Oil industry seizes advantage of uncapped gas prices

THE ISSUE Average gasoline prices in the past five weeks show Hawaii motorists paid 10 cents more than price caps would have allowed.

WHEN gasoline prices soared after Hurricane Katrina devastated the Gulf Coast, many motorists blamed Hawaii's price cap, which was based partly on that region's prices. Since Governor Lingle signed legislation that removed the caps, that theory has been disproved.

In the past five weeks, Hawaii's gas prices, implemented Sept. 1, have returned to their pre-cap pattern of hovering above mainland prices, unaffected by the dips and peaks of the marketplace. If the oligopoly continues to impose artificially high prices through the rest of this year, legislators should consider reinstating the caps.

The price limits, pegged to gas prices in New York, California and the Gulf Coast, allowed Hawaii's prices to rise to as much as $3.68 a gallon in the weeks following the Aug. 29 hurricane's destruction of oil facilities. The national average peaked at $3.08 a week after Katrina.

Since Lingle signed legislation lifting the caps on May 5, the state's average price has ranged from $3.38 to $3.43, averaging $3.41 -- a dime more than it would have averaged if the caps still were in place. Adding Singapore prices to the equation, as proposed by Senate Consumer Protection Chairman Ron Menor, could have forced the price down by an additional 27 cents, to $3.04 a gallon.

The national average over the same period was $2.88 a gallon, rising and falling by 80 cents, and is now priced at an average of $2.90. Nathan Hokama, a spokesman for Tesoro Hawaii Corp., claims that gasoline pricing "has reverted back to a free market system and the retail and wholesale levels," but the lack of fluctuation in Hawaii's prices shows otherwise.

Menor, who authored the gas-cap law, told the Star- Bulletin's B.J. Reyes that the pricing during the five-week period "demonstrates that our gas pricing law had been working previously." He said the prices confirm his expectation "that the oil companies would return to their old pricing practices of keeping prices high even as mainland prices were falling."

Price increases on the mainland have been attributed to the rising cost of crude oil, which accounts for about 60 percent of gasoline costs. That price peaked at $75.17 a barrel in May -- more than triple the cost five years ago, when gasoline cost $1.40 a gallon -- but fell below $70 a barrel last week. That could cause gasoline prices to fall on the mainland, but don't expect Hawaii's prices to follow.

The high gas prices on the mainland have lowered consumer demand by families trying to cope with increased food costs and interest rates. That has been countered by growing demand for oil by China, India and other emerging economies. The war in Iraq has disrupted oil supplies.