California Watches Hawaii's Effort to Cap Gasoline Prices
With chronically high pump prices straining its laid-back ethos, Hawaii embarks this week on a radical experiment to cap gasoline prices, a move being keenly watched nationwide by legislators and consumer groups eager to rein in record fuel costs.
Interest will be especially high in California, a unique market that some experts liken to Hawaii's because of the high prices charged by gas stations and big profits reaped by a few in-state refiners.
This week, state Sen. Joe Dunn (D-Santa Ana) will reintroduce legislation that would give the California Public Utilities Commission the power to regulate gasoline prices.
"Hawaii is taking the absolutely correct approach to the gasoline industry," said Dunn, a strident critic of energy companies. "The more states that follow Hawaii's lead, the sooner we'll be able to force this industry to get back to normal market behavior that benefits the consumer but also allows them a reasonable profit."
How the caps, which take effect Thursday, will alter Hawaii's gasoline market remains a mystery. Lawmakers are hoping that the new system will curb price surges and spur competition among service station owners. However, there already are signs that the new caps might not lower prices for island motorists -- at least not immediately.
For starters, Hawaii's limits don't apply to the retail prices that consumers pay at the pump. Instead, the caps will be placed on prices charged by gasoline wholesalers Chevron Corp. and Tesoro Corp., which own the state's two refineries, and a range of smaller companies that act as middlemen, buying fuel in bulk and delivering it to service stations.
The law's proponents believe that capping wholesale prices will reduce the profits of refiners without hurting retailers, whose gasoline margins are relatively small. Even though gas stations aren't obligated to pass along any savings from the price controls, backers hope that "somebody will break ranks" and not pocket the entire amount, said Scott Foster of Advocates for Consumer Rights, one of two consumer groups that helped shape the gas cap law.
"It's a grand experiment, and my hopes are very high," Foster said. "If this bill works here [in Hawaii], there are a lot of other states that are watching it and might do likewise."
Cap opponent Fred Hemmings, Republican minority leader in the Hawaii Senate, said the law was "making Hawaii a laughingstock of the nation." He has called the price control effort "ludicrous" and "foolhardy," and said of the bill: "We don't need it and it won't work."
