Hawaii announced it would be the first state in the union to place a cap on wholesale gasoline prices Wednesday.
The plan was originally designed to force Chevron and Tesoro, the two suppliers of gasoline to Hawaii, to keep prices more in line with those on the mainland. Hawaiian officials accused oil companies of taking advantage of the small, isolated market to charge exorbitant prices.
Hawaii's Public Utilities Commission announced that wholesalers in Honolulu cannot charge more than $2.1578 for regular unleaded gasoline after September 1. With taxes added on, the price cannot exceed roughly $2.74 per gallon. At the retail level, if gas stations take their typical 12 cents per gallon markup, the price will be approximately $2.86 per gallon. There is no cap at the retail level under the new law.
The average cost of a gallon of regular unleaded gasoline in Hawaii is $2.761, roughly 15 cents above the national average. On Maui, prices have already exceeded $3 per gallon.
The price ceiling will be in effect through September 4 with a new announcement made each week by the Public Utilities Commission.
'The purpose of the cap is so that we move with the rest of the country,' Frank Young, a member of Citizens Against Gasoline Price Gouging told the Associated Press.
Predictably, John Felmy, chief economist of the American Petroleum Institute, said the new law could cause problems throughout the supply chain.
'It's a solution in search of a problem,' he claimed.
Chevron released a statement saying, 'We continue to believe that this law is flawed and not in the best interest of the state.' The statement, posted on the Web site of the 'Wall Street Journal' claimed the new law 'will only serve to distort market forces and will result in long-term negative impacts to the citizens and the economy of Hawaii.'
Only time will tell if this is the right solution for the problem Hawaii and the rest of the nation faces as gasoline prices continue to hit record highs and oil companies continue to announce record profits.
