Gas cap could
boost prices

A Star-Bulletin analysis shows
the new law will bring only
slight changes for isle drivers

Prices at the pump are unlikely to change dramatically and could climb a few cents on some islands under gasoline price controls scheduled to take effect Sept. 1, according to a Star-Bulletin analysis.

At the pump

How the price of regular, self-serve unleaded gasoline could be affected by the state's gasoline price cap law.

Under the law

» $2.65 in Honolulu, $2.81 in Wailuku, $2.72 in Hilo


» $2.61 in Honolulu, $2.90 in Wailuku, $2.70 in Hilo

Sources: AAA Fuel Gauge Report, Star-Bulletin analysis

Under the cap's pricing formula, the cost of regular, self-serve unleaded was estimated at about $2.65 a gallon on Oahu, based on market conditions last week. That is about 4 cents higher than the average reported yesterday in Honolulu by AAA's Fuel Gauge Report.

On Maui, prices under the so-called "gas cap" would be about 9 cents cheaper than the $2.90 a gallon reported by AAA yesterday in Wailuku, but roughly 2 cents higher than the auto club's listing of $2.70 a gallon in Hilo, according to the analysis.

Frank Young, a member of the consumer group Citizens Against Gasoline Price Gouging who helped push the price cap through the Legislature, said he expects retail prices to be about $2.75 a gallon for Oahu after Sept. 1. But he noted that gas prices nationwide have increased as much as 14 cents a gallon in the past two weeks and are likely to go up again by Aug. 24, when the state Public Utilities Commission is scheduled to publish the first list of price caps.

"To make a comparison to say it (the cap) would make prices higher is kind of unfair," he said. "They (gas prices) are going up everywhere. They're going to be what they would have been regardless of the cap."

The cap is tied to an average of spot prices for wholesale gas in Los Angeles, New York and the U.S. Gulf Coast as determined by the Oil Price Information Service, or OPIS, a New Jersey-based organization that bills itself as "the most widely accepted fuel price benchmark for supply contracts and competitive positioning."

Because the benchmark listings are property of OPIS, the PUC has said it cannot release which of the service's numerous indexes are being used to set the price cap.

The Star-Bulletin analysis used a baseline price of $1.77 a gallon, based on an average of daily spot barge and pipeline prices for conventional unleaded gasoline in the three key markets as listed in the weekly newsletter sent to OPIS subscribers. The newsletter, with prices from July 29 through Aug. 4, was provided to the Star-Bulletin by OPIS. It is unknown if these same benchmarks are being used by the PUC.

The Star-Bulletin's price estimates do not include any potential markups that retailers may charge. The law sets no limit on retail prices, but supporters say they believe lower wholesale costs will allow dealers to pass savings along to consumers.

Critics say gas stations are likely to charge the maximum possible while adjusting to the new regulations.

The law gives the PUC authority to adjust the price caps as it sees necessary to bring prices in line with market conditions. It also has a provision stating the governor can suspend the caps if they cause economic hardship.

Gov. Linda Lingle has said she does not believe the law will bring down prices, but she plans to let it take effect as scheduled.

In letters last month to Lingle and Democratic leaders in the Legislature, PUC officials warned of potential pitfalls from the cap, including the potential for higher prices and the possibility of shortages resulting from some suppliers leaving the market.

Lingle said she would sign legislation to delay the cap if lawmakers were to come back in special session to pass such a bill.

House Speaker Calvin Say said yesterday that Democrats do not plan to pursue a special session. The gas cap was among the topics House Democrats discussed in caucus yesterday.

An analysis of the cap prepared for caucus members estimated the price of regular unleaded gasoline on Honolulu would be about $2.48 a gallon without any dealer markups. That cost also does not include the 4 percent general excise tax, which would be about 8 cents.

The House analysis used a baseline price of $1.68 as determined by the U.S. Department of Energy for the period of July 25 through 29.


Per-gallon price
has hidden costs

A look at what goes into the cost of a gallon of regular, unleaded gasoline on Oahu under the state's price cap law:

» $1.77: Baseline wholesale price as determined by an average of spot prices in New York, Los Angeles and the U.S. Gulf Coast.
» 4 cents: Location adjustment factor to account for costs stemming from Hawaii's remote location.
» 18 cents: Marketing margin factor to account for operational costs of producing gasoline.
» 6.5 cents: Zone price adjustment to account for cost of distributing gasoline. This fee is greater for neighbor islands, ranging from 13.6 cents on Kauai to 40.3 cents on Lanai.
» 50.9 cents: State, federal and county taxes. (County taxes vary.)
» 8.2 cents: General excise tax.

Sources: State Public Utilities Commission, Oil Price Information Service, Star-Bulletin analysis

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