Hawaii To Cap Gas Prices

Discussion in 'Economy' started by GotZoom, Aug 25, 2005.

  1. GotZoom
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    GotZoom Senior Member

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    HONOLULU — Hawaii (search) will begin enforcing a cap on the wholesale price of gasoline next week, hoping to curb the sting of the nation's highest gas costs.

    The limit would be the first time a state has capped the price of gasoline — a move critics warn could lead to supply shortages.

    But many Hawaii residents are just looking for some relief from soaring costs.

    "The gas prices that are continuing to go up — how am I supposed to afford it?" Nathan Slenk, a 25-year-old student at Kapiolani Community College (search), said as he pumped regular unleaded gas into his black sedan for $2.79 a gallon in Honolulu.

    On Wednesday, the average retail price of regular unleaded in Honolulu was at a record $2.761, some 15 cents above the nationwide average. Prices on Maui have already topped $3 a gallon this week. Statewide, prices average $2.84, the highest in the nation, according to AAA's Web site.

    The state Public Utilities Commission (search) said the initial price ceiling is due to take effect Sept. 1. Wholesalers may not charge more than about $2.74 including taxes in Honolulu for a gallon of regular unleaded. The commission set separate price caps for other islands.

    If retailers keep their usual 12-cent-per-gallon markup, prices for regular unleaded in Honolulu could in theory rise to about $2.86 a gallon.

    The ceilings will be in effect through Sept. 4. The following week, the commission will announce a new set of caps.

    The 2004 law passed by the Legislature that authorized 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.

    Chevron said in a statement Wednesday it believes the law "is flawed and not in the best interest of the state," The Wall Street Journal reported on its Web site. Tesoro said its Hawaii operation believes any cap "will only serve to distort market forces and will result in long-term negative impacts to the citizens and the economy of Hawaii."

    The oil companies also have said the state should cut back on Hawaii's excessive regulations to reduce prices rather than setting price caps.

    Chevron and Tesoro did not return calls by The Associated Press Wednesday seeking comment. Chevron owns a 54,000 barrel-a-day refinery in Hawaii and Tesoro has a 95,000 barrel-a-day refinery.

    Fereidun Fesharaki, an energy expert with the East-West Center in Honolulu, said the caps were a futile attempt to hold down oil prices as they rose around the globe.

    "This kind of thing it just gives us a bad name, frightens people from investing — it may make one of the refineries shut down and leave Hawaii," Fesharaki said. "It reduces competition and does all harm but doesn't gain us anything."

    Direct comparisons between the gas cap and current wholesale prices are not possible because the oil companies do not release wholesale price data.

    The caps are based on 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 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.

    For example, under next week's cap wholesalers may not charge more than $2.3058 — about $2.86 including tax — for a gallon of regular unleaded gas in Hilo on the Big Island. Allowing for a retailer's markup, prices at the pump in Hilo could be close to $3 a gallon or more.

    Federal, state, and county authorities each impose a fuel tax on wholesale gasoline. The state's excise tax is also imposed on gasoline at the wholesale and retail levels.

    Frank Young, a member of Citizens Against Gasoline Price Gouging, said the price caps were pretty much in line with current market rates in the state.

    "The purpose of the cap is so that we move with the rest of the country," he said.

    Gov. Linda Lingle, who unsuccessfully sought repeal of the 2004 law, has said she worries the cap will actually increase prices and create fuel shortages. The governor has the power to suspend the price caps if she determines they would cause a major adverse impact on the economy, public order, or the health, welfare or safety of the people of Hawaii.

    Crude oil prices hit a record US$68 a barrel Thursday after the United States reported a decline in gasoline stocks and China said its crude imports spiked in July. Storms brewing close to Gulf of Mexico production facilities and fears that it could hurt output also contributed to the upward march.

    http://www.foxnews.com/story/0,2933,166696,00.html
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    I wonder if other states will follow.
     
  2. dmp
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    dmp Senior Member

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    Sometimes I Like letting government control corporate greed. :)
     
  3. Merlin1047
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    Merlin1047 Senior Member

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    Oh yeah, that's gonna work. Here's my guess on the outcome - when the cap goes below the normal market price, shortages will occur. When enough shortage proliferate, a black market will develop and the price of a gallon of gas will be two to three times current levels. If this stupidity goes on long enough, the next thing will be gasoline smuggling to supply the black market. This might be a bit of a stretch, but as long as I'm speculating - it's not totally beyond reason to see organized crime taking over gasoline supply in Hawaii. Hold onto your hat. Twelve bucks a gallon, baby.
     
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  4. no1tovote4
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    no1tovote4 VIP Member

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    Further prediction. The capping of prices will be released after the above begins to happen (unintended consequences) this will cause serious inflation in an already low economy in HI, much like the price capping in Nixon's time, this will cause the same effect it did with Nixon. High inflation leads to worse economy, leads to less jobs, leads to desperate people hoping for another Government "Solution" that can never come because the solution was the cause.
     
  5. dilloduck
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    dilloduck Diamond Member

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    Maybe Hawaiians could just simply put out a hit on the specualtors who are driving the price up (along with other factors). When I lived there they had quite the powerful underworld ( bodies found in sugar cane fields and cool stuff like that kept of the news to protect the tourist trade)
     
  6. dmp
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    dmp Senior Member

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    Well that'll teach me to 'think things through' before forming an opinion :D
     
  7. manu1959
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    manu1959 Left Coast Isolationist

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    a very close frined of mine was an emt there.....boddies thrown into the canyon.....or the volcano.....or the blow hole....somoan nut cases
     
  8. elephant
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    elephant Member

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    There is no evil greed here. The gas companies can charge whatever they want. Gas too expensive? Do not buy it. Sell your car. I am so tired of people blaming corporations for gas price increases.

    If I owned an oil company and Hawaii capped gas prices I would send my tankers to China. They will buy at the market price.
     
  9. Big Blue Machin
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    Big Blue Machin Member

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    The government should give tax credits to regular transit riders. The government should also gave tax credits to hybird car owners. The people who buy these huge SUVs are dumbs. Not people don't need an SUV that big. Buy a wagon.
     
  10. Shattered
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    Here's a fantastic idea.. If people can afford to drive whatever they want, let them drive whatever they want. Who are you to tell them what they need to drive, and why?
     

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