- The Washington Times - Thursday, May 2, 2002

Hawaii is set to become the first state in the nation to cap gasoline prices.
Both Hawaii's House and Senate plan to vote today on whether to allow the state to set a maximum price on gasoline based on average prices in West Coast markets.
Narrow approval is expected. The cap would take effect July 1, 2004.
Critics say price caps are an election-year tactic that will drive gasoline stations out of business.
Supporters say the move would protect the state's consumers, who traditionally have paid among the highest prices in the country.
The average price for regular gasoline in the state yesterday was $1.67 a gallon, the nation's highest, according to AAA. California was second at $1.66. In the Washington, D.C., area the average price of a gallon of regular, unleaded gasoline yesterday was $1.48, about the same as it had been for two weeks but up 35 cents from a winter low in January.
President Nixon imposed price caps during the Arab embargo of the early 1970s to prevent oil companies from making exorbitant profits while gasoline was scarce.
Mr. Nixon's move set a precedent that could make Hawaii's caps on gasoline legal, said Rep. James P. Moran, Virginia Democrat.
"I just don't think it's smart," he said.
The Service Station Dealers of America and Allied Trades said price caps would reduce or eliminate profits for independent service-station owners, making them unable to pay their rent and other expenses.
"You could actually put independent dealers in a position where they couldn't sell gas because they would go out of business even faster," said Roy Littlefield, vice president of the Lanham trade association.
Oil companies say high taxes, few suppliers at the wholesale level and barriers to entry for competitors all contribute to Hawaii's high gasoline costs.
The so-called "price of paradise" the theory that goods are bound to cost more simply because of Hawaii's location also has been blamed for the high prices.
Supporters of the proposed caps, who include Gov. Benjamin J. Cayetano and Attorney General Earl Anzai, say evidence shows no economic reason why Hawaii's gas prices traditionally have been so high.
"There is no real competition in the gasoline industry in Hawaii," Mr. Cayetano said. "When you have industries with such a captive market, it is appropriate for government to step in to provide relief to beleaguered consumers."
Mr. Anzai's office in January settled a $2 billion antitrust lawsuit against five major oil companies in Hawaii for $20 million.
The state filed the lawsuit in 1998, accusing divisions of Chevron, Shell, Texaco, Unocal and Tosco of fixing prices and allocating market share among themselves as early as 1987. BHP Hawaii and Tesoro, named in the original lawsuit, were dismissed from the case as part of a $15 million settlement in November 1999.
The price-cap measure comes as lawmakers on Capitol Hill are looking into costs at the pump.
The Washington area lacks political support for legislative caps on gasoline prices. Although local officials are worried about rising costs, they are even more concerned about the economic consequences.
"I don't think there's any sentiment for that in the Virginia General Assembly," said Ellen Qualls, spokeswoman for Virginia Gov. Mark R. Warner.
Maryland has not considered price caps. Raquel Guillory, spokeswoman for Gov. Parris N. Glendening, says such a move would be "premature" because prices can fluctuate quickly.
Opponents say price caps are anti-competitive and prevent market expansion.
"I don't think it's a good idea," Mr. Moran said. "All that's going to happen is you're going to squeeze the service-station owners. The wholesale distributors will still make the most profit."
This story is based in part on wire service reports.

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