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Finding Out the True Cost of Doing Business

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By Lowell L. Kalapa

     Well, the politicos are at it again – find an issue and let them latch onto it in an election year – and politicians seem to have found one with the high cost of gasoline.  



…more than one-third of [the price of gasoline] is taxes imposed by federal, state and local governments.

  fuelnoz.gif     What better issue to jump on the bandwagon with than one that hits every consumer right in the pocketbook every time they fill up at the local gas station. With gas prices plummeting on the mainland, the word has reached Hawaii consumers that the price of crude oil has fallen, affecting prices on the mainland – but curiously not in the 50th State. So, now come the calls by elected officials that the industry should be investigated. Despite having been investigated as recently as 1994 when the attorney general found that the “greedy” oil companies weren’t making excessive profits, time and more taxpayer money will be spent investigating why the cost of gasoline is so much higher in Hawaii than on the mainland.

Well, there are some obvious costs that come to mind, not the least of which are the taxes imposed on this product. In addition to the 4% general excise tax (did you think gasoline escaped the onerous monster?), there are fuel taxes imposed by the state and county governments as well as that of the federal government. The state and county taxes combined range from 24.8¢ per gallon on the Big Island to 32.5¢ per gallon in the City & County of Honolulu. When federal taxes, superfund taxes imposed by the state and the general excise tax are added in, the total tax reaches a high of nearly 56¢ per gallon in Honolulu.

So, for example out of the $1.55 per gallon tab in Honolulu for the lowest grade of gasoline, more than one-third of that price is taxes imposed by federal, state and local governments. Out of the remaining dollar, there has to be refining costs, transportation costs, compliance costs, and just the cost of the crude oil right out of the ground. What many consumers don’t see is that cost of compliance.



…let’s not overlook what lawmakers are doing to increase that cost of gasoline.
       Because crude oil, gasoline, fuel oil and all those other types of petroleum products have such a nasty reputation for fouling up our environment, our thoughtful lawmakers have imposed a plethora of compliance costs on the businesses that deal in these products. There are permits galore and more often than not the agencies, such as the health department, drag their feet. One recent media report indicated that one of the two refiners in Hawaii filed for an air quality permit nearly three years ago and has yet to receive a decision one way or another. Since for many businesses time is indeed money, the delay in securing that permit will end up costing consumers more at the pump.

While the very image of every gas station in the islands having to buy their product from either of Hawaii’s two refiners of petroleum products conjures up visions of collusion and price-fixing, consumers should know that the prices those refiners charge have to be competitive with those charged by a mainland refiner plus the cost of shipping, because independent gas dealers can just as well order their product from a mainland supplier. Thus, to charge that the local refiners are ripping off the public is somewhat absurd, yet those very calls from politicians will have us taxpayers footing the bill for yet another investigation.

Whoa! Wait a minute, let’s not overlook what lawmakers are doing to increase that cost of gasoline. One measure currently making its way through the legislative maze is a bill that would increase the amount that would be collected for the environmental response fund. This is the nickel per barrel charge on every petroleum product where the maximum ceiling on how much can be tucked away is currently $7 million.

A bill under consideration would raise that ceiling to $20 million. That means that the nickel per barrel will continue to be collected beyond the $7 million mark. While that all sounds good to guard against oil spills, what does that mean to the economy, let alone to your pocket book? That $20 million that is taken out of the economy could go toward creating jobs, allowing consumers a little bit more in their pocket books, and more money to be spent on other necessities.

Before the politicians use more of our tax dollars to go on another wild goose chase, they may just want to look at how their own actions raise the price of gasoline and everything else we consume in Hawaii.

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