Gas-price dip leaves dealers in quandary

Gasoline prices should drop about 44 cents next week, possibly as soon as Monday Oct. 17.

While that is good news for consumers who have coped with mostly-rising prices since Hawai’i’s wholesale gas-cap law went into effect Sept. 1, it is a puzzle for gasoline retailers who have to figure out how to parcel out inventory they purchased at a much higher rate from suppliers.

“If the competition goes down sooner than I would like before using up the inventory, then I might have to take a loss,” said Glenn Konishi, owner-operator of Gary’s Chevron on Kuhio Highway in Lihu’e.

Konishi said the volume of his business is down.

“It is lower, and I anticipate it being lower this week. I think there is confusion over the prices, and when they are dropped.”

Jeff Guest, owner of the Princeville Chevron, said, “the impact for me is a loss of volume. We’re in a new gas climate I don’t know how to deal with.

“I see volume dropping. The only way my business will survive is if this law is repealed,” said Guest.

“I don’t have a handle on it yet,” Konishi admitted. But, unlike Guest, who encourages the repeal of the law, Konishi is willing to give the gas-cap law a bit more time, to see how prices react after the shock of hurricanes Katrina and Rita wear off.

Members of the state Public Utilities Commission (PUC) Wednesday lowered the maximum pretax wholesale price of gasoline by 44 cents.

The state gas-cap law, which went into effect Sept. 1, does not put a cap on how much retailers may charge.

David Hackett, president of Stillwater Associates LLC, a fuel- and gasoline-industry consultancy whose leaders have worked with officials in state government in studying the gas-cap law, said the gas cap has introduced tremendous volatility to Hawai’i’s market.

Hackett said another wrinkle caused by the gas-cap law is that automated distribution schedules could be thrown out of whack.

“The truck knows when to show up during normal times, but if the price is due to drop 44 cents Monday, they are not going to want that load Saturday or Sunday.”

The weekly maximum pre-tax wholesale price of a gallon of gasoline for the seven-day period from Monday, Oct. 17, to Sunday, Oct. 23, for Kaua’i, was set by PUC members at $2.35, down from $2.79 last week.

To determine what drivers will likely pay at the pump beginning as early as Monday, Oct. 17, take that base price of $2.35, then add about 61 cents in taxes, and the total is $2.96. Add the dealer mark-up at the pump, which is not capped, and which on Kaua’i can be any where from 18 cents to 30 cents, and the price of unleaded regular gasoline likely will be in the $3.20-plus range, considerably more than retail gasoline on O’ahu, which should be just over $3 next week.

The weekly cap established by PUC members sets the maximum amount officials at the oil companies can charge for wholesale gasoline.

The baseline price established by members of the state Legislature under the wholesale-price-cap law and used by PUC members is the weekly average of the daily spot price for Los Angeles, the U.S. Gulf Coast, and New York.

“This is a very good sign that the law is working as intended. There is about a 10-day lag behind the Mainland, so as gas prices stabilized on the Mainland after the hurricane last week, Hawai’i will now start to see that benefit,” said state Rep. Marcus Oshiro, D-Wahiawa, majority leader for the state House of Representatives.

According to the AAA Daily Fuel Gauge Report as of Wednesday, Oct. 12, not counting the PUC decrease, Hawai’i boasted the highest gas prices in the nation, at $3.248 for a gallon of regular gasoline. This is 42 cents more than the District of Columbia, the next-most-expensive venue.

The nation’s attorneys general are asking leaders with the Federal Trade Commission to investigate “possible unlawful conduct by the petroleum industry and others” in causing record high fuel prices, Hawai’i Attorney General Mark Bennett said Wednesday.

They told FTC Chairperson Deborah Platt Majoras in a letter that “we stand ready to assist you to investigate possible unlawful conduct by the petroleum industry and others that could be contributing to the increased cost of fuel.”

They noted that leaders in more than 45 states are already investigating the cause of the escalating fuel costs since late August, when Katrina slammed into the Gulf Coast.

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