Hawaii gas prices again stuck on high

Pump prices could be $2.89 a gallon or less if price caps had been retained, as the national average has fallen 22 cents

WHILE THE nationwide average for gasoline has come down about 22 cents in the past two weeks, pump prices in the islands have retreated at about half that rate, and Hawaii remains the only state with an average price still above $3 gallon.

Analysts say the decreases come as crude oil prices have settled below $66 a barrel for the first time since March, and gasoline stocks remain healthy as a result of having no major disruptions to the nation's oil supply this summer.

In Hawaii some discount retailers such as Costco have dropped prices as low as $2.79 a gallon, although the statewide average for regular unleaded was listed at $3.28 yesterday on AAA's Fuel Gauge Report -- about 66 cents higher than the national average.

The Hawaii price is down 10 cents from summertime highs of $3.38 reached in mid-July and again in early August, but still almost 40 cents higher than they could be if the state's now-suspended gasoline price caps were still in place.

According to Star-Bulletin calculations, this week's average price could be around $2.89 a gallon under the regulations suspended May 5, and even cheaper -- possibly as low as $2.71 a gallon -- under a revised formula proposed by the price caps' chief legislative supporter.

What has happened to Hawaii's gas prices since the caps were lifted was expected, said Tim Hamilton, a mainland oil industry analyst who has studied Hawaii's market and worked with Senate Consumer Protection Chairman Ron Menor in devising the price cap proposals.

"There's nothing there that forces them (oil companies) to lower the price back down," said Hamilton, repeating the contention that the lack of competition in Hawaii's market allows the states two refiners -- Chevron and Tesoro -- to set artificially high prices.

"If you don't have this cap pushing the gas price back down, there's no competitive pressure to push it down," he said.

UNDER THE price caps, Hawaii's prices fluctuated from week to week -- as much as 50 cents in one instance -- as the maximum wholesale price was pegged to markets in the U.S. Gulf, New York and Los Angeles. Wholesale spot prices in those markets have dropped as much as 60 cents since mid-July.

The proposed new formula would include Singapore spot prices in calculating price caps. Those prices are about 10 cents cheaper than the average of the three U.S. target markets.

Since the pricing regulations were suspended, Hawaii's prices have reverted back to a previous trend of staying fairly stable but above the national average.

"That's typical of prices in Hawaii," said David Hackett, president of Stillwater Associates, an oil and gas industry consulting firm that also has studied Hawaii's oil and gas market. "They don't come down very fast, and they don't go up very fast.

"The prices there tend to be sticky both up and down."

IN JULY, when the national average rose 7 cents in a three-week span following the escalation of violence in the Middle East, Hawaii's average increased by a penny.

Oil industry officials contend that the higher price and slower fluctuation in Hawaii's prices are a result of market forces and the state's unique island economy.

"One of the biggest challenges for us is the isolation in the middle of the Pacific, in a small market, means we pay a pretty hefty premium to import ethanol, as well as crude oil, into the island," said Chevron spokesman Albert Chee. "It's a smaller quantity and transportation costs are high.

"I'm not saying this explains all of it, but clearly I believe it is a factor."

Chee and Nathan Hokama, a spokesman for Tesoro in Hawaii, also note that there is competition among retail stations within neighborhoods, which also can lead to different price levels at different times.

"We continue to price aggressively in this marketplace at the wholesale level to allow our retailers to be competitive," Chee said. "Our goal is to be competitive in this marketplace, not try to compete against the rest of the nation."

Hackett said he expects mainland prices to continue falling as demand tapers off and refiners begin shifting production to making heating oil for winter and performing routine plant maintenance.

Whether Hawaii prices follow remains to be seen.

"I think gasoline prices will continue to fall for maybe a few more weeks, and then it will stabilize," Hackett said. "We'll see what happens from there."

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