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Give the ‘Fair Gas Price’
law a chance to work

WITH a new gas price law set to go into effect a week from today, the high price of gasoline is affecting the pocketbooks of families statewide. Like most folks, I am paying at least 30 cents per gallon more than I did a year ago, and for someone who spends two to three hours a day commuting, that means a whopping $300 a month! The price of crude oil is skyrocketing due to factors no legislator in Hawaii can control, and this is driving the price of gas to unbelievable highs.

The new law sets a cap on the price of wholesale gasoline. While no one can predict whether this will cause the price of gasoline to rise, fall or stay the same, one thing is clear: Big oil companies are making record profits due to the high cost of crude oil, and consumers are the ones being hurt. Hawaii also deserves prices that are on parity with the mainland. Of course everyone wants lower gas prices, but the real issue here is fairness. That's why we sought to protect the consumer from price gouging, and why we passed what we are now calling the "Fair Gas Price" law.

Three years ago, the Legislature enacted this groundbreaking law, the first in the nation, to protect Hawaii's gas purchasers from having to pay prices that were among the highest in the country. We saw evidence that Hawaii is the only market where the price of crude oil and the price of gasoline do not rise and fall together. Further, the production and sale of gasoline in our state is structured as an oligopoly (two companies -- Chevron and Tesoro), but act as a monopoly. The Legislature was determined to bring a level playing field to a gas wholesale market that was virtually unaffected by any natural competition. We believe that this law can protect our consumers, provided it is implemented in the way the law is designed to work.

First, the fair gas price law gives the Public Utilities Commission all the authority it needs to respond responsibly to market fluctuations and Hawaii's unique geographical conditions. Here's how:

The PUC has set up a mechanism to adjust the wholesale price maximums every Wednesday in response to market conditions. If the proper adjustments are made, this will help to ensure that consumers do not face gas shortages, nor should any small gas retailer have to shut down due to refusals by jobbers (middle men) to deliver the gas.

If gas shortages occur that cannot be cured through price adjustments by the PUC, the Legislature gave the governor the ability to use emergency powers to immediately suspend the law.

The PUC is able to set the wholesale price caps to ensure that gas manufacturers and wholesalers can make a reasonable profit.

The law allows the PUC to accommodate the higher transportation and handling costs required to deliver gas in small quantities to remote locations, such as Hana, or by barge to Lanai and Molokai.

So, what can consumers expect when this law goes into effect?

The PUC will set and post the maximum prices allowed by law for wholesale gasoline. The wholesale market will react by setting its prices accordingly. It may take a few weeks before the retail market reacts to the wholesale prices.

But remember, if you see higher prices at the pump, it will likely be the result of the rising price of crude oil in the global marketplace rather than the effect of this law. The test of the law will not be the retail price but rather whether Hawaii's gas prices will track the mainland markets in the same proportionate way as do other mainland states.

Fair gas prices are not just about what we pay at the pump. Fair gas prices affect our quality of life, and that's why it's important for Hawaii to understand the long-term benefits of this law. As with every new concept that challenges established traditions, there is resistance. We are about to take a bold step to protect consumers and to fix the lack of competition created by a limited source for gasoline in Hawaii. Give the Fair Gas Price law a chance to work.

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