Gas cap expected
to take first dip

Pump prices could drop to
around $3.11 per gallon on Oahu

With the cost of gasoline approaching $4 a gallon in many parts of the state, prices should start to fall Monday as the state's gasoline price caps begin to reflect the nationwide decline that has followed the Gulf Coast's recovery from Hurricane Katrina.

Preliminary estimates by "gas cap" supporters show prices could fall by as much as 40 cents.

New weekly price caps take effect each Monday and are posted by the Public Utilities Commission on Wednesdays.

The commission does not release the figures early, but in a letter to Gov. Linda Lingle and the Legislature last week, Chairman Carlito Caliboso said early data showed the cap prices for next week "may begin to decrease."

Any decline would be a first since the caps took effect on Sept. 1.

Current caps use a baseline price of $2.59 a gallon, which represents an average of spot prices in the Gulf Coast, New York and Los Angeles for the five business days leading up to the Wednesday publishing date. That figure is 45 cents higher than a week ago and 72 cents higher than Sept. 1.

House lawmakers estimated next week's baseline price at $2.10 a gallon. The estimate is based on figures from the Oil Price Information Service, the same index used by the PUC.

"Now that the Gulf Coast is recovering from Hurricane Katrina and the oil industry is starting to stabilize, the fair gas price law is operating under more normal conditions," House Majority Leader Marcus Oshiro (D, Wahiawa-Poamoho) said in a news release.

If refiners charge up to the cap and dealers maintain their traditional markups, the baseline could bring the cost of gas down to about $3.11 a gallon for regular unleaded on Oahu.

There is no guarantee that prices will fall, because the law places no limit on the amount that retailers may charge. Backers of the law say there is enough competition at the retail level to ensure fair market pricing.

After surging to a record high $3.06 a gallon nationwide on Sept. 5, gas prices have steadily declined, according to AAA's Fuel Gauge Report. Yesterday's national average for regular unleaded was $2.96 a gallon, down 2 cents from the previous day, the auto club said.

Hawaii's statewide average of $3.30 a gallon yesterday was third highest in the country, behind Washington, D.C., at $3.32 and New York at $3.31. The statewide average is 37 cents higher than the average on Sept. 1.

Critics of the gas cap blame the increase on the pricing formula, saying it forces Hawaii's prices to go up along with the three mainland markets, even though the oil used by Hawaii's refineries is brought in from Asia and Alaska.

Senate Minority Leader Fred Hemmings said he and other Republicans in the Legislature continue to believe that the law is flawed and should be repealed.

"If you listen to all the flaming rhetoric by the proponents of this, you see it was really designed to punish the oil companies, not to help the poor consumers of Hawaii," said Hemmings (R, Lanikai-Waimanalo). "Now that the law has been implemented and not working, proponents of it are trying to spin everything and blame everybody else."

Hemmings and other Republicans, including the governor, have noted that the law specifically states: "It should be clearly understood that the objective of this Act is not to guarantee lower gasoline prices."

Supporters have maintained that the law was intended to bring fairness to Hawaii's gas prices, arguing that oil companies have gouged consumers in an isolated market. Oil companies note that analysts have disproved that allegation and say Hawaii's poor business climate and high taxes lead to higher prices.

Price cap supporters say now, because of the law, Hawaii's prices will rise and fall along with mainland prices, unlike in the past when island prices traditionally have remained higher when mainland prices dipped.

"Next week, we're going to reflect the trends of the mainland markets," said Frank Young, a member of the advocacy group Citizens Against Gasoline Price Gouging. "We're going to see all of these deductions that we never saw before."


How to contact the state about Hawaii's gas cap law:
Public Utilities Commission

Commerce and Consumer Affairs

Hotlines for consumers: 586-2769, on Oahu; (800) 830-4295, toll-free, from neighbor islands.

Business, Economic Development & Tourism

Hotline for owners and operators of gas stations: 586-2752
E-mail: gasoline@dbedt.hawaii.gov

AAA Fuel Gauge Report:

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