Hawaii Gas Cap Running on Fumes

The Associated Press
Saturday, May 6, 2006; 1:52 AM

HONOLULU -- Gas prices keep going up everywhere, and Hawaii's unique attempt to control them is running on fumes.

The isolated island state whose drivers consistently pay the highest pump prices in the nation has given up on its government-regulated price controls after an eight-month experiment.

With the average price for regular in Hawaii rising above $3.38 per gallon Friday, Gov. Linda Lingle signed into law a suspension of the cap that sought to keep the oil companies in check and give a fair price to customers.

Bad timing with rising oil prices, outrage among island motorists, industry lobbying and public pressure in an election year combined to scuttle the nation's only state attempt to cap the cost of fuel.

"In a lot of people's minds, they thought the gas cap wasn't working," said Sen. Paul Whalen, a strong supporter of the law. "It was hard to generate lots of support for it because ... we're paying more than we ever were before."

Hawaii first imposed weekly limits on wholesale gas prices Sept. 1 based on the average of prices in Los Angeles, New York and the Gulf Coast. Then allowances were added for what it costs wholesalers to ship to Hawaii and distribute gas to more remote islands.

Price caps differed for each island. There was no cap on the markup added by gas stations.

Some opponents argued that the state's limit on gas prices actually helped the oil companies boost profits because they knew they could charge up to the maximum allowed.

Another problem was that it was hard to tell whether the law did any good.

"It's ridiculous. Prices jumped up 20 cents in the last couple of days," said Calvin Reddick, who paid $15 for just over four gallons of gas for his Volkswagon Beetle. "Usually when you have a cap, it's supposed to freeze prices off. Obviously, their idea of a cap is different from mine."

Because the oil refiners keep their profit margins and costs private, it was difficult for even experts to determine whether residents were paying more or less than they would without the gas cap.

One study by an economics professor showed the gas cap cost consumers 5 cents more per gallon.

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