Gas price drop will
likely be brief if
Rita boosts costs

The statewide average for gasoline is steadily declining, and was expected to drop an additional 6 cents by Monday, when new weekly price caps take effect.

But optimism over lower prices was tempered with caution as some analysts predicted gas on the mainland could top $5 a gallon by next week as a result of Hurricane Rita's disruption to Gulf Coast oil production. Hawaii's law ties island pump prices to an average of three mainland markets.

Meanwhile, Gov. Linda Lingle again called on lawmakers to repeal the law but said she would work on trying to give back some of the tax money generated by the recent rise in fuel prices.

art Although yesterday's statewide average of $3.53 for regular unleaded was still the highest in the country, that price was down a dime from the day before, according to AAA's Fuel Gauge Report.

Prices have decreased steadily since Monday, when new, lower price caps for this week took effect. Caps for next week were posted yesterday, and are 6 cents lower than the current price ceilings.

The price caps are based on an average of spot prices in the Gulf Coast, New York and Los Angeles, where prices also have declined following the recovery of oil production after Hurricane Katrina.

But oil and gas prices started climbing again this week as Hurricane Rita churned toward the Texas and Louisiana coasts, home to roughly a quarter of the nation's oil and natural gas production. Many companies have evacuated production facilities in the region ahead of Rita, which is forecast to make landfall by Saturday.

When Katrina's winds and flooding shut down refineries and pipelines, retail gasoline prices surged past $3 a gallon nationwide. Pump prices could reach $5 a gallon should there be extensive damage to Texas refineries from Rita, said Natexis Bleichroeder Inc. analyst Roger Read.

Because Hawaii's price caps are based on the average of prices in the target markets from the five business days leading up to the weekly publishing date, isle pump prices have lagged about a week behind mainland trends.

Critics of the gas cap say Hawaii's prices would have been less affected without the law, because the state primarily gets its oil from Alaska and Asia, not the affected Gulf Coast region. Supporters dismiss that argument, saying Hawaii prices have historically gone up whenever mainland production has been affected.

"It has provided a buffer and a shield from higher gas prices," said House Majority Leader Marcus Oshiro (D, Wahiawa-Poamoho).

Lingle said she continues to believe that gas prices are being forced higher because of the caps, and called on lawmakers to repeal the law. She compared it to the state's "van cam" photo enforcement program to catch speeders, which was repealed within weeks of its introduction in 2002 after overwhelming public outcry.

"They thought they were doing the right thing. They were trying to help and it simply didn't work," Lingle said. "It seems like this (gas cap) is going down that same road.

"They should examine it themselves, and I think if they are objective they'll reach that same conclusion: It's just an idea that didn't work."

Oshiro called the comparison unfair.

"The gas cap is addressing high gas prices and providing consumers fair prices at our pumps," he said. "It just needs additional time and it's premature to end it."

Lingle said her administration continues to monitor the effects the price caps are having on the economy.

She echoed statements from earlier in the week that she wanted to give back some of the money generated by the recent increase in gas prices through the 4 percent general excise tax.

Because the excise tax is applied as a percentage of the wholesale price, it generates more money as that price increases.

"Whether we can do it immediately or we do it during the (2006) session, we are going to find a way to get this money back to the people of Hawaii," Lingle said yesterday. "This was an unintended windfall."

Oshiro said majority Democrats in the Legislature remain open to all of the governor's proposals, but stressed that all tax refunds or credits must be thoroughly examined because of their effect on the state treasury.

Bloomberg News Service contributed to this report.


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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