LIHU’E – If it really costs more to bring oil to Hawai’i, refine it into gasoline and ship it to the Neighbor Islands than it does on the Mainland, it should figure that the cost of jet fuel used by
LIHU’E – If it really costs more to bring oil to Hawai’i, refine it into gasoline and ship it to the Neighbor Islands than it does on the Mainland, it should figure that the cost of jet fuel used by airlines and helicopter companies would be the highest in the nation, too.
The cost of jet fuel is similar in Hawai’i to California, with a line graph showing prices reflecting each price shift looking nearly identical for the two states.
“Airlines are powerful consumers, not like average consumers,” said state Attorney General Earl Anzai, explaining why Hawai’i drivers pay more than any other state’s drivers for gasoline, when prices paid by airlines for jet fuel don’t reflect the 40-cent difference between the cost of a gallon of unleaded regular gasoline in California and Hawai’i.
Anzai outlined a series of compelling statistics that oil companies would never have revealed, he said, had not the state sued the oil companies in the fall of 1998, alleging oil companies for years have over-charged drivers for gas through calculated, monopolistic-like pricing practices between the oil companies.
How else could you explain the differences between pump prices at military bases versus civilian stations? he asked. “How can they sell to them (the military exchanges in Hawai’i) for so much less if it costs more to make it in Hawai’i?” Anzai asked, debunking one of the many “myths” he says the oil companies have used for years to justify charging the highest pump prices in the nation to Hawai’i residents and visitors.
Large car-rental companies in the state also pay less for gas than the average consumer, he continued.
It costs less to turn oil to gas in Hawai’i, in part because the two O’ahu refineries, Chevron and Tesoro, have been paid for years ago. The cost of getting crude oil to Hawai’i is nearly identical to that same cost to get crude into Los Angeles, he added. High profits, not high costs, cause high gas prices in the state, he continued.
“It’s way out of whack compared to everywhere else,” said Anzai, adding that the proposed cap on wholesale and retail gas prices moving now through the state Legislature if approved would mark the most important achievement of the administration of Gov. Ben Cayetano.
“They’re making tremendous profits in Hawai’i,” and the fact that the oil companies lose money or make less money in places like Los Angeles and San Francisco than in Hawai’i “doesn’t happen by accident,” said Anzai.
The lack of full-fledged competition between companies servicing Kaua’i, for example (Chevron, Shell, Union 76), has kept pump prices artificially high in the state, even when prices nationally and on the West Coast ebbed and flowed in relation to the cost of crude oil from Alaska, he said.
During the lawsuit proceedings, even the lawyer for the oil companies came close to admitting that the companies’ failure to aggressively compete is a reason for high prices and high profits, said Anzai.
“Once you decide it’s an oligopoly, you’ve got an explanation for the phenomenon of the high prices, the high margins, the high profits, the lack of vigorous competition,” said Max Blecher, an attorney for the oil companies in the state, during proceedings which ended up with the oil companies agreeing to pay the state millions of dollars while refusing to admit any wrongdoing.
Even Anzai admits the state wasn’t able to produce a “smoking gun” proving the oil companies consciously conspired to keep pump prices artificially inflated through illegal price-fixing, or other collusion.
Hawai’i oil companies remain on the offensive in a battle to defeat legislation being considered before the state Legislature that would place caps on the cost of a gallon of gasoline that both the supplier can charge to dealers, and what dealers can charge drivers.
There is no logical explanation, Anzai said, why when it costs only around eight cents a gallon to ship gas from Honolulu to Nawiliwili, that pump prices on Kaua’i are around 30 cents higher than they are in Honolulu.
Honolulu drivers pay more for a gallon of gas than residents of any metropolitan area in the United States, and Neighbor-Island residents pay even more, he said.
The dealers are not to blame, he stressed, the oil companies are to blame. Even though when the lawsuit was first announced in 1998 the oil companies adamantly denied that gasoline refined in Hawai’i was being sent to other states as a way to artificially reduce supply and inflate prices, paperwork produced during the lawsuit proceedings showed exactly that export phenomenon, Anzai said.
The companies said it was “human error,” and are now working to correct that situation, he said.
The administration’s proposal is to place a cap on the wholesale and retail price of gas, and based on today’s prices would yield a cap very close to the $1.79 price for an average gallon of self-serve, unleaded regular gasoline at Lihu’e-area stations.
But that cap figures a 16-cent-a-gallon profit to local dealers, and when local competition takes place, dealers may settle for lower profit per gallon, he explained.
“Why should Hawai’i’s consumers pay so much more when the cost of making gas is less here?” he asked again. “Why should we be blessed to give oil companies high profits? And the Neighbor Islands are doubly blessed,” paying the highest prices for gas in the country.
High gas prices are bad for the state’s economy, and worse when profits leave the state for Mainland-based oil companies, he continued.
“They’re not in the business of taking care of Hawai’i customers. They’re in the business of making as much profit as they can,” said Anzai.
“The dealers compete, and their margins are small. The problem is not with the dealers,” who like drivers must pay whatever suppliers charge them for gas.”
It’s all right for oil companies and dealers to make profits, but not excess profits, he added.
Hawai’i drivers also pay the highest tax rates per gallon of gas in the country, with the price of a gallon of gas on Kaua’i reflecting 18 cents federal tax, 16 cents state tax, and 13 cents county tax, for a total of 47 cents of taxes.
Anzai finally shows a chart indicating the cost of gasoline in Honolulu falling even though the cost of gas at certain West Coast locations began rising in December of last year. The Honolulu downward trend, he said, was calculated for the opening of the current legislative session, when the oil companies knew legislation would be introduced to cap gas prices.
Reaction to the proposed legislation from oil companies has been predictable. “We call on the Legislature and administration to reconsider their interest in a government-imposed price cap, something we do not believe any other state in the nation has enacted,” said Tom Malone, president and chief executive officer of Aloha Petroleum, Ltd., an O’ahu gas dealer.
He argued that lowering gas taxes would be a better and more equitable way to quickly reduce gas costs.
Citizen support for the gas-price cap is growing. Anzai said the bill should win House approval but may have a tough time in the Senate.
“We all know that Hawai’i’s consumers have been ripped off for years on the obscene price of gasoline in our islands, and the recent settlement of the state’s lawsuit finally revealed the blatant truth,” said Scott Foster, communications director for Advocates For Consumer Rights.
“The predatory fuel industry in Hawai’i can no longer lie to us with a straight face,” Foster said.
Staff Writer Paul C. Curtis can be reached at mailto:pcurtis@pulitzer.net or 245-3681 (ext. 224).
