Main Page | Recent changes | View source | Page history

Printable version | Disclaimers | Privacy policy

 Not logged in
Log in | Help
 

Hawaii Gas Cap

From dKosopedia

Categories: Transportation in Hawaii | Energy issues in Hawaii

On September 1, 2005, Hawaii will become the first state in the United States to apply a cap to the wholesale price of gasoline. The cap is meant to prevent the state’s two refineries, Chevron and Tesoro, from taking advantage of the small, isolated market to charge exorbitant prices. The wholesale price will be based on an index calculated from the three large mainland markets of L.A., New York harbor and the U.S. Gulf Coast, and then allowances for shipping costs are added. The retail price of gas will not be capped so, concievably, the price of gas at the consumer level could end up rising anyway.

The Hawaii Gas Cap Law or Fair Gas Price Law was passed by the Hawaii State Legislature in 2002 and revised in 2004 is being implemented on September 2005. The law requires the state to set a maximum wholesale price at which gasoline is sold based on a national average of prices. The Public Utilities Commission would implement the law with oversight by the Hawaii State Department of Business, Economic Development and Tourism.

The Hawaii State Public Utilities Commission publishes current gas caps here.

"The law requires the Public Utilities Ccommission to set a maximum pretax wholesale price at which gasoline can be sold in Hawaii based on the weekly average of spot prices in Los Angeles, New York and the U.S. Gulf Coast. An additional 4 cents per gallon is added to account for increased fuel transport costs stemming from Hawaii's location, and retailers are allowed to add up to 18 cents per gallon to cover other costs. Other charges to account for the added cost of providing gasoline on neighbor islands are being determined by the PUC and ICF Consulting of Fairfax, Va." [1]

"Supporters of the price cap say there is no economic reason for Hawaii's gasoline prices to be typically higher than other states. Opponents -- mostly gas station owners and the oil industry -- say Hawaii's anti-business climate and high taxes drive up the costs." [2]

Other factors influencing a higher price in Hawaii include the state's geographic isolation, lack of wholesale-level competition and relatively small market.

"Any potential savings under the law hinge on gasoline dealers' passing savings on to consumers. However, some O'ahu retailers contend the savings may not be passed on because margins on gasoline are low relative to high land, labor and tax costs." [3]

"Senate Consumer Protection Co-chairman Ron Menor (D, Mililani) and state Sen. Rosalyn Baker (D, Honokahau-Makena), Consumer Protection Committee co-chairwoman, said a major concern was whether oil companies would cooperate and provide information needed to calculate the cap." [4]

According to a Star-Bulletin article entitled, Small gas stations get pinched printed on Sept. 11, 2005:

Most gas stations "buy their gasoline from jobbers -- middlemen who buy it from refiners and resell it to stations -- who say the state's gasoline price cap law makes it difficult, if not impossible, to deliver gas to such smaller operations.

If refiners charge jobbers up to the maximum of the cap, jobbers would be unable to make any profit because they would not be able to charge above the cap when reselling that gas to stations. This would leave no way for them to recoup costs of delivering small volumes to remote locations.

"Ultimately, it is suppliers who will price gasoline to jobbers," Senter President Brian Barbata said. "If they price it at or near the cap, jobber margins will be squeezed. How much will determine where we can deliver."

Supporters of the gas cap say the Kauai situation shows the law works as it is supposed to -- with suppliers being able to ask for adjustments and the PUC taking quick action.

But under the law, only gasoline manufacturers, wholesalers or jobbers may petition for a revision. Individual stations, like Priam's, would have to persuade their jobber to petition the PUC for a change."[5]

In a Star-Bulletin article dated January 2, 2006 and entitled, Dire effects of gas cap have yet to materialize, B.J. Reyes reported the following:

Price caps plunged 90 cents for an eight-week period starting in mid-October, but in recent weeks have fluctuated a few cents per week as the price of crude oil reacts to market forces on the mainland.

Today, with more stability in key mainland markets, the statewide average for regular gasoline is still about 50 cents above the national average, but prices are well below pre-cap levels.

And in the same article,

On its final survey for 2005, AAA's Fuel Gauge Report listed Hawaii's statewide average for regular gasoline at $2.71 a gallon, 52 cents higher than the national average and 27 cents above the next-highest state, Alaska. The auto club bases its price survey on credit card transactions from the previous day at more than 80,000 self- service stations across the country, including 222 in Hawaii.

[6]

In a Star-Bulletin article dated May 6, 2006, Tara Godvin reported the gas cap demise:

Gov. Linda Lingle signed a bill yesterday ending Hawaii's cap on wholesale gasoline prices, saying there is probably no way she would ever use the power the new law gives her to reimpose price controls.

But before signing the bill, the governor suggested that lawmakers should consider a system to limit oil company profits in the islands. She plans to submit a resolution to the Legislature next year seeking a study of possible state regulation of the industry.

"I can't see any condition that I would reinstate the gas cap," Lingle told reporters after speaking at a convention of the Hawaii Credit Union League in Waikiki. "It's a bad idea, and it's not going to keep prices down for Hawaii."

The new law passed by the Legislature on its last day, Thursday, gives Lingle, a longtime critic of the gas cap, the power to bring back the controls if she thinks fuel prices are too high.

In a June 11 Star-Bulletin article, Island Gas Guzzlers wonder if the Price is Right: Hawaii drivers could have saved 10 cents per gallon, B.J. Reyes reports on the consequences of the gas cap repeal:

A Star-Bulletin analysis indicates that Hawaii motorists could have saved an average of 10 cents a gallon on regular gasoline in the past month if the state's wholesale gasoline price cap law had remained in place.

Instead of rising and falling with mainland markets as they had under the price caps -- with sharp week-to-week changes of more than a dime in many cases -- Hawaii prices have remained fairly consistent since Gov. Linda Lingle signed the legislation to suspend the caps on May 5.

Since then, the daily statewide average as reported by AAA's Fuel Gauge Report has ranged from $3.38 to $3.43 a gallon, with the average settling at $3.41. The national average over the same time has been about $2.88 a gallon.

Under the old price cap formula, the statewide average over the past month could have been about $3.31 a gallon. A proposed new formula, included in the law that suspended the caps, could have forced the average 27 cents lower than that. [7]

External Links

Transparency

Retrieved from "http://localhost../../../h/a/w/Hawaii_Gas_Cap_3268.html"

This page was last modified 05:18, 13 March 2008 by dKosopedia user Jbet777. Based on work by dKosopedia user(s) Allamakee Democrat and Wh7e. Content is available under the terms of the GNU Free Documentation License.


[Main Page]
Daily Kos
DailyKos FAQ
View source
Discuss this page
Page history
What links here
Related changes
Special pages
Bug reports