Hawai'i drivers got some relief from high gasoline costs yesterday with pump prices falling as much as 30 cents at some stations.

Supporters of the state's new gasoline price-cap law were relieved that rates retreated from last week's record highs of around $3.70 a gallon for regular on O'ahu.

"Last week was an aberration," said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the price-cap law. "I believe that a significant hurdle has been overcome because the last week has been a very difficult one."

The high prices last week were a result of shortages related to Hurricane Katrina. Hawai'i's price cap, which took effect Sept. 1, ties wholesale prices to those on the Mainland. The law was adopted by the Democrat-dominated Legislature frustrated with watching Hawai'i routinely post the highest gasoline prices in the nation.

The state sets the upper limit on wholesale gasoline prices each week, and this week's limit is 50 cents below the previous week.

Prices could rise slightly next week as concerns about a new tropical storm possibly entering the Gulf of Mexico drove Mainland wholesale gasoline prices up as much as 30 cents a gallon yesterday.

Still a repeat of last week's high prices is remote, which means price caps will remain in place for the foreseeable future, said Menor.

Gov. Linda Lingle can suspend the price caps under certain circumstances. Lingle has said she would only suspend the law if it has an adverse impact on the economy, public health, or the welfare and safety of the state's residents. Given that a one-week price increase of 50 cents did not lead to the governor suspending the law, Menor said he expects it will survive for several months.

"That bodes well for the continued implementation of the gasoline price-cap law," Menor said.

NEW STORM, NEW THREAT

The law forces Hawai'i prices to move up and down in correlation with Mainland prices. That means that Mainland refinery failures and storms will have a much more pronounced effect on Hawai'i pump prices than in the past.

That's what happened in the wake of Hurricane Katrina and it could happen again if Tropical Storm Rita damages oil operations in the Gulf of Mexico. Rita, which was near the Bahamas yesterday, may become a hurricane and approach the Texas coast this weekend.

"Rita is expected to pass over the Florida Keys, strengthen in the warm air of the Gulf and head for Houston," said David Hackett, president of oil industry consultant Stillwater Associates. "Everybody is nervous. Katrina did a hell of a lot of damage."

Hawai'i's price caps are set each 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 a five-day period, spanning the previous two weeks.

'PINGPONG EFFECT'

Despite a spike in wholesale prices in oil markets yesterday, the average wholesale price for regular in Los Angeles, the Gulf Coast and New York since last Tuesday was $2.03 a gallon, which would translate into a wholesale cap on O'ahu of $2.92 a gallon next week, including taxes. That's 8 cents lower than this week's wholesale price cap. However, next week's price cap won't be finalized until the markets close today.

Critics of the caps claim that last week's spike in prices wouldn't have been as severe without the cap, which encourages oil companies to charge the highest prices allowed by law to offset periods when they're forced to sell gasoline at low prices.

"Prices may have gone up, and probably would have gone up" without the caps, said Bob Swartz, who Sunday cut the price of regular at his Chevron stations in Kalihi, Kane'ohe and Kailua by 32 cents to $3.179 a gallon. "However, we wouldn't have had this pingpong effect.

"Prices would not have gone up 70 cents a gallon in two weeks, then dropped 50 cents a gallon in one week."

Reach Sean Hao at shao@honoluluadvertiser.com.