- The Washington Times - Saturday, May 4, 2002

HONOLULU (AP) Hawaii's legislators have passed a bill that would let the state regulate gasoline prices, prompting harsh criticism from oil industry officials and analysts.
Hawaii where prices at the pump are traditionally among the highest in the nation would be the first state to institute such regulations under the measure, which passed Thursday and which Gov. Ben Cayetano plans to sign. The price cap would go into effect in July 2004.
Senators approved the bill by an 18-7 vote. The House passed the bill 29-21, with one member absent.
The bill would allow the state Public Utilities Commission to set a maximum price on gasoline based on an average of prices in West Coast markets. Profit margins for dealers would be capped at 16 cents per gallon on regular unleaded gasoline.
Supporters, including state Attorney General Earl Anzai, say evidence shows there is no economic rationale for Hawaii's high prices.
"The fact that the so-called free market approach has consistently failed to deliver equitable gas prices in Hawaii justifies the action that were taking today," said state Sen. Ron Menor, Democrat.
But opponents, who contend the law is an attempt to appease beleaguered consumers in an election year, argue the measure will raise gasoline prices by shuttering gas stations and completely driving some oil companies from the state, further reducing competition.
"It's going to damage and hurt small business. It's going to hurt every dealer in the state," said Bill Green, a dealer who operates a Shell station on Oahu.
Oil industry analysts and officials scoffed at the proposed cap.
Hawaii's refiners and retailers, which include Tesoro Petroleum and ChevronTexaco corporations, respectively, won't hesitate to ship gasoline to more profitable markets or shut down stations if they cannot make a profit, said Fadel Gheit, an oil industry analyst at Fahnestock & Co., a New York-based brokerage firm.
"Their ego won't be bruised if they shut down," Mr. Gheit said. "They sometimes exit whole countries where they don't make money."
Nathan Hokama, a spokesman for San Antonio, Texas-based Tesoro, said the proposed law is "counterproductive." If the law is enacted, Tesoro, which runs Hawaii's largest refinery and has 35 gas stations throughout the state, will have to consider selling its gasoline elsewhere and closing certain retail stations, he said.
Profit margins on a gallon of gasoline typically fall within a range of 6 cents to 15 cents, according to the Petroleum Industry Research Foundation Inc., a New York-based trade group. The business is seasonal, though, with profit margins rising during the summer and falling in the winter.
Lawrence Goldstein, president of the petroleum trade group, said if Hawaii follows through with the measure which he doubts the state will be setting itself up for a loss of supply.
"It gives the appearance of doing something positive, but is going to lead to negative economic consequences" a lesson the United States learned during the 1970s, when the federal government imposed price caps on gas, he said.
The national average for regular unleaded gasoline is $1.40 per gallon, 23 cents cheaper than it was a year ago, according to the Energy Department. Average per-gallon prices in Hawaii ranged from $1.60 in Honolulu to $1.88 in Wailuku.

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