Hawaii Moves To Cap Gas Prices

1st Time A State Has Taken Such Action; Critics Warn Of Shortages

(CBS/AP) 
The oil companies also have said the state should cut back on Hawaii's excessive regulations to reduce prices rather than setting price caps.

Chevron and Tesoro did not return calls by The Associated Press seeking comment Wednesday. Chevron owns a 54,000 barrel-a-day refinery in Hawaii and Tesoro has a 95,000 barrel-a-day refinery.

Fereidun Fesharaki, an energy expert with the East-West Center in Honolulu, said the caps were a futile attempt to hold down oil prices as they rose around the globe.

"This kind of thing, it just gives us a bad name, frightens people from investing — it may make one of the refineries shut down and leave Hawaii," Fesharaki said. "It reduces competition and does all harm but doesn't gain us anything."

Direct comparisons between the gas cap and current wholesale prices are not possible because the oil companies do not release wholesale price data.

The caps are based on a baseline price calculated from the five-day average of spot rates from three mainland markets: Los Angeles, New York harbor and the U.S. Gulf Coast.

The commission then adds on allowances for the cost of shipping to the state and for transporting gasoline from Oahu to more remote and less populated islands.

For example, under next week's cap wholesalers may not charge more than $2.3058 — about $2.86 including tax — for a gallon of regular unleaded gas in Hilo on the Big Island. Allowing for a retailer's markup, prices at the pump in Hilo could be close to $3 a gallon or more.

Federal, state and county authorities each impose a fuel tax on wholesale gasoline. The state's excise tax is also imposed on gasoline at the wholesale and retail levels.

Frank Young, a member of Citizens Against Gasoline Price Gouging, said the price caps were pretty much in line with current market rates in the state.

"The purpose of the cap is so that we move with the rest of the country," he said.

Gov. Linda Lingle, who unsuccessfully sought repeal of the 2004 law, has said she worries the cap will actually increase prices and create fuel shortages. The governor has the power to suspend the price caps if she determines they would cause a major adverse impact on the economy, public order or the health, welfare or safety of the people of Hawaii.

Crude oil prices hit a record $68 a barrel Thursday after the United States reported a decline in gasoline stocks and China said its crude imports spiked in July. Storms brewing close to Gulf of Mexico production facilities and fears that it could hurt output also contributed to the upward march.