Hawaii's Gas Cap Law

[pzarquon]

Whether or not it can be fixed, Lingle has confirmed that she'll implement the controversial gas cap law in September, as established by the Legislature.

"We firmly believe that (price caps are) the wrong approach" [DBEDT Director Ted] Liu said in an interview this week. "If a repeal bill fails, the gas price cap law is the law. I want to absolve you of any notion that the governor is not going to implement it, or that DBEDT is not going to implement it."

Like Hawaii's bottle bill, it looks like this one's got too much inertia to stop now. If it can't be tweaked, the only hope is that it isn't too disastrous... else we'll be in pretty deep kimchee before we can back out of it.

Regulating such a price-sensitive and competitive industry is, IMHO, a bad idea. And of course, there's good evidence that this "gas cap" will in fact raise prices at times, as there are indeed places on the mainland that pay more for gas than we do.

The Advertiser has an interesting graph (which rightfully notes we see more ups than downs, compared to other markets)... but I'd really like to see a line added for what the gas cap price would've been if the law was already in place.

[scrivener]

Re: Hawaii's Gas Cap Law

The gas-cap law is a lousy idea, for reasons you've already stated. Tying the price of anything to the price of similar items somewhere else is dicey. The economy is like the weather--if you could somehow do something to modify the weather in one part of the world, you're going to screw up some other part of the world. There are too many variables to confidently make one kind of adjustment like this without screwing up something else.

The energy-crisis in California a few years ago was partially the result of a price-fixing law where the state got too involved in the market.

As Pz says, if the law had passed as it was originally written, prices here would have been ridiculously, unnecessarily higher than they were when the prices in California shot up at a steeper rate than the prices elsewhere. Remember, the original language tied the price in Hawaii to the average price in California.

So legislators are saying they fixed it, but they really have no way of knowing that. There's nothing that says what happened in California couldn't happen in these other places that will affect the price, and there's no way to predict how dramatically something like that could happen.

The gas-companies here have been screwing us, yes, I know. The solution, however, is not to legislate prices by some totally irrelevant means. Fix whatever's CAUSING the high gas prices, if it can indeed be fixed. Artifically setting the prices is bad, bad, bad news. This is NOT what we need our elected officials to be spending their time on.

[Glen Miyashiro]

Re: Hawaii's Gas Cap Law

I don't think that gasoline prices here are too high, or that they need capping. Gasoline prices in the USA are artificially low due to oil company tax breaks that are so long-standing and so ingrained into the tax code that we're not even aware of them. If you compare with Europe or Japan, gasoline in the USA is a bargain. And everybody who complains about traffic should recognize that our low gas prices are partially responsible for the near-24-hour freeway gridlock we also enjoy.

[Konaguy]

Re: Hawaii's Gas Cap Law

Ok let me point this question ? If the oil companies are not gouging us,
how can Costco sell 87 grade gas at 2.34 a gallon here in Kona. But you
drive down the hill the Tesoro is charging 2.59 for 87 grade gas.
The so called gas tax argument doesn't fly here as I would assume when
I buy gas at Costco I'm paying the same gas taxes as I would be if I bought
at Tesoro.

[scrivener]

Re: Hawaii's Gas Cap Law

Dictionary.com:
price gouging
n : pricing above the market when no alternative retailer is available

What the gas companies have done is not price-gouging, since, as you point out, there are alternative retailers. Now, what they seem to have been found guilty of is price-fixing: colluding with the competition to keep prices above a certain level, removing the aspect of competition that keeps businesses honest. That is in violation of the spirit of free enterprise, not to mention anti-trust laws. It is not a crime for businesses to set prices higher than they need, and in fact the laws of supply and demand almost dictate that. People have complained about high gas prices, but most of them are still buying SUVs and other gas-guzzlers. When the gas prices truly have gotten too high, people will drive less, purchase more fuel-efficient vehicles, and buy less gas. This will force the gas companies to lower their prices.

Costco makes the bulk of its money not on sales, but on annual membership fees. Remember, you're not paying eighty-three cents less per gallon--Tesoro doesn't charge you annual fees. Of course, for those extra bucks per tank, nor does it make you wait in really long lines. Nor does it insist you pay with a credit card. Nor is it located in just one remote location. Nor does it open at nine and close at eight. Nor, if you're feeling the munchies while you're filling up, does it make you guy twelve bucks worth of M&Ms if all you want is one small bag.

One could argue that gasoline in today's society is like water, electricity, and telephone service--a complete societal necessity--and therefore a public utility. If this is the case, local governments need to make it so and cut out the pretense that gas companies are allowed to run their businesses the way they consider most beneficial to themselves within the confines of the law, like all other businesses are supposed to do.

If local governments aren't willing to do it--and they shouldn't be--they and we need to back off and express ourselves via our purchases. If the gas companies lose enough business, believe me, they'll respond in as customer-friendly a manner as necessary.

[Miulang]

Re: Hawaii's Gas Cap Law

Up here, a gallon of regular unleaded is going for anywhere from $1.85 to $1.96 right now. Our gas prices would be lower, except our state government has decided to add about 25 cents per gallon for their take. Supposedly this is being collected to help with road repair, etc., but our potholes don't seem to be getting fixed as often as we would like. And then we've got another tax based on the price of your car (we renew our license tabs every year) that's supposed to be used for funding a light rail system for Puget Sound and another one just for King County to fund a monorail system.

Hawai'i gas prices have always been higher than the contiguous US, primarily because of the expense of shipping, so your motorists are kind of a captive audience. But a gas cap without also providing funding for public transportation is a little short sighted; if people perceive that the prices will never exceed a certain amount per gallon, it will not encourage them to conserve.

Miulang

[Konaguy]

Re: Hawaii's Gas Cap Law

There is a thing called the Costco cash card which you can use the Costco pumps. You can also use your banks ATM card along with only American Express.Since I'm not a member of Costco but my Dad is I use the Costco cash card.

The difference in gas is not 83 cents, but 25 cents between Costco here in Kona and the Tesoro down the hill in Kaloko. Generally that goes the same
with other Gasoline vendors here in Kona.

To me the other vendors of gas have no justification in my eyes to be selling
gas for 25 cents more than what Costco charges. I back up my complaint
by refusing to buy gas at anywhere besides Costco except in extreme circumstances.

[Miulang]

Re: Hawaii's Gas Cap Law

According to this article in today's Advertiser, if the newly passed gasoline price cap had been in effect last year, it would have saved the average Honolulu driver a little over $21.00 per vehicle. $21.00 is going to maybe buy one good meal at a restaurant every year (or 4 trips to McD).

The only problem with tax ceilings of any kind is rarely do lawmakers put a floor on how low the prices can get. What this does is encourage the enterprising businesspeople to keep prices closer to the ceiling so they can make more profit.

"..."If we could get more margin, we'd keep it," said Bill Green, a former owner and current consultant to Kahala Shell. "I know that's not a good public thing to say. (But) there'd be no reason for us to lower a price because we're already on the ragged edge."

O'ahu retailers contend margins on gasoline are low relative to high land, labor and tax costs. Profits on car washes, service bays and convenience-store sales typically are higher, Green said. "...

So how will the State pay for highway improvements without that extra nickel a gallon? Will you guys take it in the shorts in the form of higher State income taxes, because the gas station owners are not going to willingly give up any extra profit they can make for the good of the motoring public.

Miulang

[Miulang]

Re: Hawaii's Gas Cap Law

A consulting group in VA just released a report that was commissioned by the Public Utilities Commission that indicates the wholesale price of gas would go down if the gas cap is enacted Sept. 1. However, there is no guarantee that the consumer will see that 10-15 cent decrease because there is no ceiling on profits that can be made by the individual stations. As I stated in previous posts, the individual owners (and the chains) are in business to make money, and they aren't going to give up their profits without a fight. If some retailers leave the market because they aren't making money, it will drive the cost of gas up anyway, because it will become more scarce and you'll have to drive farther to fuel up.

One other consideraton now is funding for your light rail system. More than likely, any savings are probably going to be chewed up with additional taxes on fuel to fund public transportation.

The only good thing you guys have going for you is that the price fluctuations that we're seeing up here on the Mainland (like a 20 cent/gallon jump in a week) aren't affecting you. You're used to paying more than $2.50/gallon all the time anyway.

Miulang

[scrivener]

Re: Hawaii's Gas Cap Law

The only good thing you guys have going for you is that the price fluctuations that we're seeing up here on the Mainland (like a 20 cent/gallon jump in a week) aren't affecting you. You're used to paying more than $2.50/gallon all the time anyway.

Gee. For some reason, that's not making me feel a whole lot better.

[Miulang]

Re: Hawaii's Gas Cap Law

Well, the Advertiser and StarBulletin have slightly different takes on what imposition of the gas cap will mean for Hawai'i drivers. I tend to believe the StarBulletin's reporting a little more---that if the gas cap is imposed, Hawai'i drivers will be getting a real crapshoot where your prices might actually go up pretty drastically, because the cap is based on the wholesale price of gasoline, not the retail price per gallon, and there's no ceiling on the amount of profit an individual station can make.

Miulang

[Moto]

Re: Hawaii's Gas Cap Law

Scrivener mentions a good point about Costco, with them being a Wholesale Membership Warehouse. Another factor that people often times miss is, Costco does not depend on profit from their gas sales to support their business. Their big profit margin is based on small profits on volume sales. They achieve that primarily in their warehouse, not at the gas pumps. Therefore, Costco can utilize a strategy of taking very little profit for each gallon of gas and using it as a loss leader to get people to join their membership and shop in their warehouse where they will make their real $$. I'm always going "broke" saving $$ at Costco.

On the other hand, a large number of service stations only pump gas and has an attached convenience store. They cannot make their profits based on volume, because their operation is too small. So they need to add a significant profit to make it worth their while to stay in business. The service stations that have a repair business associated with their gas sales do not generate sufficient business on repairs to simply break even on gas sales.

We should be lucky that these service stations are able to survive and stay in business even though they have an huge environmental liability with the possibility of leaking fuel tanks, or as seen on another link when customers come in and decide to fill their tanks while smoking a cigarette. For some, (and I am not one, for we have a Costco close by), a trip to Costco is out of the way or when the gas service is not open, and you need gas, you are really happy to see a 24/7 station available several blocks from your house. Essentially, that is what you are paying the premium price for.

And no, I do not own a service station, just trying to give another point of view.

[pzarquon]

Re: Hawaii's Gas Cap Law

Public hearing on gas cap void of key ingredient: The public

What if the state asked for residents' input on how to implement the gas cap this fall and no one showed up? That was virtually the case Monday night at a public meeting held at Aiea High School... "At the very least I thought some more industry people, the retail station owners, who have been so vocal at the Legislature would have come out tonight. But there was none of that," said John Cole, state consumer advocacy director.

For a guy who's a self-proclaimed liberal lefty, I gotta say I think this "gas cap" scheme is a bad idea. Gas prices are going up everywhere anyway... hell, state taxes on gas are likely going up too (which makes this plan even more ridiculous), and IMHO any plan that tries to "fix" the open marketplace is almost guaranteed to make things worse (i.e. how does capping wholesale prices guarantee any relief at the retail level?).

Anyway, whether or not you support this thing, for information on upcoming meetings (neighbor islands, now), visit the Department of Commerce & Consumer Affairs site.

[scrivener]

Re: Hawaii's Gas Cap Law

Come . . . to the LIGHT side, PZ!
The Libertarians are calling you . . .

[Surfingfarmboy]

Re: Hawaii's Gas Cap Law

Did any one happen to see on the news yesterday that a Shell station in Malibu, CA is charging $3.29 to $3.49 a gallon? The report didn't make reference if this was the prevailing price of gas in the Malibu area, or if it was an isolated station.

Gasoline here in Rhode Island is generally about $2.22-2.25; go across the border into Massachusetts, and one can find it for about a nickel less per gallon.

I mention this, with the higher prices of gas we've seen of late, because I tell all my friends and acqaintences here that the prices one sees listed on the price signs at the gas stations reminds me of the prices I used to see when I lived in Hawai'i, relative to mainland gas prices. I remember when there was such a marked difference between mainland and Hawai'i gas prices; now there really isn't that much of a significant difference, or in some (rare) instances, Hawai'i has even lower prices than the prevailing prices, say in San Francisco or Chicago.