Hawai'i drivers could wake up to significantly higher pump prices today as the state's experiment with gasoline price controls enters its second week.

Under the law, which caps wholesale but not retail prices, wholesalers will be allowed to raise the price of regular gasoline statewide by about 28 cents from yesterday's level. That means that in Honolulu the wholesale price cap for regular rises from $2.76 a gallon to $3.04 a gallon, including taxes, today. At the retail level, prices could rise from about $2.88 a gallon to $3.16 a gallon, if wholesalers charge the maximum allowed by law and dealers maintain an estimated 12 cent per gallon margin.

The caps don't require wholesalers to price at the maximum allowed, but economists and oil industry analysts said it is likely they will to offset times when they are forced to lower prices.

"The government is giving the oil companies the green light" to charge the maximum, which is moving higher each week, said David Hackett, president of oil industry consultant Stillwater Associates. Stillwater produced a report critical of gasoline price caps.

The caps, which were passed by the Democrat-controlled Legislature last year, are expected to drive local prices up faster when Mainland prices rise, then force prices to fall faster than in the past, when prices changed more gradually.

This week's jump in the cap price is a result of a spike in Mainland wholesale prices in the wake of Hurricane Katrina. That cap is set once a week based on wholesale prices in Los Angeles, the Gulf Coast and New York. The wholesale cap is an average of those prices plus a margin to account for the costs of shipping, distributing and marketing gasoline in Hawai'i. The cap is adjusted each Monday based on prices from the previous two weeks.

"Of course, nobody intended this (rise in prices), but the road to hell is paved with good intentions," Hackett said.

Democrats who support the gas cap have said the goal was to make Hawai'i prices fair by linking them to Mainland prices. The cap means when Mainland prices fall, Hawai'i prices will also decline, the Democrats said, adding that given time the benefit of the cap will become clear. Before the cap existed, Hawai'i prices often remained high even though Mainland prices fell.

The timing of the start of the cap is unfortunate for supporters of the law. For the next two weeks at least, prices under the cap are likely to rise because of the drastic jump in Mainland prices.

Last week Gov. Linda Lingle wrote to Hawai'i's two refiners, Chevron Corp. and Tesoro Petroleum Corp., urging them not to charge the maximum wholesale price this week. Both companies declined to discuss where they will set prices.

Lingle, who opposes the caps and can suspend them, pointed out that the gasoline Chevron and Tesoro will sell next week was bought at pre-Katrina prices.

"My point in writing is that the gas they're going to be selling was refined from oil that they purchased long before this hurricane occurred and therefore I'm asking them to exercise some restraint," she said.

Lingle has said high gasoline prices alone would not provide enough legal justification to suspend the caps.

Reach Sean Hao at shao@honoluluadvertiser.com.