Hawaii sets caps on wholesale gasoline

The state of Hawaii has become the first US state to set caps on the wholesale price of gasoline in an attempt gain some control of the skyrocketing prices consumers must pay at the pump. Hawaii has the highest gasoline prices in the United States. On Wednesday, the price of regular unleaded gasoline in Honolulu was at $2.761 per gallon, fifteen cents above the nationwide average, and statewide prices for that gallon of unleaded were averaging $2.84 per gallon. On the island of Maui, the price for a gallon of unleaded gasoline had topped $3 per gallon.

In order to try to get a handle on prices, Hawaii’s Public Utilities Commission announced on Wednesday that beginning on September 1, wholesalers in Honolulu may not charge more than $2.1578 per gallon for unleaded gasoline, putting the wholesale price after taxes at $2.74 per gallon.

While no cap has been put on retail prices, the regular retailer markup of 12 cents per gallon would put the price to consumers at around $2.86 per gallon. Then, beginning of September 4, the PUC will adjust caps on a weekly basis; the caps will be adjusted to conditions on each of Hawaii’s islands. The caps will be calculated from an index based on the average five-day spot rates in three mainland markets: Los Angeles, New York harbor, and the US Gulf Coast, with add-on allowances for shipping costs.

The caps are allowed under a 2004 law in Hawaii that was intended to force Hawaiian refineries to keep their wholesale prices close to mainland rates. Critics of the new program, including the American Petroleum Institute, say that the PUC and the people of Hawaii should expect negative consequences in response to the price caps, including a lessening of ability to attract supplies and new investment to the market. Hawaii’s governor expressed the concern that the caps will, contrary to their purpose, increase pump prices and cause shortages.