Rising gas prices are causing increased concern for many residents. “We’re at the mercy of large oil companies. We need to diversify to move into the future.”The national average price of gasoline hit $3.61 a gallon as reported by the American Automobile Association’s (AAA) Daily Fuel Gauge Report on Wednesday, May 7. But prices on Maui were as high as $4.21 that day, leading many residents to wonder why prices are so high on the Valley Isle.
One concern is how well gas pumps are able to function. The Maui News reported that a common defect involves a check valve that is supposed to open as soon as the meter begins running and close when the meter stops. If it doesn’t properly open when it should, the customer gets charged more than was pumped. And although the state Department of Agriculture is responsible for checking pumps and other commercial measuring devices, it hasn’t done so regularly on Maui since 2004.
“People [gas station retailers] can make a living on this island, whereas on other islands, they cannot,” said Terry McBarnet, co-owner of Maui Oil Company.
Gas prices on Maui are high because it’s not a competitive market, he said. Maui doesn’t have competitive pressure so, the market is determined by the aggression of the retailers. He said small retailers on Maui can get loans from banks to buy retail gas stations, but are unable to do the same on O‘ahu because there is more competitive pressure to keep prices lower, making it challenging to obtain profits in the retail business of selling gas. Because profits are challenging to realize in gas refinery and retail, “all of the majors, like Tesoro, want to get out of retail,” said McBarnet.
“We’re at the mercy of large oil companies,” said McBarnet, whose company buys fuel from major companies like Chevron. Major oil profits are being attained by businesses that extract oil from the ground.
“In 1999, a barrel cost around $20-ish. In August of last year, oil cost $70 a barrel,” said McBarnet. This year in the first quarter, the cost of one barrel of oil was $90, and on Wednesday, May 7, the cost was $124 in an era of seemingly ever-increasing gas prices.
“The facts are that the U.S. does not have an energy policy,” said McBarnet, who believes that a lack of a nationwide policy and an organized structure, oil extraction companies in places like Venezuela and Saudi Arabia are not threatened by U.S. buyers.
Rising oil prices not only impact vehicle drivers, but also food production, airline travel and residential utility costs. The Honolulu Weekly reported that Hawai‘i relies on oil to import 80 percent of its food from the Mainland. Because the Mainland has greater economies of scale (cost advantages associated with large-scale production), it is cheaper for Hawai‘i to ship in food than to grow it locally. Therefore, high oil prices disproportionately hurt Maui, being dependent on oil for both food and transportation.
Corn and ethanol production is another factor affecting food costs. Corn growers are more likely to sell their corn for ethanol production because it earns more money than food production, according to The Honolulu Weekly. McBarnet said that first generation ethanol production utilizes food products, whereas second generation technologies only use waste items to produce energy. But this is years away, he said. If corn growers are more inclined to sell their corn for ethanol production, the supply of corn for food production will decrease, driving up the cost of both corn and food, compounded on Maui by the cost of shipping.
High oil prices are also affecting air travel. The Maui News reported on Thursday, May 1, that Hawaiian Airlines will increase interisland passenger fares to keep up with rocketing fuel costs. It was reported that an additional $5 would be charged on longer flights between Honolulu and Hilo and Kona to help cover fuel costs. With the recent shutdown of Aloha and ATA Airlines, travelers within islands will take on higher traveling costs due to increasing oil prices and costs caused by a lack of competition between airlines.
High oil costs are sweeping the state and affecting electric bills as well. The Honolulu Advertiser reported that average residential electric bills for the state have risen from $148.70 in January to $162.37 in April.
The cost of driving, eating, flying and lighting our homes are all affected by our dependency on oil. As the price per barrel increases, the cost of living increases. And without competitive pressures to keep prices down, Mauians are taking on an ever-increasing burden.
We, as an island, may not be able to change current oil prices in Saudi Arabia or Venezuela, but there are other options—as McBarnet stated: “We need to diversify to move into the future.”