One of the key questions surrounding Hawai'i's law capping wholesale gasoline prices as it took effect Sept. 1 was whether gas stations would pass along any drop in prices to consumers.

The gas cap limits only wholesale prices. Gas stations are free to set retail prices wherever they like.

Five weeks after the law took effect retail prices have risen quickly when wholesale prices rise, but appear to have fallen more slowly when wholesale prices have dropped.

The average retail price of regular gasoline Thursday in Honolulu was $3.19 a gallon — a nearly 34 cent increase since Aug. 31, according to the AAA Daily Fuel Gauge Report.

Meanwhile, the maximum wholesale price rose only 16 cents a gallon in the same time.

House Majority Leader Marcus Oshiro, D-39th (Wahiawa), said the disparity between the rise in the wholesale cap versus an even bigger rise in retail prices deserves closer examination.

"I think that might give reason for the attorney general, or at least the consumer protector, to investigate whether there's profiteering going on here," he said.

The wholesale price cap law originally included a cap on retail prices, but that was abandoned amid complaints from dealers. The architects of the gas cap hoped that with wholesale prices capped, competition between dealers would drive down prices.

In general, stations that had lower prices before the caps such as Costco, Lex Brodie's and Aloha still have relatively low prices, when compared with major brands such as Shell and Chevron. However, in recent weeks retail prices between neighboring stations have varied as much as 30 or 40 cents a gallon. Industry observers said the disparate prices are a reflection of differences in strategies, costs and competition around O'ahu.

"The net result is you have all kinds of prices," said Bill Green, a former owner and now consultant to the Kahala Shell station. "Some (stations) are real high. Some are real low."

Such big price differences persuaded many drivers to be more savvy about where and when they buy gasoline.

"I think that people are shopping around and are responding to the marketplace," Oshiro said. "It benefits the consumer and it benefits those stations that change their business practices."

Others disagree. Searching for relatively low-priced gasoline puts consumers in a losing position, said Bank of Hawaii economist Paul Brewbaker.

"We were the highest in the nation before (the caps) and we have the highest prices now," he said. "Only, now people have to drive around looking for the lowest priced gasoline. This is not reflective of an improvement in social welfare."

So far, retail prices may have been slow to drop because of times when stations were stuck selling gasoline purchased during a prior week when wholesale prices were higher, said Jack Suyderhoud, a business economics professor at the University of Hawai'i-Manoa.

Also included in the price cap law is a provision that caps the rent that oil companies can charge their dealer-owned stations. As a result rent at some stations rose, but fell at other locations, according to Chevron Corp.

In addition, station owners may be increasing their margins to offset potential losses because of volatile swings in wholesale gasoline prices. The wholesale cap, excluding taxes, has gone from as low as $2.16 on Sept. 1 to as high as $2.87 on Sept 12.

Bob Swartz, who operates Chevron stations in Kalihi, Ka-ne'ohe and Kailua, said there's no question that prices are falling more slowly than they rise. However, he denied the industry was gouging consumers. Volatile gasoline prices create uncertainty and an interest in keeping prices high as do higher rents, Swartz said.

Pump prices also depend on a station's sales volume, costs and what the competition does.

"The retail price is based on what the guy is doing across the street," Swartz said. "So if the guy across the street doesn't go down, I don't have to. If he goes down, I have to go down."

The gasoline station price gap also reflects differing strategies with some stations keeping prices high but stable, as opposed to hiking and slashing prices week to week.

"The guy who went down all the way (one week) will have to go up all the way" the next week, Swartz said. "The guy who didn't go down all the way will not have to go up all the way."

"We're in a new ball game. The marketplace is still trying to figure out how to level out this whole 'buy (gasoline)' one week, 'don't buy' the next" week, Swartz said.

Bank of Hawaii's Brewbaker said it's still too early to assess the impact of Hawai'i's gasoline price cap law. That's because oil companies and consumers are still trying to figure out how to survive in an environment where gasoline prices are regulated.

"There's a big cloud of dust and it's not settling," he said. "The rules of the game are changing every week. So this kind of disparity is not surprising."

Reach Sean Hao at shao@honoluluadvertiser.com.