Keep a wary eye on Hawaii's gasoline prices

THE ISSUE The average price of gasoline has greatly decreased nationally but declined only slightly in Hawaii during the past month.

SCORNED and then withdrawn after Hurricane Katrina caused gas prices to soar, Hawaii's mainland-based gasoline price caps would have led to plummeting prices in recent months if kept in place. Instead, Hawaii's prices have followed the pre-cap behavior of hovering far above mainland prices. The state should investigate the oil oligopoly's explanation for the continuing high prices to determine if the caps should be reinstated.

The average price for self-service regular gasoline nationally has fallen about 40 cents in the past month, reaching a level today of $2.61 a gallon. It is expected to drop further in the coming weeks. During the same month, Hawaii's average price dipped by 9 cents, to $3.28 a gallon -- 67 cents above the national average. Hawaii is the only state where gas costs more than $3 a gallon.

If the price caps had been retained, the Hawaii price would be $2.89. If Singapore prices had been added to the equation, as proposed by Senate Consumer Protection Chairman Ron Menor, Hawaii's gallon would cost $2.71 -- 57 cents below the current price.

Oil industry officials attribute the high prices partly to the cost of ethanol. A Hawaii law that took effect in April requires that 85 percent of gasoline contain at least 10 percent ethanol. However, the Renewable Fuels Association has estimated that more than 30 percent of the nation's gasoline includes ethanol.

The amount of gasoline containing ethanol probably increased further this summer when the oil industry substituted ethanol for an additive called MTBE, which several states banned because it pollutes groundwater. As a result, ethanol prices reached a record high in June, but have fallen since then.

The industry rationale does not explain how some discount retailers such as Costco have been able to significantly drop prices and still make a reasonable profit. Since June, the state average has dropped 13 cents from $3.41 to $3.28 a gallon, while Costco's price went from $3.09 to $2.79, a reduction of 30 cents.

The oil companies' behavior comes as no surprise to Tim Hamilton, a mainland oil industry analyst who worked with Menor in developing the price-cap revision rejected in the Legislature's session this year. "If you don't have this cap pushing the gas price back down, there's no competitive pressure to push it down," he told the Star-Bulletin's B.J. Reyes.

The legislation suspending the price caps in May did not repeal the law that created them. Instead, it gave Governor Lingle the authority to restore them if gas prices soar out of control.

The state Public Utilities Commission is responsible for keeping track of the wholesale and retail gasoline prices. The commission should not hesitate to recommend restoration of the controls if it finds the oil industry to be abusing their absence.