Paradise! Hawaii Caps Gas Prices

Some analysts warn move may spur supply problems

HONOLULU – In an effort to gain some control over what motorists pay at the pump, Hawaii on Wednesday became the first state in the U.S. to set caps on the wholesale price of gasoline.

The 2004 law authorizing the caps was intended to force Hawaii’s two refiners, Chevron Corp. and Tesoro Corp., to set their wholesale prices closer to mainland rates. Proponents of the law said the refiners were taking advantage of the small, isolated market to charge exorbitant prices.
But industry officials and analysts said Hawaii, whose average retail gasoline prices are the highest in the country, now runs the risk of becoming less attractive to suppliers, raising the possibility of supply problems down the road. However, some analysts gave the state credit for developing a pricing model that takes market forces into account.

The state’s Public Utilities Commission said Wednesday that, beginning Sept. 1, wholesalers in Honolulu may not charge more than $2.1578 a gallon for regular unleaded, or about $2.74 a gallon when taxes are included. The commission set the caps, which will fluctuate from week to week, at different levels for other islands.

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