Posted on 05/25/2005 11:16:21 AM PDT by SlowBoat407
Hawaii’s gas price cap kicks in Sept. 1
Governor unsuccessfully sought repeal; chief architect convinced it will lower gasoline prices at pump; expert says effort doomed
Ron Stanton
Associated Press Writer
Hawaii’s one-of-a-kind gasoline price cap law is scheduled to go into effect Sept. 1, but there’s disagreement among both politicians and industry experts on whether it will actually lower prices.
Gov. Linda Lingle, who unsuccessfully sought repeal of the 2004 law, has said she feels the cap will actually increase prices and create fuel shortages.
But state Sen. Ron Menor, the chief architect of the law, said he is convinced it will lead to lower prices at the pump and should at least be given a chance.
Some say it doesn’t matter what the state does because Hawaii is powerless to affect the impact of international oil prices.
“Having a gas cap will not make a difference at the end of the day,” said Fereidun Fesharaki, energy expert with the East-West Center. “It’s like throwing a leaf in the ocean to try to stop an oncoming wave.”
Fesharaki called the gas cap “a very bad law.”
“It is doomed to failure,” he said. “I don’t think it will lower prices” that are driven by unpredictable global market forces.
Governor could get implementation authority There is a slim possibility the governor could be given the authority to determine when to implement the cap. The Senate Ways and Means Committee urged Menor to consider the merits of this during conference committee sessions that will determine the final version of any amendments to the law.
While Menor remains opposed to that suggestion, Rep. Kenneth Hiraki, D-Kakaako-Downtown, chairman of the House Consumer Protection and Commerce Committee, said that is the position of the House.
The Legislature enacted the gas caps and it should be left to the executive branch to implement it, Menor said.
“If not implemented correctly, it could cause problems,” he said.
Menor proposed the price caps when Hawaii’s gasoline prices were the highest in the nation. With the recent surge in gasoline prices nationwide, California and Nevada have at times moved ahead of Hawaii.
Commission to set wholesale price The law allows the state Public Utilities Commission to set a maximum wholesale price at which gasoline can be sold in Hawaii. That price would be based on the weekly average of spot prices in Los Angeles, New York and the U.S. Gulf Coast.
The law would not put a cap on retail prices.
Implementation of the gas caps “will represent a core change in the gasoline market in Hawaii,” said Thomas O’Connor, project manager for ICF Consulting, a Fairfax, Va., company hired by the state Public Utilities Commission to help it implement the new law.
If the gas caps had been in place between 1999 and 2004, wholesale unleaded gasoline prices on Oahu would have been reduced by about 10 cents per gallon for fuel delivered by truck and by 13 cents per gallon for purchases directly from a storage facility, O’Connor said in his report delivered to legislators in mid-April.
The report indicates the gasoline caps would save Hawaii consumers $45 million annually, said Menor, D-Mililani.
However, O’Connor warned that the cap can go up, and it has “nothing to do with anything going on in the state of Hawaii,” referring to international events that can affect wholesale prices.
His report also shows that, even with the caps, wholesale prices in Hawaii could go up by as much as 20 cents a gallon in today’s market.
More frequent wholesale changes Consumers can expect to see more frequent price changes at the wholesale level, O’Connor said, but he emphasized that lower prices may not necessarily trickle down to the pump.
Frank Young, a former Chevron dealer, believes they will.
“I have no doubt they will,” said Young, chairman of Citizens Against Gasoline Price Gouging, an advocacy group that includes academics and former oil industry executives. “Retailers will react to wholesale price changes.”
Young said he has talked to many dealers and they are telling him that if they don’t lower prices, someone else will and they will be forced to follow.
Bill Green, former owner and consultant to Kahala Shell, disagrees.
Dealers are operating on a very narrow margin and don’t have any savings to pass on, he said. The cap will cause prices to fluctuate with little, if any, impact at the pump.
But Menor believes that if wholesale prices drop, dealers will also lower their prices to remain competitive and attract more customers.
“If the dealers don’t reduce their prices, we’re no worse off,” he said. “But if they do pass on the price savings, the consumers finally benefit.”
While Menor champions the price caps, others are skeptical.
Sen. Gordon Trimble, R-Downtown-Waikiki, the Senate minority policy leader, sees potential problems that could lead to “catastrophe” if the gas cap is implemented. Included, he said, is China’s increasing demand for gasoline as it industrializes.
“Demand will continue to increase while our refining capacity in the U.S. market stays constant,” said Trimble, an economist. “That is a recipe for much higher prices and shortages.”
Not just history, basic econ. These people are unfit for office.
Californians should be happy about this. Oil tankers that used to make deliveries to Hawaii will instead ship bigger loads to California.
Calls for suing the oil industry will start on Sept 3
A cap too low will lead to shortages and rationing. A cap too high will have no effect.
Gas costs $2.20
The highest I could sell it for is $2.00
How much do I buy for resale?
I wonder if the tax on gas will be reduced if the price surpasses the cap?
(If what I just wrote makes you sad or angry,
This is going to be a disaster.
But how about cutting the gasoline tax? Ooops, silly me, that is too obvious.
Silly!
Price cap huh. Here in NC the legislature actually gave (and may still be giving) serious consideration to setting a MINIMUM price that gas could be sold for!
It will probably have the same effect wage caps had during the war.
Since they couldn't pay anyone more money, they started offering health insurance, etc.
What can be bartered for gas? Pay me the cap, plus...
How about setting the cap and using reduced gas taxes to achieve it?
You're probably referring to an effort to stop Kroger and other stores like it from selling gasoline below retail prices.
If I recall, there is already a law in effect on that.
Exactly. But in a DemonRAT legislature, would it pass?
It might work. When I was in West Germany in the mid 80's, the government there was pushing for more unleaded gas to be sold (bleifrei). They still allowed leaded gas to be sold, however, applied a LOWER motor fuel tax to the bleifrei. This was when gasoline there was roughly 0.90 DM/liter.
Oh, brilliant idea. Clearly Sen. Ron Menor is ignorant of economics (so much so, in my opinion, that he's unfit to serve as senator).
By artificially holding down the price of gas, the govt will encourage people to drive more, thereby creating a shortage. If prices can't rise, to discourage people from driving and thereby end the shortage, the problem will become worse rather than better.
I hope the more informed people in Hawaii's govt will prevail over the socialist knuckleheads.
I think this was a different debate and it didn't become law (yet). They cited the need for the law to introduce more competitiveness into the gas market in the state, saying it would help the small, independant retailers compete against thhe giants like BP, Mobile, Amaco, etc...
Problem is, the little independant shops like NAD, Trade, etc... only real ability to get customers is that they sell for 1 or 2 cents less than the big mini-mart Mobile next door.
What does come to in Daylight Savings Time?
/Grouch Marx
Why not reference the spot prices in Mumbai, Bejing, and Riyadh? They have just as much to do with the economics of Hawaii as LA, NYC, and the Gulf Coast.
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