Monitoring necessary to ensure fair gas pricing

THE ISSUE Hawaii legislators are considering measures to require oil refiners to reveal why gasoline prices remain high.

ADEQUATE monitoring of corporate behavior affecting gasoline prices appears headed for approval by the Legislature, but public access to the information might be questionable. Oil companies insist that much of their pricing information is confidential for competitive reasons, but the public should be informed of basic information as a deterrent against overpricing.

A law enacted last year affords the companies protection from disclosure of proprietary information provided to the state Public Utilities Commission. That issue has been moot for the past year because the commission was provided only $1 to collect and analyze the information. An interagency transfer of $316,000 was inadequate in producing necessary information.

The Lingle administration has asked for $1.2 million to fully implement the law, and lawmakers are prone to provide that amount. The commission's monitoring of Hawaii's two oil refiners, Chevron and Tesoro, should determine whether prices reflect supply and demand, as the companies maintain.

Gasoline price caps were authorized by the Legislature five years ago after the notion of market forces in Hawaii's petroleum industry had become a bad joke. The oil companies' attorney had acknowledged during a price-fixing lawsuit that they comprised an oligopoly.

Uniform pricing, described as "conscious parallelism," is not an antitrust violation, "even though the effect is the same as if price fixing had been involved," according to prominent California antitrust lawyer Julian O. Von Kalinowki. Such pricing usually occurs in "oligopolistic industries producing standardized goods," he wrote in his book on antitrust law.

The 2006 Hawaii law requires the refiners to disclose a wide assortment of information about the number of gallons imported and sold, wholesale fuel prices they charge, operating expenses and profit margins. Refiners claim they are held hostage to crude oil prices, but oil accounts for only 60 percent of gasoline costs. Soaring gas prices nationally following Hurricane Katrina resulted in record profits for Big Oil.

Periodic statements made by Chevron and Tesoro to the utilities commission containing confidential information are exempt from public disclosure under Hawaii's Freedom of Information Act. However, the law requires the commission to disclose information that it considers not to be proprietary.

Close monitoring should reveal whether the two refiners are engaged in "conscious parallelism" having little to do with market forces. The commission should be able to make such an assessment, even though some information might be withheld from the public.

If uniform pricing is determined to be deliberate, the gasoline price caps that were despised and withdrawn because they reflected skyrocketing post-Katrina prices on the mainland might have to be resurrected to bring Hawaii prices under control.