Gas hike temporary,
isle expert suggests

The energy analyst sees prices falling
nationwide as supply is quickly restored

CORRECTION Thursday, September 8, 2005 » Hawaii's gas cap law took effect last Thursday. A Page A3 article Saturday incorrectly said it started Aug. 31. The Honolulu Star-Bulletin strives to make its news report fair and accurate. If you have a question or comment about news coverage, call Editor Frank Bridgewater at 529-4791 or email him at corrections@starbulletin.com.

An East-West Center energy policy expert says isle gas prices likely will go up in the next few weeks thanks to Hurricane Katrina and the new state gas cap, but they might fall back down sooner than expected.

The gas cap, which began Wednesday, ties Hawaii gas prices to markets on the mainland, where pump prices have climbed well above $3 a gallon after Katrina pummeled the Gulf Coast and its oil industry.

"Once you index things to something which is not in your back yard, then anything which happens -- whether it be a refinery outage or a fire or accident -- it affects your prices," said Fereidun Fesharaki, senior fellow at the East-West Center.

Supporters of the "gas cap" say Hawaii prices always have gone up when the mainland oil industry has been affected. But the price cap will ensure that Hawaii prices come down when mainland prices do, whereas in the past they usually remained among the highest in the country during nationwide price declines.

"If you look through history, look at the national average, Hawaii has (borne) the brunt of every disaster in the United States, regardless of whether it was on the West Coast, the Midwest or now the Southeast," said Frank Young, of Citizens Against Gasoline Price Gouging. "We felt the effects of last year's hurricane that hit a similar area.

"We've always felt the effects of things that have happened on the continental USA."

Yesterday, the statewide average for regular unleaded was $2.95 a gallon, according to AAA's Fuel Gauge Report, an increase of about 2 cents from the previous day. The national average was $2.87 a gallon, up 16 cents from the previous day, the auto club said.

Fesharaki, a senior fellow at the center who has been an adviser to major oil companies and governments in the Middle East, Pacific Basin and Latin America, said it might not be much longer before prices start to come down.

Some refiners in the Gulf of Mexico already have started to come back online, and the industry is showing signs it might return to pre-hurricane production levels sooner than some expect, he said.

Coupled with the release of some of the nation's strategic oil reserves, gas prices in Hawaii and nationwide could start to come down by the end of the month.

"To get (production) back to where things stood before Hurricane Katrina in the next two to three weeks is a distinct possibility," Fesharaki said.

Over the long term, Fesharaki said he did not expect the price cap to make a big difference. "This is an index," he said. "Indexes go up and down, and at the moment it's up."

He said the bigger impact of the price cap will be a negative perception it creates for Hawaii that could discourage investment.

"The (issue) is not going to be people shutting down and going out of business, but people not investing to upgrade to fit the environmental standards that the EPA or the state of Hawaii will require, because if you make the investment, you don't know whether you can get your money back," he said.