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Refiners have right
but not reason
to raise prices

THE ISSUE Hawaii's new gasoline price cap allows oil companies to raise their price this week by 27 cents a gallon.

GASOLINE prices rose swiftly on the mainland following Hurricane Katrina, but prices in Hawaii seemed relatively stable on Thursday, the first day of the state's gasoline price cap. Prices in Hawaii could jump much more this week, not because of Katrina but because the cap will rise by that much. Energy companies in Hawaii should reject the temptation to raise prices to the lid or face accusations of legal but unwarranted price gouging.

Prices rose by 35 to 50 cents overnight in many places on the mainland after Katrina knocked out 90 percent of the oil production in the Gulf of Mexico, shut down nine Gulf Coast refiners and disrupted two major pipelines carrying gas to the Midwest and East. About 45 percent of the nation's gasoline is produced in the Gulf Coast.

The hurricane should have little direct effect on prices in Hawaii, where most of the crude oil and refined oil products are imported from Asia. Less than a third of Hawaii's imported oil comes from domestic sources, mainly Alaska.

The hurricane should affect those prices only as it may boost the world cost of oil. That cost actually fell in the past week from a record high of $70.85 a barrel on Tuesday to $68.22 on Friday, although some pessimists saw three figures on the horizon even before Katrina. The Gulf of Mexico accounts for about 1.5 percent of the world's oil.

That is why the hurricane's disruption of oil supplies on the mainland should have next to no effect on the cost of oil shipped to Hawaii. Those costs normally account for about half the price of gasoline, the remainder attributed to refining, transportation, taxes and dealer markups, so prices at the pump should not rise significantly.

Hawaii's new wholesale gasoline price ceilings are pegged to wholesale prices in the Gulf Coast, New York and Los Angeles. Horror stories about increased prices were reported from all three regions in the aftermath of Katrina. Prices rose to well over $3 a gallon in some areas.

The average price on Thursday of a gallon of regular unleaded gasoline in Honolulu was $2.86, a dime more than the previous week and only a penny less than allowed by the price cap, when factoring dealers' normal markups. The price increase, within caps set before the hurricane, was modest only when compared with the post-Katrina hikes on the mainland.

The hurricane's effect on mainland prices will raise the Hawaii wholesale price ceiling through this week by 27 cents a gallon, which could increase the average retail price in Honolulu to $3.13. A Chevron spokesman said the company will weigh "supply, demand and competitive forces" in setting its price.

That would be a first in a state that has been subjected to an oligopoly insulated from market forces and leading to the price caps.

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