Hawaii gas prices plummeted to as low as $2.89 a gallon yesterday at one store chain, while prices everywhere else hovered about 90 cents higher on average.

Costco Wholesale Corp. broke with the norm in Hawaii by slashing gas prices as oil costs fall worldwide, while the rest of the state still averaged the second-most expensive gas in the country at $3.79 a gallon, according to AAA's Fuel Gauge Report.

Costco is able to cut fuel prices faster because its stores buy gas at current prices, while other stations may buy and sell gas at prices that are a week old, said Richard Galanti, Costco's chief financial officer.

“;When the underlying cost of oil is going down in price, we turn our inventory dramatically faster than the average station in America,”; Galanti said.

Even so, Costco's membership-driven business model alone doesn't explain how it can undercut the competition so severely, especially when all the motor fuel in the state comes from two refineries.

In the same Iwilei neighborhood where the Honolulu Costco was selling gas for $2.89, a nearby Aloha Petroleum station was charging $3.66 a gallon of unleaded - a difference of 77 cents.

Hawaii gas prices tend to fall slower than they rise, said Bank of Hawaii chief economist Paul Brewbaker.

“;Research has tended to support the hypothesis that retail gas prices in Hawaii tend to be sticky on the way down and more flexible on the way up,”; Brewbaker said.

A gallon of unleaded gas cost an average of $2.89 nationally yesterday, according to AAA. Alaska had the most expensive gas at $3.84 per gallon.

Oil prices fell below $71 a barrel yesterday compared with $79 a barrel a week earlier. Oil cost more than $100 a barrel Sept. 30.

“;I don't know how Costco does their pricing,”; said Al Chee, a spokesman for Chevron Corp., one of Hawaii's two oil refiners. “;It's a very different business model than your traditional service station.”;

Costco is able to buy in bulk and serve more customers than most service stations, and the wholesaler doesn't have to support the cost of running a retail service station store, Chee said.

On the Big Island, the Costco store in Kailua-Kona charged $2.99 a gallon yesterday - also far less than nearby gas stations.

“;It's a slightly different business model,”; said Nathan Hokama, a spokesman for Hawaii's other refiner, Tesoro. “;But that's more than a couple of cents.”;

If there's some truth to the idea that gas currently costs more at service stations because they bought fuel at more expensive prices, then it would follow that their prices also will soon drop.

Neither Chevron nor Tesoro would predict whether a decrease in pump prices is coming in the next few days.