Hawaii Moves To Cap Gas Prices

Nathan Slenk fills his car's gas tank in Honolulu on Wednesday, Aug. 24, 2005. In an effort to gain some control over what Hawaii motorists pay at the pump, the state Public Utilities Commission on Wednesday set the nation's first state caps on the wholesale price of gasoline.
Hawaii will begin enforcing a cap on the wholesale price of gasoline next week, hoping to curb the sting of the nation's highest gas costs.

The limit would be the first time a state has capped the price of gasoline — a move critics warn could lead to supply shortages.

But many Hawaii residents are just looking for some relief from soaring costs.

"The gas prices that are continuing to go up — how am I supposed to afford it?" Nathan Slenk, a 25-year-old student at Kapiolani Community College, said as he pumped regular unleaded gas into his black sedan for $2.79 a gallon in Honolulu.

On Wednesday, the average retail price of regular unleaded in Honolulu was at a record $2.761, some 15 cents above the nationwide average. Prices on Maui have already topped $3 a gallon this week. Statewide, prices average $2.84, the highest in the nation, according to AAA's Web site.

The state Public Utilities Commission said the initial price ceiling is due to take effect Sept. 1. Wholesalers may not charge more than about $2.74 including taxes in Honolulu for a gallon of regular unleaded. The commission set separate price caps for other islands.

If retailers keep their usual 12-cent-per-gallon markup, prices for regular unleaded in Honolulu could, in theory, rise to about $2.86 a gallon.

The ceilings will be in effect through Sept. 4. The following week, the commission will announce a new set of caps.

The 2004 law passed by the Legislature that authorized the caps was intended to force Hawaii's two refiners, Chevron Corp. and Tesoro Corp., to set their wholesale prices closer to mainland rates. Proponents of the law said the refiners were taking advantage of the small, isolated market to charge exorbitant prices.

Chevron said in a statement Wednesday it believes the law "is flawed and not in the best interest of the state," The Wall Street Journal reported on its Web site. Tesoro said its Hawaii operation believes any cap "will only serve to distort market forces and will result in long-term negative impacts to the citizens and the economy of Hawaii."