Hawaii imposes wholesale gasoline price cap

Sept. 5, 2005
The Hawaii Public Utilities Commission has set a cap on wholesale gasoline prices, effective Sept.

The Hawaii Public Utilities Commission has set a cap on wholesale gasoline prices, effective Sept. 1. It’s the first time a state has established a gasoline price cap.

The PUC plans to adjust the cap weekly. Different islands will have different price caps. The cap was authorized by a state law intended to force Hawaii’s two refiners, Chevron Corp. and Tesoro Corp., to set their wholesale prices closer to mainland prices.

Chevron has a 54,000 b/cd refinery, and Tesoro has a 93,700 b/cd refinery. Both are in Kapolei.

Hawaii Gov. Linda Lingle, who opposes the move, has the authority to suspend the cap. She said she would suspend the price cap if either or both of the state’s refineries indicated plans to close.

She also said she would suspend the cap if Hawaii were to experience wholesale or retail gas shortages stemming from curtailed shipments to the state.

“I think they are all possibilities,” Lingle told the Associated Press in Honolulu. “I can’t gauge their likelihood right now because the law hasn’t gone into effect yet. I think it has to go into effect on Sept. 1, and it has to remain in effect so we can see what those impacts are.”

On Aug. 24, the PUC said Honolulu wholesalers may not charge more than $2.1578/gas for regular unleaded gasoline.

On Aug. 25, the average retail price of regular unleaded in Honolulu was a record $2.76/gal, 16¢ above the national average, AAA said. The average statewide price was a record $2.865/gal.

The wholesale cap is calculated from the average prices in Los Angeles, New York Harbor, and the US Gulf Coast. The PUC then adds a margin to account for the costs of shipping, distributing, and marketing gasoline to the islands.

Tesoro reacts

In a statement, Tesoro Hawaii said it “believes that imposition of price caps by any mechanism will only serve to distort market forces and will result in long-term negative impacts to the citizens and the economy of Hawaii.”

Tesoro said its refinery is operating at normal seasonal capacity and has ample supply in the distribution system.

“Should the gas cap alter the public’s fuel purchasing habits or the supply economics for Hawaii, then Tesoro Hawaii will deal with these supply issues as they arise,” the statement said. No immediate response was available from Chevron.