Hawai'i drivers woke up to the highest gasoline prices in the nation again yesterday, despite a 12-cent-per-gallon, or nearly 4 percent, drop in taxes.

Statewide pump prices fell after a new general excise tax break meant to spur sales of ethanol-blended gasoline. Even with the tax break that took effect yesterday, drivers in Hawai'i were paying an average of $3.386 a gallon for self-serve regular, which was nearly 19 cents a gallon higher than any other state, according to the AAA Daily Fuel Gauge Report.

"I still think it's outrageous when you compare it to a few years ago," Kahala plumber Randy Weightman said as he pumped $3.289 a gallon mid-grade gasoline into his gold Toyota Corolla at Kahala Shell yesterday. Weightman saved 39 cents compared with what the same transaction would have cost Saturday, when the station's prices were 13 cents higher.

"It's a good thing, but I'm not sure why they're doing it," he said.

Yesterday's decline was the biggest one-day drop in retail prices since the state ended an experiment with gasoline price controls in May 2006.

"I noticed it immediately," said Rick Stanley, a stagehand from Kaimuki who bought $10 worth of $3.189-a-gallon gasoline yesterday. "Every little bit helps, but it's still not enough."

Elimination of the state's 4.712 percent in retail and wholesale general excise taxes lowers the total tax on gasoline sold on O'ahu to 52 cents a gallon. That drops Hawai'i from No. 2 to No. 6 on the list of states with the highest gasoline taxes, according to a survey by the American Petroleum Institute.

However, when lawmakers eliminated the general excise tax on gasoline, they opted to raise a separate state tax on fuels by a penny to 17 cents a gallon. That tax helps to pay for road repairs and construction.

For O'ahu drivers, the net tax difference yesterday was a decrease of 12 cents per gallon. Residents on Lana'i and Moloka'i, which typically pay the highest gasoline prices in the Islands, will actually pay a penny more in taxes under the changes. That's because neither island sells alcohol-blended gasoline, which is the only type of gasoline now exempt from excise taxes.

Not all drivers welcomed the drop. Paul Zarkowski, a psychologist visiting Hawai'i from Seattle, said higher taxes could be used to pay for better roads and to persuade more people to use public transportation. Eliminating the excise tax on gasoline will cost the state coffers an estimated $34 million in forgone tax revenues annually, according to the state.

"I think (taxes) should be higher," Zarkowski said after pumping 10 gallons into a silver Ford sport utility in Kahala yesterday. "I think to have gasoline artificially cheap is bad for the environment."

Hawai'i's historically high gasoline prices can be traced to numerous causes, including the state's small market size, geographic isolation and lack of Mainland-type competition.

High taxes also are a major factor. In breaking down the taxes, the most — 18.4 cents a gallon — goes to the federal government, while 17 cents goes to the state. County taxes vary and are 16.5 cents on O'ahu. An additional 0.1-cent-a-gallon tax for environmental response programs goes to pay for cleaning up oil spills, drinking water contamination and underground storage tank leakage.

Yesterday's pending price drop caused some consumers to hold off on pulling up to the pump earlier in the week.

"I just heard about it Thursday and I figured I'd wait to fill up," said Christian Guzman, a Kaimuki college student, who pumped nine gallons of mid-grade gasoline into a Red Acura yesterday.

However, in many instances, dealers had already dropped prices by late Saturday in anticipation of the tax break.

"We happily dropped prices," said Barney Robinson, who operates Chevron stations in Kahala and near Honolulu International Airport. Robinson cut regular prices at each station by 12 cents a gallon on Saturday. "Today is a good day for consumers."

Oil companies, which have criticized Hawai'i's high tax rates, applauded the tax cut.

"It's a good first step in the right direction," said Al Chee, a spokesman for Chevron Corp. "I'd like to think that this is a watershed moment — that there is a recognition that there's certain things that we can do."

Reach Sean Hao at shao@honoluluadvertiser.com.