[ OUR OPINION ]
Reopen gas price cap
debate with fairnessA report last September by a California petroleum consulting company was highly critical of Hawaii's gasoline price cap law, which is scheduled to go into effect in July. Two lawyers hired by the state in its now-settled lawsuit against the oil companies are equally critical of that report. The disagreement is reopening the issue, and the Legislature should make sure the debate is fair and complete before a decision is made about whether to go forward with the price caps.
THE ISSUE
Two lawyers who represented the state in a lawsuit against oil companies have criticized a consulting company's recommendation against gasoline price caps.
The report by the California-based firm Stillwater Associates acknowledged that "the high profitability of Hawaii's gasoline market relative to other markets is indicative of the use of market power in an oligopoly." However, it concluded that price caps "would bring volatility, market distortions and opportunities for profiteers to game the market." It said price caps had been tried in Australia and several Canadian provinces but had failed to result in "clear consumer advantages."
The Stillwater report has prompted a derisive response by San Francisco lawyers Spencer Hosie and John McArthur , who represented the state in its price-fixing lawsuit against six major oil companies, resulting in a $35 million payment to the state. In a letter to U.S. Rep. Ed Case, who sponsored the gas-cap bill when he was in the state Senate in 2002, Hosie and McArthur called the Stillwater treatise "a report by former industry insiders that provides a largely industry viewpoint."
David Hacket, president of Stillwater, says his employees have no ties to oil companies, although oil companies are among the firm's clients. Stillwater was hired by the administration of Gov. Ben Cayetano, who favored price caps, but the work it has done for energy companies because of its expertise also may have affected its perspective.
Hosie and McArthur concede that the Stillwater report "contains valuable information" that can be useful in the ongoing debate but ignores findings by experts used by the state in the price-fixing suit. In one instance, they note, the Stillwater report cites one expert's opinion that the oil companies' profits were not "disproportionate," neglecting to point out that the expert changed his mind after learning of information made available by the lawsuit.
State Sen. Ron Menor plans to propose an amendment to the gas-cap law that would tie the caps to national gasoline prices instead of the West Coast prices used as the basis in the current law. Governor Lingle is opposed to price caps.
The issue is certain to be debated in the upcoming Legislature and probably future sessions. While the Stillwater report will be cited as authoritative in such a debate, Hosie and McArthur warn, "There is no counterbalancing consumer group with the resources and knowledge to keep the record straight."
The lawyers recommend that the state assign three expert economists used in the price-fixing suit to prepare a short report explaining where they differ from Stillwater's assessments. The Legislature should ask for such a report to make the debate fair.
