ASSOCIATED PRESS Hawaii's rising gas prices were on display in Honolulu yesterday. Prices in Wailuku were among the state's highest.

Another big leap in gas cap forecast

Lawmakers have until April 28 to settle on any change to the law

Hawaii's wholesale gas price caps are poised for a third straight week of double-digit increases as record crude oil costs drive pump prices across the country to levels not seen since hurricanes Katrina and Rita.

Price caps are forecast to jump 16 cents on Monday, according to Star-Bulletin calculations. Price caps already have shot up 26 cents over the past two weeks, and 66 cents since reaching their lowest points of the year during the week of Feb. 20.

The Public Utilities Commission is scheduled to post new price caps today, just as House and Senate lawmakers begin final negotiations on competing proposals to modify or suspend the nation's only price controls on gasoline.

By Monday, retail prices in Hawaii are forecast to range from $3.37 a gallon for regular on Oahu to $3.74 on Lanai, while the statewide average could top $3.40. Estimates include taxes and assume wholesalers charge up to the maximum. Projections also include an assumed dealer markup of 16 cents, although such charges vary and are not governed by the price cap law.

Yesterday's statewide average for regular was $3.09 a gallon, 30 cents higher than the national average and 11 cents more than the next-costliest region, Washington, D.C., according to AAA's Fuel Gauge Report. Hawaii gas prices are expected to continue climbing this week to reflect the price cap increase set by the PUC last week.

Hawaii's caps are based on an average of spot prices in three mainland markets -- the Gulf Coast, New York and Los Angeles -- which closely follow trends in crude oil costs.

Oil prices settled at a new high above $71 a barrel yesterday as supply threats around the world overshadowed a new report from OPEC forecasting weakening global demand.

Critics of the gas cap say it ties Hawaii's price to markets that otherwise would have no impact on local prices. Supporters argue the cap forces Hawaii prices to rise and fall along with mainland prices, unlike in the past, when island prices typically remained at high levels during mainland decreases.

The fate of the gas cap now rests with a conference committee of seven House members and four senators who will have to reach a compromise before April 28.

House lawmakers want to suspend the cap in favor of new oversight measures aimed at making sure oil companies set fair prices for gasoline.

The Senate has passed a measure that would suspend enforcement of the caps but continue to have the Public Utilities Commission calculate hypothetical caps under a revised formula. Under that formula, which includes Singapore as a benchmark, current price caps could be about 17 cents cheaper. Under the Senate bill, caps would be reinstituted for two weeks if wholesale prices rose above the hypothetical caps for two straight weeks.

The measure was introduced by Consumer Protection Chairman Ron Menor as a compromise to House members who strongly indicated that they did not want to keep the current law.

"All I can say is I'm hopeful that the House remains open-minded to my proposal, and I look forward to discussing the issues with them," said Menor (D, Mililani).

House members have balked at Menor's proposal, saying the on-and-off nature of the price caps could be too unwieldy to implement.

"I'm very hopeful that a compromise can be reached," said Rep. Kirk Caldwell (D, Manoa), one of the House conferees who has emerged as one of the chamber's strongest opponents of the price caps.

"In the end, though, it has to not have Menor's tweak of 'on again and off again,'" he added. "To reach a compromise, that cannot be part of it. The mechanism to implement his 'on again and off again' just won't work."

If no compromise can be reached, the current law would remain in place.

"I think the current law is generally working," Menor said. "I think that if we pass any legislation out, as much as possible, it should be an improvement over the existing law."

Richard Parry, president of Mid Pac Petroleum LLC, a jobber that buys gasoline at wholesale and sells it to retail stations, said the law is hurting people in the industry and that Menor's proposed changes could force some out of business. He noted that the proposal aims to significantly reduce margins allowed for wholesalers.

"If we have to give up (more of our) margins, we're obviously not going to be able to make any money out of the business," Parry said. "We're going to be selling at a loss, and we obviously won't be able to afford to do that and won't continue to do that."

He agreed with House lawmakers that the on-off nature of the caps could be problematic.

Menor noted that Mid Pac has opposed the price cap legislation, and he accused oil industry representatives of spreading misinformation.

"I think that the wholesaler, along with oil companies, continue to engage in scare tactics and fear-mongering," Menor said. "They know that our gas pricing regulation is forcing them to lower prices during various periods of time and cutting into the excessive profits they've been earning off consumers in the past."