Flooding and other damage in the wake of Hurricane Katrina caused Mainland wholesale gasoline prices to soar yesterday, virtually assuring that Hawai'i consumers will be paying higher pump prices next week when the state's new wholesale gas-price cap undergoes its first adjustment.

The pump price for a gallon of regular unleaded gas is projected to average $2.87 tomorrow when the wholesale price cap takes effect. That compares with yesterday's average Hono-lulu price of $2.83 quoted by the AAA Fuel Gauge Report.

However, the pump price could jump well above $3 a gallon on Monday when the weekly adjustment in the price-cap forumula is done, factoring in the effects of Hurricane Katrina. The formula for the wholesale cap that goes into effect tomorrow was calculated last week, before Katrina began affecting oil prices.

Under the price-cap formula created by the Legislature and the state Public Utilities Commission, the maximum wholesale price on O'ahu effective Monday is expected to be about $2.47. Add to that about 61 cents in taxes and a 12-cent dealer margin and Honolulu gasoline prices could hit $3.20 a gallon for regular if wholesalers charge the maximum allowed by law.

In addition to potentially higher prices, there are indications the cap could create shortages after a Kaua'i supplier warned that it may not deliver gasoline to three gasoline stations on the island once the caps take effect.

Hawai'i's prices likely would increase without a price cap in place. However, once Hawai'i's new gasoline price cap takes effect, the cost at pumps in the state will be tied directly to wholesale prices in Los Angeles, the Gulf Coast and New York.

That means local prices likely will rise faster and fall faster than in the past, when prices changed more gradually.

Right now Mainland prices are rising fast. The Gulf Coast wholesale price for regular shot up more than 68 cents a gallon to close at $3.12 a gallon, excluding taxes, yesterday according to the Bloomberg News Service. Just how high O'ahu retail prices rise remains to be seen.

However, $3 a gallon or more for regular on O'ahu seems increasingly likely, said David Hackett, president of Stillwater Associates, which has produced a report critical of gasoline price caps.

"You couldn't have picked a more unlucky time to start your gasoline-cap experiment," he said.

House Majority Leader Marcus Oshiro, D-39th (Wahiawa), said the unforeseen jump in prices on the Gulf Coast may illustrate a need to change the way the cap is calculated.

"We've given the PUC the authority and the responsibility to make those adjustments," he said. "To those critics, first of all, we don't know if the price cap is exclusively responsible for any increases in prices at the pump.

"We all know oil prices have shot up astonishingly, which no one could have predicted."

Gasoline prices over $3 a gallon are nothing new in Lihu'e, where retiree Gary Claunch said he recently bought 3.3 gallons of gasoline for $10.

"I don't see how we can do anything except put up with it," he said.

Claunch said he doesn't think the price cap will reduce prices.

"If anything, they should be putting a gas cap on the street value," he said.

Under the caps, the maximum wholesale price for regular on Kaua'i tomorrow will be $2.795 a gallon, including taxes. Yesterday, Kaua'i-based gasoline supplier Senter Petroleum Inc. said it will be unable to deliver gasoline to stations in Kalaheo and Princeville unless the PUC increases the amount wholesalers can charge to cover the cost of delivering gasoline to remote areas.

"We can't make anything" supplying Kaua'i stations under the price cap, said Roger Cable, general manager for Senter. "We have no margin left."

Cable said he petitioned the PUC late yesterday seeking an increase in the cap.

Kevin Katsura, a PUC spokes-man, said the agency, which received Senter's petition late yesterday, would review it in an expedited manner.

As of yesterday, there had been no other petitions filed, which could indicate that any immediate gasoline supply problems may be limited to Kaua'i.

Jeff Guest, owner of the Princeville station, said he expects Senter to top off his storage tanks Wednesday night. However, the station could run out of gasoline by mid-Friday, or sooner, without another gasoline delivery.

Reach Sean Hao at shao@honoluluadvertiser.com.