CRAIG T. KOJIMA / OCTOBER 2002 Governor-elect Linda Lingle said the the law regulating gas prices would create fuel shortages in Hawaii.

Lingle to kill
gas caps

The measure won't help
reduce prices, she says

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By Tim Ruel
truel@starbulletin.com

As promised during her campaign, governor-elect Linda Lingle said she will suspend a law that would regulate Hawaii gasoline prices.

The controversial measure was passed by a divided Legislature this year after the state dropped a price-fixing lawsuit against the major oil companies.

"I don't want it. It is not in the public interest, but, again, out of respect and courtesy to the Legislature I want to talk with the leaders about why I have those feelings," Lingle said in an interview yesterday.

"It doesn't go into effect until 2004 so there's no ... rush on it, but I will meet with legislative leaders first and talk with them about what my opinion is about the bill.

"I don't have any specific proposal at this time to bring down the cost of wholesale gasoline, but it is an important issue for the state and that'll be part of what I talk to the Legislature about."

The law in question would create a cap for wholesale and retail prices of regular unleaded gasoline, using a formula based on weekly spot market prices in Los Angeles, San Francisco and the Pacific Northwest.

At the retail level, the law applies only to self-service pumps, and does not cover mid- or premium-grade gas.

Unlike most laws, the gas regulation measure allows the governor to suspend the caps by writing an opinion that it will hurt the economy or the welfare of residents.

The new Legislature can revive the measure by addressing Lingle's concerns. If Lingle then vetoes the bill, both houses of the Legislature would have to muster a two-thirds vote to override her veto.

Lawmakers adopted several last-minute compromises to get the bill passed this year. The law does not take effect until July 1, 2004, to allow for further review.

Of the measure, Lingle said: "It would drive up the cost of gas in Hawaii. It would create shortages."

Outgoing Attorney General Earl Anzai, a major proponent of the legislation, disagreed. Markets in Canada and Western Australia have enacted similar regulation, bringing prices down without shortages, Anzai said, based on research conducted by his office.

Lingle said the state should do other things to improve competition in the gasoline market, though her suggestions revolve around current laws that affect gasoline dealers. Lingle acknowledged she doesn't yet have a plan to tackle lack of competition at the wholesale level. Hawaii has two oil refiners, ChevronTexaco and Tesoro, and a handful of wholesalers who don't have incentive to compete. That finding was the result of the Cayetano administration's $2 billion antitrust lawsuit against Hawaii's major oil companies, which the state dropped this year for a settlement of $35 million.

"Whether it's two airlines, or two oil companies or two of anything ... lack of competition does tend to make prices higher," Lingle said. Hawaii drivers basically consume the same amount of gas whether prices go up or down, she noted.

"I think the wholesale issue is a function of the fact that it's a very expensive market to get into, because of the capital investment that you have to make," Lingle said.

ChevronTexaco, for one, has openly opposed the state attempt to regulate Hawaii's gas prices, saying it establishes Hawaii as a hostile climate to business. In the closing days of her gubernatorial campaign, Lingle received a $4,200 campaign contribution from Tesoro and $2,000 from Chevron, according to campaign flings reported by the Associated Press.