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Posted on: Wednesday, May 10, 2006

Confusion remains in the wake of gas cap

By David Shapiro

After the Legislature's ungainly retreat from the gasoline price cap, we may never know if this law was a bad idea or simply a victim of bad timing.

Lawmakers were right to suspend the 8-month-old cap, given its ambiguous results and the growing discontent among the consumers it was supposed to protect.

But it might have been useful to continue calculating prices under the old cap for comparison with actual prices in the newly unregulated market to provide a better fix on the cap's impact over a longer period and under a broader range of market conditions.

This would be helpful information if the state ever considers reinstating the gas cap, as the law allows.

Unfortunately, future price monitoring dictated by the Legislature uses a worthless new formula that sets per-gallon wholesale prices at about 25 cents less than the old cap, serving only to further confuse consumers.

This formula has no clear rationale, and we may as well compare gasoline prices to the price of the bean soup at Zippy's.

Sen. Ron Menor, who championed the gas cap, appears to have pulled the new formula out of his hat to save face politically in his run for Congress.

Lack of clear rationale is what doomed the gas cap from the start.

It was passed by the Legislature in 2002, but implementation was delayed until September 2005 as nervous lawmakers wavered and tinkered in the face of Gov. Linda Lingle's opposition.

The cap took effect just before Hurricane Katrina sent fuel prices here and elsewhere soaring to record levels.

A brief price decline ended when increased summer demand for gasoline, combined with rising worldwide oil prices, recently pushed average Honolulu prices to $3.28 per gallon.

But the problem seemed more than bad timing; the gas cap had vague and shifting goals, was never clearly explained to the public, and lacked means to accurately measure whether it was working or not.

It introduced high volatility into a previously stable market, causing prices to fluctuate by as much as 50 cents from week to week.

Without clear evidence that the cap was having any effect on keeping prices lower than they otherwise would have been, consumers simply got tired of the hassle of timing their purchases to weekly swings.

After initially raising public expectations for lower prices, Menor and other backers of the cap changed their tune after Katrina.

Their new line was that the law which tied local prices to three Mainland markets was merely intended to make Hawai'i prices mirror the ups and downs of Mainland markets.

If that was the case, how did it make sense for Menor to throw Singapore prices into the mix in his latest "phantom" formula?

But Menor and the Democrats have no monopoly on playing it both ways politically.

Lingle, who complained endlessly that the gas cap was artificially inflating prices, now warns us not to expect any price relief after she signed the cap into oblivion.

The oil industry is second only to perhaps the tobacco industry in its disregard for consumer interests in the pursuit of profits, and there's good reason to monitor its activities for evidence of price gouging.

Public officials go wrong, however, when they take the view that doing anything even if it's ineffective is better than doing nothing.

The House had it right when members advocated taking a breather, gathering and analyzing more data, and looking at gasoline prices in the context of what it actually costs to produce the fuel here not how it's priced in faraway markets with little relevance to Hawai'i.

David Shapiro, a veteran Hawai'i journalist, can be reached by e-mail at

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