Record-breaking The average price for regular gasoline set a record in Honolulu yesterday, hitting an average of $1.948 a gallon, and is poised to crack $2 at many Oahu neighborhood pumps.
gas prices pinch
drivers at the pumps
Isle Chevrons up for sale
By Tim Ruel
CORRECTION
Friday, March 21, 2003» If the state's gasoline price cap were in effect now, the estimated maximum retail price of gas in Honolulu this week would be $2.28 a gallon, not $2.12 as reported in a story on Page A1 Wednesday.
The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at corrections@starbulletin.com.
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Gas prices on the neighbor islands have surpassed $2 a gallon, and are setting records as well. In Wailuku, Maui, the average price for regular unleaded hit a record Friday of $2.242 a gallon, beating the previous record of $2.239 in June 2001. Wailuku's price continues to set new records almost every day and hit $2.264 yesterday.
Honolulu's previous record, $1.945 a gallon, was set two years ago.
In Hilo, the average price has exceeded $2, but hasn't hit the record of $2.299 set in July 2001, according to data from AAA, formerly the American Automobile Association.
Hawaii gas prices began a steep incline late last year. Nationally, the average price has risen faster than it has here, though Hawaii remains one of the nation's most expensive places to buy gasoline, second only to California.
In Los Angeles, the average price per gallon of regular gas hit $2.161 yesterday, a 45 percent jump from $1.491 a year ago. In San Francisco, the average reached $2.276.
Hawaii residents who seek to escape high gas prices in Las Vegas will be disappointed. The price there hit $2.039 a gallon.
Hawaii's average price statewide still tops the national average by more than 30 cents.
Conventional wisdom says the high cost of oil is to blame for high gas prices.
Crude oil costs are the most significant factor influencing the price of gasoline, said Chevron Hawaii spokesman Albert Chee.
The market price of Indonesian minas, a type of crude oil often used in Hawaii, jumped more than 36 percent late last year. A week ago, the price of another common oil, Alaskan north slope, hit a record $37.48 a barrel.
But crude oil prices have dropped since. The price of Alaskan north slope fell to $31.32 a barrel as of yesterday.
In the past, when crude prices have risen and fallen, mainland gas prices have followed the crude oil patterns, but Hawaii prices have been slow to move.
In this case, it's hard to say whether there will be immediate relief, Chee said. "I would caution people that it's very difficult to predict what will eventually happen," Chee said, adding, "there is less certainty."
Tom Kloza of the Oil Price Information Service thinks prices could keep rising, based on strong demand and normal price trends for gasoline from mid-March to May.
"Gasoline has its own trajectory," Kloza said. "You might have gasoline rallying even as crude goes down."
If the cost of crude oil falls, but gas prices remain high, it would seem logical that the oil companies would reap rising profits from sales. Chee disagreed. Crude is not the only factor that helps to set gas prices, although it's a big one, he said.
In Hawaii, which has only two refineries, Chevron and Tesoro, and a handful of wholesalers, there is little competition on price. Chevron once produced 60 percent of Hawaii's gas.
Consumers keep burning the same amount of gasoline regardless of price. The oil companies charge what they can, and dealers pass the price on to consumers, according to court testimony from oil companies during a state antitrust lawsuit. In the past, Chevron insisted that the isle market was competitive.
Chevron's profits from gasoline sales through Hawaii dealers made up nearly one-quarter of the company's overall profits from its dealers nationwide between 1988 and 1995, according to an expert report in the state's antitrust lawsuit against the oil companies. At the same time, Chevron was only selling 3.1 percent of its volume in Hawaii.
The total profit from Hawaii dealer sales during that time was $101.2 million, according to a report by Barry Pulliam, senior economist with Econ One Research Inc., a Los Angeles firm that worked for the state in the lawsuit.
In 1991, during the war against Iraq, Chevron lost $148.2 million on dealer sales nationwide. But in Hawaii, the company had a profit of $9.5 million from dealer sales.
The numbers don't necessarily mean Chevron makes more money overall in Hawaii than any other state, but it illustrates a disparity in economics.
Hawaii's refineries have used profits from gasoline sales to make up for less profitable sales of other products derived from crude oil, according to the recent findings of a state consulting firm.
For those who think something should be done about the high prices, get in line.
The state Legislature has passed a price cap for regular unleaded gasoline, but the consulting firm Stillwater Associates said in preliminary findings that the cap was a bad policy.
The cap is not to take effect until 2004. If it were in effect now, the maximum price of gasoline in Honolulu this week would be about $2.12 a gallon, or about 17 cents a gallon higher than the current price, said David Hackett, president of California-based Stillwater.
Why is the cap higher than the current price? Because it's based in part on spot market prices in San Francisco and Los Angeles, where prices are higher.
According to Stillwater's report, under the cap, gasoline dealers would have an incentive to charge more than they normally would, to make up for losses caused by the cap at other times. But under the price-cap law, the amount that the dealer gets from the sale of gasoline is fixed, starting at 16 cents a gallon.
A final report from Stillwater is due at any time, and the company is expected to offer its own solutions for improving gas prices here. Gov. Linda Lingle opposes the cap, but has said she will leave the matter in the hands of the Legislature for now.
The state has already tried an antitrust lawsuit against the oil companies. After more than three years of litigation, the suit was settled for a small fraction of what the state was seeking, and the oil companies denied collusion.
The Houston Chronicle contributed to this report.
