Tuesday, June 07, 2011


Where is the Gas Cap now that we need it?

by Larry Geller

There are certain words that can’t be uttered when in the Hawaii State Capitol. Among them: “Gas cap” and “Van-Cam.” The Lingle administration killed the gas cap and legislators pulled several fast ones to make sure it would die for good.

The Van Cam could have saved lives, but it was badly executed—principally by letting the vendor profit the more speeding tickets were issued. The public was rightfully outraged—and so no legislator is likely risk proposing anything similar for some time. Public outrage for the gas cap, however, was manufactured and abetted by biased reporting.

The price of gasoline is back in the stratosphere, and energy companies again enjoy windfall profits. Those profits, of course, come out of your pocket every time you pump gas. Sure, there are reasons world petroleum prices are high (though among those reasons is speculation and opportunism). But in Hawaii, we are forced to simply pay, regardless of what the oil companies want to charge. It may be more or less the same anywhere in the country, except that we had a gas cap once. We tried to do something about it.

The Lingle administration’s Public Utilities Commission had discretion on how to set the gas cap. Under questioning at a hearing before Sen. Menor’s committee, it came out that in using its discretion, the PUC set prices as high as it could rather than as low as possible. With that simple strategy, public opinion was easily turned against the gas cap. Hawaii prices didn’t seem to drop, since if one sets a high ceiling, that’s where the price of gas will go. No newspaper reported that strategy, though I mentioned it in an op-ed in the Advertiser on March 7, 2006.

Legislators, for their part, were more than ready to kill the cap. I speculated that it was because of industry payola to their campaigns:

… in the 2004 election cycle, the industry pumped up the campaign funds of Hawai'i lawmakers by a whopping $150,822, according to followthemoney.org.

This includes $46,250 from Chevron/Texaco, $36,097 from Tesoro, a generous $25,000 additional from Albert D.K. Chee, director of Chevron/Texaco, and other large contributions from Interisland Petroleum, Aloha Petroleum, Maui Petroleum, or people associated with those companies.

Let's keep in mind that this huge payout to politicos has been more than recovered from the wallets of Hawai'i drivers and small-business owners who paid more for their gasoline than they would have if the gas cap had been administered to produce the lowest prices.

The gas cap was killed by a truly dastardly maneuver by the House. A 61-page amendment, no doubt drafted by the industry itself (that’s not unusual), was withheld from the public until just before the hearing. The public was effectively removed from the debate. I wrote:

First, you have to find a copy of it of course. You can only pick up a copy of the 61-page bill (yikes!) in room 314. Tough luck if you live on another island, in Waianae or the North Shore. You're not intended to participate, sorry.

If you can get one, speed-read it, type testimony at 1000 words a minute, then rush down to the Capitol to confront the oil barons who of course know exactly what is going on. You can bet they have copies. Can you win this high speed chase?

So the oil barons are prepared, the public is not. You can imagine what might result from this imbalance. May as well kiss your wallet goodbye, or just give Chevron your second mortgage and let them take care of it for you. Highway robbery indeed.

Now, please don’t feel too sorry for these oil companies. Today’s Star-Advertiser breaking news reports that Tesoro is looking for ways to improve the profitability of its Hawaii refinery (Tesoro Corp. 'looking at alternatives' for Hawaii refinery, 6/7/2011). One thing they are contemplating is charging HECO more for its fuel, which of course will result in higher electricity costs for all of us still on the grid. However, based on Tesoro’s earnings reports just last month, the company is doing really well, though their Hawaii refinery lags the others.

The San Antonio, Texas-based firm reported revenue of $6,526.0 million for the three-month period. This was 9.8% above our projection and was up 41.7% year-over-year.

Refining: Tesoro’s ‘Refining’ segment swung to an operating income of $303 million versus a loss of $169 million in the year-earlier quarter. This can be attributed to higher refinery throughput rates, significant crude sourcing advantage, and strong sweet/sour crude spread.

[yahoo finance, Higher Margins Fuel Tesoro Profit, 5/5/2011]

So no tears for Tesoro, and no reason why a state should not try to protect its citizens (and the competitiveness of its small business) by regulating windfall profits (hint for the new administration).

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