Honolulu gas price may hit $4 by summer
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By Greg Wiles
Advertiser Staff Writer
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It may not be long before you're paying $4 a gallon for regular unleaded gasoline in Honolulu, perhaps as early as this summer.
Prices of premium and medium-grade gasoline already have spilled over the $4-a-gallon mark on Maui, and the Honolulu average price for diesel fuel set a record of $3.879 on Friday.
Passing the $4 mark for regular will add about $200 a year to the gas bill of an average Honolulu driver.
"It probably represents taking your wife to dinner four times," said David Hackett, president of Stillwater Associates LLC, an oil industry consultant. "You do hear restaurants saying, 'Yeah, we're feeling it.' "
Rising gas prices can hurt the broader economy as consumers have less to spend elsewhere. And the prices could change motorists' habits.
"The days of just hopping in your car and just driving without thinking about the cost of fuel, those days are gone," said Barney Robinson, operator of two service stations, in Kahala and the airport area, and a gasoline dealer since 1985.
"It's a lifestyle adjustment that a lot of people have to make."
Some motorists are already taking steps, such as cutting back on driving by consolidating trips to stores, work or school into a single outing and buying cheaper grades of gasoline.
"Getting around is just getting very expensive," said Terry McBarnet, vice president of Maui Oil Co., a Kahului-based distributor of gasoline on Maui and Lana'i and operator of Paia Chevron. "I think everybody is finding energy to be very expensive. Certainly I am."
The statewide average price of regular has gone up 9.6 cents in the past month and 25 percent in the past year. Crude oil futures started 2007 around $60 a barrel, and have surged ever higher, hitting a new intraday record of $106.54 on Friday. Gasoline prices tend to follow crude prices.
There are a myriad of factors for the increase, most of which are little comfort to people paying $50 or more when filling their gas tanks.
Around the state, budget-conscious drivers are dusting off fuel-saving practices from September 2005, when hurricanes Katrina and then Rita disrupted production and wheeled already rising prices above $3 a gallon for the first time.
According to American Automobile Association data, the peak price for regular came on Sept. 18, 2005, when the average at Hawai'i stations was $3.68.
At the time, West Texas Intermediate crude futures prices were in the $60- to $70-a-barrel range. Last week, a barrel of the sweet crude was trading in the low $100 range.
That has some oil experts saying $4 a gallon gas could be a reality this summer. Hawai'i already has the highest average gasoline price in the nation.
"It certainly could get to $4, but we're not calling $4 yet," said oil consultant Hackett. "Mostly because I hope it won't."
WE ADAPT A BIT
As recently as five years ago, gas prices averaged $1.90 a gallon in the state.
Friday's average for regular in Honolulu was $3.474, according to the AAA. At that price, a driver who travels 10,000 miles a year and gets 22 miles per gallon will spend an additional $239 per year if the price goes to $4.
That kind of price increase will affect driving habits, according to national surveys.
A Congressional Budget Office report found that freeway traffic has declined by 0.7 percent for every 50-cent increase in gasoline prices, and drivers went three-quarters of a mile an hour slower. In Hawai'i there's only so much driving people can cut, since there aren't long distances to travel on weekends for leisure. Most driving here is thought to be people going to work or school and back.
Other reports are finding people taking steps to cut their commuting costs as prices rise. A survey for the Automotive Aftermarket Industry Association found respondents were driving less, and making sure tires were inflated and engines were tuned. Others had joined car pools or were taking mass transit instead of driving. Only 8 percent said they wouldn't change their driving behavior regardless of price.
The increase in gasoline prices "will leave a hole in people's budgets," said Leroy Laney, a professor of economics and finance at Hawai'i Pacific University.
"It will leave less to spend on other things."
It may also have a psychological effect, prompting some people to cut back spending even if they can afford the extra expense of $4 a gallon.
RECESSION A WILD CARD
State economist Pearl Imada Iboshi noted that gasoline makes up less than 5 percent of the Honolulu Consumer Price Index. She also heard the talk of psychological thresholds when gasoline hit $3 a gallon.
"But it came and went pretty quickly," she said.
Beyond that, rising oil and diesel prices are working their way into other costs for folks here. Hawaiian Electric Industries' utilities, Matson Navigation Co., and Young Brothers Ltd. all have fuel surcharges that rise and fall with changes in costs.
"The economy gets to work on a diesel truck," Hackett said.
Most experts interviewed said they couldn't predict if or when $4 a gallon regular gasoline would occur in Honolulu because of all the variables, including a possible recession damping oil demand and prices.
"Yes, it's ($4 a gallon) possible, but actually there are as many arguments out there that the price of oil is going to come down and settle around $75 a barrel," said McBarnet of Maui Oil Co. He said more national leadership is needed to solve the country's energy problems.
One thing is certain: prices will rise in July 2009 in Hawai'i unless state lawmakers take action. A state general excise tax exemption on ethanol-blended gasoline, which applies to most gasoline sold now, is set to expire in July 2009. If the exemption were not in effect now, gasoline would be 12 cents to 14 cents higher, said Robinson, the service station operator.
Beyond that, most agree the days of cheap oil and gasoline are gone because developing economies in China, India and elsewhere are demanding increasing amounts of oil.
"As long as the world economy remains good, no, we're not going to see cheap gasoline again," Hackett said.
Join our discussion: Making sacrifices for rising gas prices?
Reach Greg Wiles at gwiles@honoluluadvertiser.com.