wholesale prices in the islands were slow to reflect price increases on the mainland, according to data collected by the Star-Bulletin.

From the middle of December 2001 to the first week of March, the nationwide wholesale price for gasoline rose 22.3 percent to 68 cents a gallon from 55.6 cents a gallon, on average, according to the Oil Price Information Service.

The increase marked a turnaround from a 48.3 percent price drop that began in mid-September 2001, and followed a jump in crude oil prices. The spot market price for Alaskan North Slope oil, one of the types commonly used in Hawaii, rose 44.5 percent between Dec. 11 and March 8, to $22.29 a barrel from $15.43, according to Bloomberg News.

At the same time, Chevron's wholesale gas price in Hawaii fell 10.3 percent, to 96 cents a gallon from $1.07 a gallon. The price was continuing its fall from a peak of more than $1.30 a gallon in early 2001.

Chevron's wholesale price began rising March 22, two months into the 2002 legislative session. Its wholesale price was $1.02 a gallon as of April 5, the last increase on record as of May 22.

Based on the data, Attorney General Earl Anzai accuses Chevron of deliberately keeping gas prices down as a way of dimming support for regulation. Hawaii's other major oil companies have said in court that they tend to follow Chevron's pricing.

"It's clear that they were holding (the price) down," Anzai said.

"I disagree with that," said Albert Chee, Hawaii spokesman for Chevron Corp. "We set our wholesale price to make our dealers competitive in the marketplace."

Chee said it's not fair to compare Hawaii gas prices with a national average because Hawaii has specific market characteristics that are different from other cities.

Anzai called that argument a red herring. "It's just an amorphous argument. They will never get down to brass tacks in defending themselves, because they can't," Anzai said.

He and Gov. Ben Cayetano have pushed for gas-price regulation in the wake of settling the state's four-year anti-trust lawsuit against the oil companies. The state got only $35 million of the $2 billion it had been seeking.

Chee also said Chevron's gas prices are not directly tied to crude prices, but are set by the local marketplace. For much of 2000 and 2001, Chevron's prices were relatively stable while crude prices dipped and soared. But in the last quarter of 2001, Chevron's wholesale price began falling in a pattern similar to a prior drop in crude prices.

In the past, Chee has said Chevron's Hawaii prices tend to lag oil prices. In 1999, Chevron's Hawaii wholesale price was nearly flat, while crude prices jumped more than 130 percent.

The following year, Chevron's wholesale price rose 50 percent while the price of crude oil fell.

Anzai questioned why there would be a lag, since Chevron has access to daily price information from the markets. "It's not like it takes six months to get the gasoline here so that our prices are six months late. The prices are instantaneous," Anzai said.

On May 2, the state Legislature approved a gas-price regulation measure that won't take effect until 2004, allowing the state time to study the issue more closely. Gov. Ben Cayetano signed the bill into law on Friday, and called it a coup for Hawaii consumers. Chevron has said the law establishes a hostile environment for business that will ultimately hurt residents.