Hawaii to enforce cap on wholesale gas price

HONOLULU -- In an effort to gain some control over what motorists pay at the pump, Hawaii will next week begin enforcing a cap on the wholesale price of gasoline.

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, they 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 wholesalers in Honolulu may 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.

Yesterday, the average retail price of regular unleaded in Honolulu was at a record $2.761, 15 cents above the nationwide average. Statewide, prices average $2.84, the highest in the nation, according to AAA's website.

Prices on Maui have already 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," said Young.

The caps are pegged to an index made up of average wholesale prices in California, the East Coast, and the Gulf Coast, which are all at record highs. According to the commission, the five-day average of the three markets was $1.8728. This was used as a baseline 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.

Governor Linda Lingle, who unsuccessfully sought repeal of the 2004 law passed by the state Legislature, has said she believes the cap will actually increase prices and create fuel shortages.

But state Senator 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 oil companies with refineries in Hawaii -- Chevron Corp. and Tesoro Petroleum Corp. -- did not immediately return calls seeking comment.

The governor can 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.