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A Matter of Opinion
Brian Barbata

Consultants find flaws
in gas price cap law

I'm sure very few readers saw the 83-page ICF Consulting report to the Public Utilities Commission on implementation of the gasoline price cap law. I read it cover to cover. After years of studies by other consultants and government agencies, this report represents the latest comment by experts on the petroleum industry in Hawaii and on the gas cap law, which is scheduled to go into effect in September.

No consultant, no expert and no government agency has ever found that there is anything to be fixed in Hawaii's petroleum refining or distribution businesses, and none of them, including ICF, a Washington, D.C.-based consulting firm, has said that gas price controls would result in lower prices for consumers. In fact, the assumption that Hawaii's gas prices are too high is flawed.

Sen. Ron Menor, the dogged proponent of this legislation, made the following comment: "The report shows that a workable and enforceable price cap can be achieved." He did not say "beneficial," "not harmful" or "fair." The PUC hired ICF to recommend formula numbers and a process to implement the law, the task assigned to it by the Legislature. In his circular logic, Menor would like you to believe that the ICF report is an endorsement of the law's vague intent. ICF consultants simply did their job and recommended how the PUC can carry out its instructions. They were not asked to opine on whether the law is a good idea.

Nonetheless, the ICF report is broadly cautionary about the impact of the law. While accomplishing its assigned technical goals, the consultants make the following important points:

» "It is not the intent of the legislation ... to guarantee lower Hawaii gasoline prices."
» "There is no obligation ... for retail dealers in Hawaii to modify their prices."
» "It will be challenging to accomplish this by September."
» "This process results in ... 96 separate price caps for Hawaii wholesale gasolines."
» "(The law) does not mean Hawaii consumers will see significant changes in gasoline prices."
» "Hawaii's gasoline taxes are among the highest in the United States."
» "(The law) may push Hawaii's refiners to closely examine refinery ... sustainability."
» "The ... impact on every jobber and distributor is difficult to quantify."
» "The gas cap legislation is still a disruption to the free market system."
» "The inability to raise prices beyond the gas cap may ... jeopardize supply."
» "Price controls ... can create a perception of an anti-business climate in Hawaii."

Do these direct quotes from ICF sound like comments supporting the law? They mirror the comments of every expert who has looked at the subject here for years. In short, the upside of gas price controls is uncertain, and the downside is very, very scary.

Brian Barbata is an independent petroleum jobber serving Kauai and Molokai.

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