Take more time to assess gasoline price cap

THE ISSUE Twelve House Democrats have indicated they will join Republicans in trying to repeal the state's gasoline price cap.

HAWAII'S petroleum industry appears to have garnered support in the state House of Representatives for repeal of the gasoline price cap, but Senate leaders are confident the lid will survive the legislative session. The coincidental crippling effect of Hurricane Katrina on gas prices as the Hawaii price controls took effect last fall makes a fair assessment impossible after less than five months. More time is needed.

Gas prices in Hawaii fluctuated like never before in those months, in contrast to the previous pattern of hovering above the upward and downward price spikes elsewhere in the country. Those spikes reflect a competitive market that has not existed in Hawaii, which has been controlled by what the Hawaii petroleum industry concedes is its oligopoly.

The average price for a gallon of unleaded regular gasoline was $2.86 on Oahu and $2.93 statewide on the eve of the cap's Sept. 1 implementation, and it skyrocketed to as high as $3.60 across the state, including Honolulu, by mid-September. This week's statewide average was back down to $2.88.

No event could have had a more devastating effect on the price lid than did Katrina. The cap is based on gas prices in New York, Los Angeles and the Gulf Coast, where oil production and refining facilities were disabled.

The industry brazenly raised prices on gasoline refined from crude oil coming from areas other than the Gulf Coast; Hawaii gets is crude mainly from Asia and Alaska. The industry raised prices in Hawaii because, under the unusual circumstances, the cap allowed it.

Senate Consumer Protection Chairman Ron Menor and other Senate leaders are proposing amendments aimed at preventing that gouging from occurring again and to lower prices through other means. One amendment would add Singapore to the three markets on which Hawaii's price lid is based, and eliminate the market with the highest average. By that method, the Gulf Coast prices would have been discarded from the equation following Katrina.

Other amendments proposed by Menor would eliminate a zone price adjustment of 6.5 cents a gallon now added to the wholesale price of gas on Oahu, replace the 4 percent general excise tax with a rate of 8 cents per gallon and adjust fixed costs to assure recouping of delivery costs by jobbers, who buy gas wholesale and deliver it to remote stations.

Governor Lingle and John E. Cole, executive director of the state Division of Consumer Advocacy, also have called for more disclosure of the oil companies' costs and wholesale prices. The Legislature should enact such a requirement to provide a closer examination of the price cap's effects.

Lingle has been opposed to the price cap from the beginning and supports its repeal, although such a measure is not among her priorities in the current session. At this point, legislators should focus on ways to improve the controls rather than eliminate them.