Gas prices drop in wake of Costco opening

Kaua‘i gas prices dropped for the second day in a row yesterday following the arrival of Costco’s $2.79 per gallon price of regular unleaded fuel.

The drop left disparate prices at stations that usually move in lock-step. For example, prices along Kuhio Highway at the Lihu‘e Shell, Chevron and 76 stations mirrored one another at $3.34 last Thursday, according to a regularly conducted survey spearheaded by Martin Rice.

However yesterday afternoon the survey showed the Shell and 76 stations stood at $3.09, while the Chevron only dropped to $3.17.

The Wailua Shell station offered regular gas for $3.05 a gallon, down from $3.23 last Thursday and leading the island with the lowest price — with the exception, of course, of Costco.

“Costco coming in has shaken up the local market,” Rice said, “but the prices still have a ways to go to reach pre-gas cap levels.”

The box store opened 12 new pumps on Tuesday, bringing $2.79 gallons to the island two days before the state’s average gas prices dipped below $3 per gallon.

The Costco prices will be subject to the same market fluctuations that drive that average up and down, but price movement should not be dramatic, said Ron Adams, supervisor of the Costco gas station.

“It’s subject to change with the market, but it will not reach what the residents of Kaua‘i are paying right now,” he said.

The reason Costco gas can be cheaper, he said, is that the company is not subject to gas company branding fees and also does not mix in additives for cleaning or performance. Kaua‘i representatives of Shell, Chevron and 76 could not be reached immediately for comment.

Despite the cheaper price at Costco, demand has not filled the station with customers, Adams said.

The state also celebrated a decline in gas prices yesterday.

Hawai‘i has finally joined the nation in dipping below the $3 mark for a gallon of regular unleaded gasoline.

The state’s average on Thursday was $2.99, a penny more than Wednesday, when the price dropped below $3 for the first time in six months. The state hit $3 a gallon on April 11.

Hawai‘i’s average was 35 percent higher than the national average of $2.22. The national average went below $3 on Aug. 15.

Oil industry critics have long argued gas companies are gouging consumers and keeping prices excessively high in the islands.

But industry officials say Hawai‘i’s market is unique and that the trend is due to market conditions such as the added time it takes to ship crude oil to the islands. They also point to increasing costs due to ethanol- blending mandates.

“We do not have the interlocking gas pipelines and the instant price wars as they do on the Mainland,” said Bill Green, former owner and now a consultant to Kahala Shell. “We will never react that quickly because our sources are different, the supply is different, the demand is different.”

Some consumer advocates are calling on Gov. Linda Lingle to reinstate the state’s caps on whole gasoline prices, which she has the power to bring back under the law that was passed to suspend the pricing regulations.

“We’re back to where we were before (the caps), only worse, because now the gasoline companies figure they can get away with it,” said Richard Miller, a University of Hawai‘i law professor and member of the group Citizens Against Gasoline Price Gouging.

He said the 77-cent difference between the Mainland and state averages is indicative of how Hawai‘i’s prices could have fallen if the price caps were still in place.

• Charlotte Woolard, business writer, can be reached at 245-3681 (ext. 251) or cwoolard@kauaipubco.com.

The Associated Press contributed to this story.

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