O'ahu drivers could see gasoline prices drop to their lowest levels since August because of an expected decline in the Hawai'i's wholesale gas cap.

Calculations by The Advertiser show the cap will fall 9 cents on Monday, helped by declining wholesale prices on the Gulf Coast. That could result in prices at the pump falling to about $2.60 at some stations.

The state Public Utilities Commission is to announce this morning a new price cap that will take effect Monday. The cap doesn't regulate pump prices, though the retail prices generally have moved with the wholesale cap.

The decline will be the fourth consecutive week the cap has fallen, resulting in retail prices breaking below $3 a gallon and continuing to fall. Yesterday, Costco on Alakawa Street, often a price leader on O'ahu, sold regular for $2.59 a gallon, with other stations in Kalihi ranging from $2.67 to $2.99 at midday yesterday.

"It's a good thing," said Darryl Iha, 45, of Pearl City. "All these oil companies have been making profits, and now it's time to give back."

Iha said he is driving a six-cylinder Dodge Caravan less and a four-cylinder Mazda sedan more to cope with higher gasoline prices this year. He tracks the cap announcements to formulate a gas-buying strategy for the coming week. If the cap is cut, Iha will wait to buy until Tuesday, knowing that it usually takes a day or two for stations to adjust their prices.

Hawai'i's wholesale cap is the only one in the nation and took effect Sept. 1 as a way to link the state's prices with those on the Mainland. Cap proponents say Hawai'i's gasoline prices rarely dropped the way they do elsewhere in the U.S., and that recent cuts show the law is working.

The state still has the nation's highest gasoline prices, according to the AAA's Daily Fuel Gauge. A gallon of regular sold for an average of $2.997 on Monday night in Hawai'i, or about 24 percent more than a year earlier.

Nationally, the average price for a gallon of regular was about 20 percent higher than a year before at $2.483, AAA reported.

During the past three weeks, the cap has fallen 74 cents a gallon. Critics have said prices are coming down from levels that wouldn't have been reached if Hawai'i's gas prices weren't tied to markets directly affected by hurricanes Katrina and Rita.

"Hawai'i remains in the No. 1 price position," said Melissa Pavlicek, spokeswoman for the Western States Petroleum Association, which represents Chevron Corp., Tesoro Corp. and other oil companies in Hawai'i. She contends the state needs to address other reasons why prices are high here, including high taxes and regulations.

The cap, which limits the amount wholesalers can charge, is based on the average prices in New York, the Gulf Coast and Los Angeles. The Advertiser calculation of next week's price cap is based on data from Bloomberg News Service while the state uses figures supplied by the Oil Price Information Service.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.