Guest Viewpoint for Tuesday — December 27, 2005

• Get facts straight before making accusations

Get facts straight before making accusations

By Jeff Guest

John Gordon recently responded to an editorial by Roger Cable regarding the gas cap and seems to have committed what he was accusing Mr. Cable of doing. Mr. Gordon’s response is emotionally charged and without factual information. It is easy to accuse someone of not using facts when writing an editorial, but in doing so you think that Mr. Gordon would make sure that he had his facts straight.

Mr. Gordon states that there has “always been price fixing and very limited competition” in Hawai’i. The state has tried to prove in court that price fixing has occurred and has failed more than once. It is true that we have limited competition and we have what is called an oligopoly at the refinery level. However, there are 28 other states in the United States that operate with what could be considered “oligopoly,” or lack of more refineries that limits competition. Face it, Hawai’i is a very small market compared to other states. If the demand were greater the profits would be greater and more refineries would be beating down the door to enter the market. Simple supply and demand economics suggest that a smaller market and an isolated market like Hawai’i will charge higher prices due to the lower volume. Another key ingredient to high gas prices is the higher cost to do business in Hawai’i.

The most compelling issue that drives up the price of fuel at the pump is the taxes. When you fill up at the pump, you pay almost 60 cents per gallon in taxes: by far the highest taxes in the nation! If we were to reduce the taxes we pay at the pump our gas prices would not be that out of line. Gov. Linda Lingle opposes the gas cap and in her latest state budget wants to return some $300 million in excess taxes to the consumers. However, the same misguided legislators that passed the “fair gas cap” will inevitably not support her attempt to return tax money to the consumers. The only price gouging going on is at the state Legislature. Think about it, we pay the highest taxes in the nation; we have one of the highest costs of living in the nation and a very difficult and costly state to do business in. What are our legislators doing to help the consumers and small businesses? The gas cap is a phony attempt by our legislators to curtail the “big bad” oil companies and it has done more damage to consumers and small business than it has helped. The “brave” legislators that Mr. Gordon is referring to need to wake up and reduce the taxes we pay at the pumps, not install false market conditions that track mainland markets that have no bearing on the Hawai’i petroleum market.

Mr. Gordon states, “I don’t know any gasoline stations or distributors that have gone out of business due to the gas cap.” The gas cap has only been in effect since September and already Kauai Petroleum, Kauai’s oldest petroleum distributor, is getting out of the business. That affects four Union 76 stations operated by Kauai Petroleum. The Princeville Chevron is on the market and has indicated several times in The Garden Island newspaper the damage the gas cap has caused. Over the long term, if we continue with the gas cap, you will see more small stations adjusting their hours of operation to fit with the gas cap changes. Mr. Gordon can look in his own neighborhood to see the effects of the gas cap on the Princeville Chevron. They are in the “survival mode.” They have reduced their operating hours, laid-off employees and reduced employee benefits. I think if most people take a closer look at how the gas cap is affecting the way gas stations are doing business and how it is affecting other small businesses, you may reevaluate the way you think the gas cap is helping the consumers.

Mr. Gordon states: “Senter Petroleum … has the exclusive contract to supply fossil fuel to our KIUC electric cooperative — purportedly at any price they chose to charge.” This is the biggest bunch of hogwash I have ever read in The Garden Island and am surprised it was even printed. The supply contract for KIUC comes directly from Chevron and the market sets the price. I am happy to report that our board members on the KIUC have enough sense to purchase bulk fossil fuels directly from the Refinery and not pay mark-up to a local distributor. What’s even more comical about Mr. Gordon’s preposterous claim is that because of KIUC’s close proximity to the fuel terminal at Port Allen, the fuel is directly piped underground across the road to the utility company, hardly a need for a Jobber or Wholesaler to deliver the fuel.

Mr. Gordon do you really believe “big box” stores like Costco bring competition to the petroleum industry? It would be competition if they had other “big box” stores to compete with. Costco sells gasoline at cost or below cost to draw people into their stores. Other hypermarket retailers on the mainland employ this same tactic and drive small retailers out of business. If Costco does come into business her they will eliminate a number of gas stations and small businesses on Kaua’i.

In closing, I would urge all residents of Hawai’i to take a closer look at the gas cap. Ask the small local dealers if it is affecting their business. Ask them if they think it is “fair” and more importantly ask if it has reduced the price of fuel for the consumer. Further, be thoughtful and get all the correct information you can before you make hasty judgments or write emotional and inaccurate editorials. It is this kind of misleading information that has demonized the oil industry in Hawai’i and caused our well-intended legislators to pass the “unfair gas cap.”

  • Jeff Guest is the owner of Princeville Service Station.

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