Monitoring of gas prices should be made to work

THE ISSUE The author of gas-cap legislation says a law aimed at helping consumers understand how fuel prices are set is not working.

Monitoring of Hawaii's gasoline prices, initiated after gasoline caps were disparaged and withdrawn, has encountered bumps in the road. That is not surprising, since they recognize proprietary information in a system that has little if any competition. The state must come to grips with that situation in order to collect meaningful information about what causes gas prices in Hawaii to soar above mainland prices.

Rep. Ron Menor, who authored the gas-cap legislation and helped craft the law creating oversight, says the reports issued weekly by the state Public Utilities Commission have been of little use. "I think consumers are entitled to have more specific information regarding the oil companies' pricing practices," Menor told the Star-Bulletin's B.J. Reyes.

Prices of regular, self-serve, unleaded gas on Friday now averages $3.42 a gallon, the same as in California but far above the national average of $3.09, 31 cents more than the first week in October. Hawaii's average continues to hover above the national average on a delayed basis.

Oil industry companies are required to report the volume of fuel imported and exported, fuel costs at various points in the supply chain and weekly gross margins but not the wholesale prices paid by gas stations.

Chevron and Tesoro, Hawaii's two oil refiners, have insisted that their prices reflect supply and demand. Releasing the total amount of crude oil inventory for both companies would allow each of them to calculate the other's stock, they maintain. That presumes competition.

However, the gas-cap legislation was initiated because of the lack of competition. The oil companies' attorney in a price-fixing lawsuit brought by the state and settled out of court acknowledged that they comprised an oligopoly.

Uniform pricing can occur and is legal as long as companies act independently. That happens most often in "oligopolistic industries producing standardized goods," according to Julian O. Von Kalinowski, a prominent California lawyer, in his book on antitrust law.

"Absent any additional factors," Kalinowski wrote, "the resultant price uniformity throughout the industry does not constitute an antitrust offense, even though the effect is the same as if price fixing had been involved."

A Public Utilities Commission consultant is helping the commission examine and assess the data supplied by the oil companies to compile a detailed report, including "an in-depth analysis of the industry drawn from the reported data," for next year's Legislature. Legislators should take a hard look at the data to determine how the monitoring can be improved.