Issue – Gas Cap Law
Senator Norman Sakamoto
Updated April 11, 2006 (originally posted on February 12, 2006)
There are calls for repealing or modifying the gas cap law in this session. Prior to the law, Hawaii's consumers paid high gas prices, even long after the prices on the mainland went down. In response to this situation the Legislature passed the gas cap law. Hawaii's consumers have benefited from the drop in wholesale gas prices as national prices went down. We all should know that the dramatic hike in gas prices in the Fall of 2005 was due to the devastation caused by Hurricane Katrina in the Gulf Coast area, not the gas cap as some have claimed. The Honolulu Star-Bulletin reported on January 28, 2006, that the oil giant Chevron enjoyed a record $4.1 billion profit for the fourth quarter of 2005, even with hurricane-related costs, and the highest annual earnings in its 126-year history. Hawaii consumers are willing to pay more for the costs of shipping and storage, but we do not want to pay more just because we are a small market and are subject to whatever the wholesaler wants to charge. We want to be treated fairly.
Although the law lowered the price of gas as intended, there is room for improvement. In 2002 I voiced my concerns noting that the bill's formula might negatively impact Neighbor Islands independent dealers, for that reason I voted for the bill with reservations. I had similar concerns again in 2004 when the Legislature made further changes to the law. The Honolulu Star-Bulletin confirmed my concerns when it reported on September 4, 2005, that some smaller dealers on the Neighbor Islands were having trouble getting deliveries.
I believe it too early and too simplistic to repeal the gas cap law unless other changes are implemented. In this legislative session there should be public discussion about how the law can be improved on, and the public assured that Hawaii consumers will be treated fairly.
Update - April 2006
In late March, Senator Ron Menor proposed suspending the gas cap law for the time being while including a "safeguard" that would allow the cap to be reinstated if gas prices rise too high.1 This proposal seems to be a reasonable compromise. It calls for the suspension of the gas cap law, which in its present form2, even its supporters admit, is not being implemented as envisioned. Although the bill in its current form suspends the gas cap, it protects Hawaii consumers by requiring greater transparency in industry pricing practices, requiring the Public Utility Commission to post a fair price indicator, and holding in reserve the imposition of the gas cap if the petroleum companies were to raise their gasoline prices artificially high.
The language of the bill will change as the Legislature heads into the final phase of the session and the House and Senate conference committees iron out their differences in proposed legislation. We will continue to speak up for a fair and commonsense solution that will protect Hawaii consumers.
B.J. Reyes, "Senate bill lowers gas cap," Honolulu Star-Bulletin, March 29, 2006, <http://starbulletin.com/2006/03/29/news/story12.html>.
B.J. Reyes, "Panel OKs halt of gas caps, with 'safeguard,'" Honolulu Star-Bulletin, March 24, 2006, http://starbulletin.com/2006/03/24/news/story01.html.
B.J. Reyes, "Dire effects of gas cap have yet to materialize," Honolulu Star-Bulletin, January 2, 2006, <http://starbulletin.com/2006/01/02/news/story07.html>.
Michael Liedtke, "Chevron posts biggest profits ever," Honolulu Star-Bulletin, January 28, 2006, p. C1.
B.J. Reyes, "Gas Cap Politics," Honolulu Star-Bulletin, September 4, 2005, <http://starbulletin.com/2005/09/04/news/story6.html>.
1 B.J. Reyes, "Panel OKs halt of gas caps, with 'safeguard,'" Honolulu Star-Bulletin, March 24, 2006.
2 House Bill 3115 House Draft 2 Senate Draft 1 "Relating to the Petroleum Industry" and Standing Committee Report No. 3156.