PUC should reveal effect of gas-tax break

THE ISSUE Gov. Linda Lingle is expected to sign legislation to pay for monitoring of oil prices and restore an ethanol tax exemption.

AT odds on many matters, the Democratic Legislature and Republican governor agreed on bills related to perhaps the state's most heated issue -- gasoline prices. Monitoring of the oil industry should shed light on its pricing practices, beginning with its response to restoration of a tax exemption for ethanol-blended gasoline on July 1.

The 2006 Legislature approved a bill directing the Public Utilities Commission to monitor the state's two refiners but neglected to adequately fund the commission to carry out the task. This year, Gov. Linda Lingle's request for the $2.1 million needed to do the job was granted.

The general excise tax exemption for gas containing ethanol was enacted in 1980, but it expired on Jan. 1, soon after 85 percent of all gasoline in Hawaii had to be blended with at least 10 percent ethanol. The dime-a-gallon tax exemption should be reflected in gas prices on July 1 -- all other factors being stable.

Aloha Petroleum has promised to pass on the savings at the pump and expects all other dealers to do the same. If that does not happen, the PUC should be in a position to determine why not.

The gas-pricing controversy became heated when pricing caps began just as Hurricane Katrina devastated oil production and refining along the Gulf Coast. Since the caps were based on mainland prices, Hawaii's prices soared, even though its petroleum comes from Alaska or Asia.

Hawaii's gasoline prices have increased in recent weeks to nearly $3.20 a gallon for regular, but three Western states have even higher prices. Mainland prices are likely to climb during the summer as driving increases, a seasonal phenomenon nonexistent in Hawaii. Monitoring of prices should reveal whether Hawaii's prices also rise and, if so, why.