Oil groups lose bid
to stop gas cap

The ruling means the new pricing
will go into effect Sept. 1

The state Public Utilities Commission has denied motions by the petroleum industry asking the state to reconsider plans to implement gasoline price controls starting next month.

Yesterday's ruling means the so-called "gas cap" will take effect as scheduled, with the first price caps for wholesale gasoline slated to go online today.

Those price caps will represent the maximum cost at which wholesale gasoline can be sold in Hawaii, starting Sept. 1. The caps are to be adjusted on a weekly basis to reflect changing market conditions in Los Angeles, New York and the U.S. Gulf Coast.

What that means at the pump is still anyone's guess, although preliminary calculations indicate that costs could rise above current levels.

"I don't think anyone knows because we don't know what the wholesalers will do," said Melissa Pavlicek, a spokeswoman for the Western States Petroleum Association, an industry trade group.

Wholesalers are not obligated to charge the maximum allowed, but many analysts expect they will while they adjust to the new regulations. The state's two major wholesalers -- Chevron USA Inc. and Tesoro Hawaii Corp. -- have not said whether they would charge up to the maximum.

"We continue to see the law as flawed and not in the best interest of the state," Chevron spokesman Albert Chee said yesterday.

The formula and rules for the gas cap were filed by the PUC on Aug. 1. Since then, the commission has run two preliminary calculations for the oil industry and allowed the companies to respond.

Chevron and Tesoro, along with Shell Oil Co. and the Hawaii Petroleum Marketers Association, last week filed motions asking the PUC to reconsider the Aug. 1 order.

Companies argued that price controls were unreasonable, did not consider unique factors related to the gasoline market in the islands and could cause disruption in service across the state, among other things.

The commission rejected all arguments saying some were "incomplete and too unclear" and others "did not meet the burden of showing that the commission's decision is unreasonable, unlawful and erroneous."

Chee and an attorney for Shell said they had not yet seen the PUC's order by yesterday afternoon and declined comment. An attorney for Tesoro did not immediately return a telephone message seeking comment.

According to AAA's Fuel Gauge Report, average prices for regular, unleaded gasoline in Honolulu ($2.75 per gallon), Wailuku ($3.02) and Hilo ($2.77) reached record highs this week.

Preliminary calculations show that if the price caps were in effect today, the cost for regular unleaded on Oahu would be about $2.87 a gallon, not including any markups that dealers could charge. Dealers have traditionally tacked on a 12-cent markup. Prices would be about $3.03 a gallon on Maui and $2.95 a gallon in Hilo.

Supporters insist that even if the caps cause prices to go up immediately, the measure will ultimately bring down the cost of gasoline once prices everywhere else start to come down.

"The problem that has plagued Hawaii's consumers is the fact that the oil companies have always been quick to increase prices when mainland and global prices have gone up, but have failed to lower them when prices are falling elsewhere," said Senate Consumer Protection Chairman Ron Menor, one of the chief authors of the gas cap.

Menor (D, Mililani) said without the cap, he believes oil companies would charge even higher prices than they are now.

Exactly what will happen at the pump won't be known until Sept. 1.