Don't repeal gasoline price cap law -- improve it

THE ISSUE The state House is considering repeal of the gasoline price caps while the Senate is poised to change the law.

HAWAII'S gasoline price caps were intended to combat the islands' lack of competition by reflecting more competitive markets on the mainland, but they were immediately thrown out of kilter by Hurricane Katrina. The chaotic weeks following the hurricane have prompted calls for lifting the caps, but a state Senate proposal aimed at including wholesale prices more relevant to Hawaii's market as a factor should be put to the test.

Katrina devastated oil production and refining along the Gulf Coast six months ago, just as Hawaii's price caps went into effect. Since wholesale gasoline prices on the Gulf Coast, along with those in the New York and Los Angeles areas, were used to determine Hawaii's cap level, prices in Hawaii soared above $3 a gallon.

A bill sponsored by Sen. Ron Menor, chairman of the Senate Consumer Protection Committee, would add prices in Singapore to the three mainland areas in determining Hawaii's wholesale price limit. The highest of the four price levels would be discarded, reducing the effect of another Katrina.

The proposal is intended to make the actual cost to Hawaii's oil refiners in obtaining crude oil a factor in determining the cap. Hawaii gets most of its crude from Singapore, with a lesser amount coming from Alaska.

Recognizing that reality, in no case should Singapore's price level be discarded from the formula in the event of its prices being highest among the four base markets. A hurricane or tsunami along the Malaysian peninsula with effects similar to those of Katrina could paralyze Singapore's oil industry and severely cramp Hawaii's petroleum market if refiners are unable to absorb the cost.

Menor says he is "in total disbelief" that the state Public Utilities Commission, which has implemented the gas-cap law, has not interpreted it to guarantee lower prices. However, Carlito Caliboso, the commission's chairman, is correct in interpreting the intent of the law to set a price cap that reflects competitive market conditions on the mainland. While that was the specific intent, the expected result was lower prices, which had been too high because of Hawaii's oil oligopoly.

A bill that would suspend and ultimately repeal the gas-cap law appears headed for House approval. House Majority Leader Marcus Oshiro says the caps should be replaced by "transparency -- as far as revealing the true cost and the fair rate of return for the oil companies." Governor Lingle, who has opposed the price caps, also has favored closer examination of oil industry costs.

The imposition of open records, without infringing on the companies' proprietary rights, is important, but it should be added to the gas-cap law, not replace it. Price caps have been in force for too little time and implemented under circumstances too extraordinary to be cast aside.