Gas cap debate
to gain new fuelThe governor predicts a measure
that limits gasoline prices will only
drive up costs
Since it was adopted by the Legislature two years ago, there has been no shortage of opinion about Hawaii's one-of-a-kind gasoline price cap law.
But whether the state will begin setting the price of gasoline come July 1 -- when the law is scheduled to take effect -- is still anyone's guess.
"I've said it and I still say it, and I'll say it throughout the session: A gas cap is going to cause prices to go up," Gov. Linda Lingle said last week. "It's going to create shortages -- especially on the neighbor islands -- in some of the smaller locations.
"It's simply not a good idea."
The issue is likely to be front and center during this year's session, which begins Wednesday.
The Republican governor insists she will not implement the law as passed in 2002, and she likely would veto any revised measure that still calls for a cap.
Senate Commerce and Consumer Protection Chairman Ron Menor, D-Mililani, has said he plans to propose key amendments to the original bill, which was signed by Lingle's predecessor, Democratic Gov. Ben Cayetano.
The law would allow the state to tie the price of regular, unleaded gasoline to an average of prices in major West Coast markets, limiting profit margins for dealers to 16 cents per gallon.
That formula embarrassed gas cap supporters last year when West Coast prices briefly went above Hawaii's price. Critics said if the gas cap had been in effect, it would have driven up the Hawaii price.
Menor's amendments would include setting a broader benchmark for the cap, apply the cap to all grades of gasoline and diesel fuel and make sure neighbor island dealers under the cap get consideration for their higher operating costs.
One analyst said a price cap should only be considered when other options fail.
"I would encourage policy-makers to look closely at whether there are things they can do to ensure that the structure of the market is as competitive as possible before putting price controls in place," said Barry Pulliam, a senior economist with Los Angeles-based research firm Econ One Research Inc. "Then, if they decide that price controls are indeed necessary, be very careful in how those are put together."
While opponents and supporters spent the past year researching the issue and trotting out various studies and experts to support their position, gas prices on the islands reached record highs over the summer.
The price of regular unleaded climbed as high as $2.39 a gallon on Maui in September.
On Friday the average price of regular unleaded on Maui was $2.36 a gallon, compared with $2.07 in Hilo and $1.99 in Honolulu, according to AAA.
Supporters of the price cap say there is no economic reason why Hawaii's gas prices are traditionally higher than the rest of the country, blaming the high cost on greedy oil companies.
Opponents argue that prices are the result of high taxes and other barriers to competition such as the state's isolation.