Tax raises isle gas price

Some lawmakers want to reinstate an exemption that expired Monday

Reinstatement of the general excise tax on gasoline brought about an expected increase in pump prices, along with a call from some lawmakers and Gov. Linda Lingle to restore a tax exemption that had been in place since April.

The exemption expired at the start of 2007. Whether its continuation would immediately lower gas prices is in question.

"I think there needs to be guarantees in the law to ensure that the oil companies pass on the excise tax savings directly to the consumers in the form of lower prices," said Sen. Ron Menor, incoming Senate Energy Committee chairman.

Even with the exemption in place the past nine months, Hawaii has had the highest gas prices in the country.

Yesterday's statewide average of $2.88 a gallon for regular unleaded was 56 cents higher than the national average and 19 cents higher than the next-highest state, Oregon, according to AAA's Fuel Gauge Report.

Anecdotal evidence indicates that prices since Monday on Oahu have gone up 10 to 12 cents, reflecting the passage of the general excise tax on to motorists.

Consumer advocates and oil company critics note that when the tax resumed, prices went up; but when the taxes were exempted in April, the prices never came down.

"I have concerns that the oil companies have not passed on all of the savings that they have realized to the consumers," said Menor, former Consumer Protection Committee chairman and architect of the now-defunct wholesale price caps on gasoline.

Menor says he plans to hold hearings to question oil companies about pricing practices since the caps were suspended in May.

Oil critic Tim Hamilton, a mainland analyst who worked with Menor in developing the price-cap legislation, alleges prices never came down because refiners increased wholesale costs, forcing retailers to raise prices and, in turn, eat up any savings that could have been passed on to consumers.

"Historically, we have found temporary tax cuts on gasoline and diesel simply end up in industry coffers. ... Oil companies got a huge payday that was intended to provide relief for consumers at the pump," Hamilton said in an e-mail.

Spokesmen for the oil industry say that is not true.

"That's not an accurate statement," said Albert Chee, a spokesman for Chevron USA Inc. in Hawaii. "We don't see nor handle the general excise tax money that is collected from consumers at the pump and eventually paid to the government. That's all handled at the retail level."

Nathan Hokama, a spokesman for Tesoro Hawaii Corp., also noted that refiners set wholesale prices competitively and that it is up to retailers to set the prices at the pump.

Retailers say they operate on razor-thin margins already, and any increase in costs typically has to be passed on to consumers.

"That's not something that, as gasoline retailers, we can absorb," said Barney Robinson, owner of Waialae Chevron.

As far as why prices never came down when the excise tax exemption began in April, Robinson pointed to the timing of the situation.

Although the exemption was passed in 1980, it took effect only in April, when separate legislation began requiring 85 percent of all gasoline sold in Hawaii to contain at least 10 percent ethanol.

In April, prices were regulated by the wholesale price caps, which set the maximum price refiners could charge based on an average of three mainland markets. That also marked a time period when crude-oil prices began climbing toward $70 a barrel amid geopolitical tensions and supply concerns heading into the traditional summer driving season on the mainland.

Robinson said the excise tax exemption hit at about the same time as a double-digit increase in the weekly price caps -- essentially canceling each other out and leading to a leveling off of prices before the caps increased the following week.

Caps continued to rise until the legislation was suspended in May.

Menor (D, Mililani) said it is incumbent upon the Public Utilities Commission to collect pricing data, analyze it and determine if price gouging has occurred. Along with a suspension of the price caps, lawmakers passed regulations last session aimed at making more pricing data public.

The Lingle administration has supported the transparency requirements but has criticized the Legislature for appropriating only $1 to the PUC to carry out the mandate.

Many Democrats have said they believe the PUC could have accomplished some of the requirements with existing resources.

"I think it's important for the Legislature to hold the PUC and the oil companies' feet to the fire and require the commission to explain why they have not been able to implement the transparency provisions," Menor said.