Gas-cap law to get ‘fixed’

As Hawai’i gas prices are poised to go up by as much as 14 cents a gallon effective as early as Monday, and as disagreement continues over whether or not the nation’s only government-regulated gas-price law is working, Kaua’i state lawmakers said that law will be amended by members of the state Legislature at the session on O’ahu beginning later this month.

“Definitely, right now, there are some items that need to be fixed, all affecting Kaua’i jobbers,” said state Rep. Hermina “Mina” Morita, D-Hanalei-Kapa’a, chair of the House Energy and Environmental Protection Committee.

Jobbers are independent contractors who deliver gasoline to smaller stations on the island.

The problem is that those at the refineries, those with the large oil companies, are taking profits written into the state’s gas-cap law designed for those further down the supply and delivery chain, Morita explained.

State Public Utilities Commission officials, who monitor Mainland wholesale gasoline prices to come up with gas-cap-law wholesale prices on a weekly basis, have opened a docket (investigation of sorts) about jobber questions, Morita said.

Refiners are taking excess profits that could be enjoyed by jobbers, retailers and consumers, said state Sen. Gary Hooser, D-Kaua’i-Ni’ihau.

Both Morita and Hooser feel that the gas-cap law is working, Hooser pointing out the difference now between regulated gasoline prices for regular, mid-grade and premium unleaded gasoline versus the much-higher price of unregulated, diesel fuel.

The price of an unleaded regular gallon of gas on Kaua’i was $2.77 and up as of Thursday, and the cost of a gallon of diesel fuel was $3.26 the same day.

Both also agree that refiners are still taking too much of the profit off the top, leaving no profit margin for jobbers such as those at Senter Petroleum on Kaua’i.

Morita and Hooser said the state gas-cap law has a built-in mechanism allowing PUC officials to react to market conditions and ensure that jobbers will get their share of profits under the law, but so far haven’t done so.

“If they perform that function, (jobbers) should get their share of the wholesale profit margin,” Morita said.

The change to the state gas-cap law this session would be intended to ensure jobbers and others get their share of profits, she explained.

For years, before Morita or Hooser were elected to seats in the state Legislature, members of the community have been asking state lawmakers to do something about the price of gas, and lawmakers made some moves to try to establish the state gas-cap law that finally went into effect in August of last year, Hooser said.

Among the more vocal critics of the gas-cap law has been Roger Cable of Senter Petroleum, who said the “ill-conceived law that has cost us millions of dollars in additional costs and taxes for our gasoline.” He continues to call for repeal of the law.

Cable argues that a few lawmakers’ grudge against Chevron leaders led to the establishment of the gas-cap law, that gas prices were far more stable before the regulation, and that “we have a small market that will only attract a few sellers.

“The gas-cap law has done nothing to lower prices, and in fact it has had just the opposite effect, unrealistically raising our prices by being tied to markets that have nothing to do with our supply or market size,” Cable argued.

“We had enjoyed the benefit of a stable price fluctuation unencumbered by Mainland problems and shortages prior to the gas cap. Now we are subject to every little problem that is experienced in these markets,” Cable continued.

The gas-cap law’s wholesale price is tied to the wholesale price in various Mainland markets.

“The inflated prices we have had to pay in the past three months will never be recovered by the insignificant savings that may be enjoyed for a short period of time when the market is stable on the Mainland. It is not hard math to figure that we have had our pockets picked in the past few months by the meddling of our legislature in the free-enterprise system of business,” Cable said.

“The complicated formula does nothing except protect the profits of the big oil companies that they were trying to punish for what they perceived as unfair profits. The little guy, the jobber/distributor who delivers most of the gasoline on the Outer Islands, has no protection, and could be left with absolutely no margin to deliver fuel to their customers,” said Cable, echoing the concerns of Hooser and Morita.

“This is far from a ‘Fair Gas Price Law,'” as it is referred to by backers including state legislators, he said.

“Not only has it cost each of us hundreds of dollars in inflated prices, but has also cost us in taxes which has been a windfall to the state treasury, while placing small businesses in jeopardy. What is fair about that?” Cable asks.

“Two consulting reports, commissioned and paid for by the state, have concurred that there is not a problem with the gasoline supply and market in Hawai’i, and recognized the market as being what it is, a small market that it served by two refiners and open to imported product by others, providing a competitive, free market place,” Cable said.

He said the weekly fluctuating prices cause consumers to rush out to buy gas before the price rises the following week, causing long lines at the pumps, shortages, and “overall disruption of the free-market system as we had known it.

“This causes additional costs for the suppliers, distributors and dealers, who must now cope with the irregularity of their business schedules,” said Cable.

“The erratic moves in price as predicted by all of the experts now has our market totally disrupted. While prior to the price-cap law we experienced fairly stable prices, now we are faced with this volatility that the legislators wanted to see,” Cable added.

“Prices do move up and down drastically, based on unrealistic references to markets that have nothing to do with the market place in Hawai’i,” he noted.

“How long do we have to wait before the legislature realizes that this experiment did not work and needs to be repealed? Hopefully it will happen before more small businesses are forced out of the market, leaving it more in the hands of the big oil companies,” he lamented.

“The free-enterprise, open-market system is what our country is based on, and has been extremely successful in making our country one of the strongest in the world. Let’s not make it any worse for the business community, and realize that to survive we need government to let the system work,” he suggested.

“If our legislators want to reduce the cost of gasoline to the consumers, then remove the Hawai’i general-excise tax from gasoline and diesel fuel. This adds 4 percent to the cost, and just bolsters the state treasury without helping to improve roads or infrastructure,” he said.

“Let’s look at the real reasons why our prices are high: taxes and cost of doing business in Hawai’i,” he said.

Gas prices on Kaua’i could reach the $3-a-gallon mark for a gallon of regular unleaded again next week, reflecting inclement Mainland weather and a rise in crude-oil prices. Prices rose above $3 a gallon for regular unleaded gasoline in the fall of this year, with Mainland hurricanes blamed for spikes in the price and reduction in supplies.

American Automobile Association information indicates that national gas price averages have risen by 45 cents over the past year (from $1.78 one year ago to $2.22 today), while Hawai’i gas price averages have risen 25 cents over the past year (from $2.42 one year ago to $2.68 today).

Next week’s rise is attributed to bad weather on the Mainland, including a cold spell in the Northeast, rain and flooding in California, and a recent surge in oil prices. Oil prices jumped $2 to $63 a barrel earlier this week, driven by speculative buying, according to analysts.

The price of a gallon of regular unleaded gasoline on Kaua’i, as of Thursday, ranged from $2.77 and up, with premium going for $2.97 and up, and diesel at $3.26 and up, according to Martin Rice, who surveys the island’s 20 stations each week.

The prices are also updated on The Garden Island’s Web site, www.kauaiworld.com/gasprices.

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