- The Washington Times - Wednesday, August 24, 2005

HONOLULU (AP) — Hawaii next week will begin enforcing a cap on the wholesale price of gasoline in an effort to gain some control over what motorists pay at the pump.

Analysts said Hawaii, which routinely has some of the highest gasoline prices in the country, runs the risk of making itself less attractive to suppliers as a result of the cap. However, some gave the state credit for developing a pricing model that takes market forces into account.

Yesterday, the state’s Public Utilities Commission released its first weekly list of price caps for different parts of the state. Including taxes, the maximum that wholesalers in Honolulu can charge is $2.74 per gallon.

Hawaii passed the law in 2004 and the first caps go into effect Sept. 1.

If wholesalers charge the maximum $2.74 under the cap and retailers keep their usual 12-cent-per-gallon markup, prices for regular unleaded in Honolulu could rise to $2.86 per gallon.

The average retail price of regular unleaded in Honolulu yesterday was a record $2.76, about 15 cents above the nationwide average. Statewide, prices average $2.84, the highest in the nation, according to AAA’s Web site.

Prices on Maui already have topped $3 a gallon this week.

Frank Young, a member of Citizens Against Gasoline Price Gouging, said he was confident that over the long run, the caps will ensure Hawaii residents pay fair prices, because they link the state’s wholesale prices to spot prices elsewhere.

“The purpose of the cap is so that we move with the rest of the country,” Mr. Young said.

The caps are pegged to an index made up of average wholesale prices in California, on the East Coast and on the Gulf Coast, which are all at record highs. The index was used as a base-line price in calculating the caps for eight geographic zones across the state.

Other factors used in calculating the price caps were marketing costs and regional market conditions.

Gov. Linda Lingle, who unsuccessfully sought repeal of the 2004 law passed by the state Legislature, has said she thinks the cap will raise prices and create fuel shortages.

Fereidun Fesharaki, an energy expert at the East-West Center in Honolulu, said the gas cap was “a stupid idea” that would be bad for competition and, ultimately, consumers.

“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,” Mr. Fesharaki said.

But state Sen. Ron Menor, the chief architect of the law, has said he is convinced it will lead to lower prices at the pump and should at least be given a chance.

The only two companies with refineries in Hawaii — Chevron Corp. and Tesoro Corp. — did not immediately return calls seeking comment. Chevron owns a 54,000 barrel-a-day refinery in Hawaii and Tesoro has a 95,000 barrel-a-day refinery there.

The governor has the power to suspend the price caps if she determines they would cause a major adverse impact on the economy or public order, or the health, welfare or safety of the people of Hawaii.

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