HONOLULU -- Governor Linda Lingle said late last week that she would suspend Hawaii's gasoline price cap law, due to go into effect next week, if either or both of the state's two oil refineries said they would close, reported the Associated Press.
Lingle said she would also halt the law if the state noticed wholesale or retail gasoline shortages stemming from curtailed shipments to any of the eight regional zones outlined in the law. I think they are all possibilities. I can't gauge their likelihood right now because the law hasn't gone into effect [image-nocss] yet, she told reporters. I think it has to go into effect on September 1, and it has to remain in effect so we can see what those impacts are.
The governor listed the examples to explain what types of situations would prompt her to use the powers given to her by the law to suspend the gasoline cap's implementation. She also outlined seven other instances that might prompt a suspension, including the disruption of gasoline supplies to ambulances and other emergency services.
She said a mere threat by a refinery to close alone would not be sufficient to suspend the cap. The refinery would have to notify its employees, shareholders, and take other concrete steps toward a shutdown before the state would move.
As reported in CSP Daily News, the state legislature mandated the caps on wholesale gasoline prices with a 2004 law designed to bring Hawaii prices in line with those on the mainland. Lingle opposes the cap, but allowed the measure to become law without her signature.
The law's authors allege the two refineries have been taking advantage of their monopoly on the local market to charge exorbitant prices. Critics say, however, that the law could lead to gasoline shortages or even prompt one of the refineries to leave the state.
Hawaii's two oil refineries, operated by Chevron Corp. and Tesoro Corp., said they will continue to supply the islands with gasoline even after the price caps kick in. We will continue to do business as usual until such time as the situation requires us to do something different, said Albert Chee, a Chevron spokesperson in Hawaii. Having said that, we continue to believe the law is flawed and is not in the best interests of the state. We continue to be concerned about the potential for adverse, unintended consequences.
Tesoro said it had ample supply in Hawaii distribution and that its local refinery was operating at full capacity, indicating it did not expect to run low on gasoline in Hawaii. But the company added that it opposed the price ceilings. Tesoro Hawaii 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, the company said in an e-mail statement from its San Antonio headquarters. The company said it had invested heavily in Hawaii, and stressed it played a key role in the infrastructure in the state.
The caps are linked to a baseline price calculated from the five-day average of spot rates from three mainland markets: Los Angeles, New York harbor and the U.S. Gulf Coast. The utilities commission then adds on allowances for the cost of shipping to the state and for transporting gasoline from Oahu to more remote and less populated islands.
The commission said Wednesday the wholesalers may not charge more than $2.1578or about $2.77 including federal, state and county fuel taxesin Honolulu for a gallon of regular unleaded gasoline. The commission set separate price caps for other islands.
The price consumers pay at the pump will depend on the retailer markup and the state's general excise tax.
The average retail prices of regular unleaded in Honolulu on Thursday stood at $2.764a record high, according to AAA. The average statewide price of a gallon of regular unleaded on Thursday was a record $2.865.
To view the Hawaii Public Utilities Commission's web page on gasoline caps, click here.
Meanwhile, by presstime, nearly 67% of more than 280 respondents to a CSP Daily News poll Fridayshould gasoline prices be regulated, as is happening in Hawaii?overwhelmingly rejected the notion (46.5% said no; 20.2% said absolutely never, under any circumstances). Nearly 30% did not reject the idea (19.9% said yes; 9.6% said maybe). Nearly 4% said I'm not sure.
And politicians in other states weighed in on the possibility of gasoline caps in their states:
California
Most California legislators said a move like Hawaii's would not work in California, and predicted that Hawaii's attempt to stabilize runaway gas prices wouldn't work there, either, reported NBC San Diego.
California State Senator Christine Kehoe (D) said Hawaii has done what the California Legislature refuses to dotake strong steps to reduce gasoline prices. She said the state should follow Hawaii's lead. Assemblywoman Lori Saldana (D) said she opposes gasoline price caps because if the price at the pump goes down, California drivers could be stuck with higher prices. She said a better approach to runaway gas prices is to become less dependent on foreign oil.
Illinois
Sources in Illinois told the Aurora Beacon News that a similar cap might be introduced in the Illinois General Assembly by a Democratic Party lawmaker in the veto session that starts October 25. If so, it will be just one of a number of measures Illinois lawmakers are likely to look at to battle gasoline prices.
House Republican Leader Tom Cross said Republicans are looking at some ideas, but they are not formed yet into any kind of legislative package. One of those ideas will be a task force to look at solutions to high fuel prices. He pointed out that the Illinois Commerce Commission does not have the same authority as in Hawaii's Public Utilities Commission, so a similar cap would need state legislative action. But Cross agreed with other Republicans that a cap does not seem to be a viable solution.
Local legislators said such tinkering with the laws of supply and demand could have the effect of creating gasoline shortages. It's like legislating a law to end the law of gravity, said State Sen. Chris Lauzen (R). It defies the basic law of supply and demand. It sounds like a bad idea. State Rep. Tim Schmitz (R) also said he disliked the idea of capping prices artificially. I think you have to question the constitutionality of it, he said. How can you put a cap on private business?
State Rep. Linda Chapa LaVia (D) declined to say what she would support specifically, but said the legislature will do whatever we have to do. We will see some ideas. Among those ideas could be incentives for development of more ethanol-based fuel and tax breaks for those who purchase hybrid vehicles that use a combination of gasoline and electric power.
Florida
State Rep. Terry Fields (D) told WAWS-TV that Florida could consider something similar to gasoline caps, where gas stations are allowed to sell below wholesale prices; however, State Rep. Audrey Gibson (D) said she thinks it is more than a state issue. There needs to be a national outcry, she said. Governor Jeb Bush needs to twist his brother's arms and get these companies to the table. The nation is suffering.
To view a petition for gasoline caps in Florida, click here.
Pennsylvania
Pennsylvania State Senator Richard Kasunic (D) told WJAC-TV that state lawmakers should definitely look into price caps for gasoline and heating oil.
Nebraska
Hawaii's decision to place a cap on the wholesale price of gasoline probably would not be copied in Nebraska, Rose White, a spokesperson for AAA Nebraska, told the Omaha World-Herald that such a move could lead to shortages and gas station closings.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.