OK, so you didn't like the gas cap. How thrilled are you now, with prices stuck at $3.25 a gallon?

According to Advertiser calculations, Honolulu drivers would be paying $3 a gallon for regular gasoline this week were the price cap still in effect.

Instead the average price for gasoline in Honolulu was about $3.25 yesterday, within a few cents of where it was on May 5 when the gas cap was suspended.

With the cap no longer controlling the market, Hawai'i prices have returned to their pre-cap pattern of remaining high and stable compared with Mainland prices.

The average price for regular on O'ahu has moved within a 7-cent range since early May — between about $3.25 and $3.32 a gallon, according to the AAA Daily Fuel Gauge Report. Meanwhile, the U.S. average has ranged between $2.85 and $3 a gallon during the same time.

Had the cap been allowed to remain in effect, Honolulu gasoline prices likely would have been lower during most of this past summer. The cap, which limited wholesale prices and was adjusted each Monday, would have dropped by 24 cents this past Monday and about 9 cents next Monday.

After a cease-fire in Lebanon was announced this month, oil prices fell and the average retail price for regular on the Mainland dropped by 8 cents a gallon. Prices in Hawai'i have barely budged since the cease-fire.

"I don't think anybody can tell us exactly what the problem is," said state Rep. Kirk Caldwell, D-24th (Manoa), who pushed to end the caps. "Yet something is not working right because our prices aren't as sensitive as prices are on the Mainland."

Caldwell said the state needs to gather more information about how oil is bought, refined and distributed before taking any further action.

"I thought (the cap) was trying to solve a problem before you have all the facts," he said.

The law that suspended the cap also called for more oversight and monitoring of the state's oil industry. Oil companies now are supposed to disclose crude oil costs and sources, refinery operating expenses, marketing and distribution expenses, and corporate overhead expenses. However, the state does not expect to begin collecting such data until next year.

CONSUMERS SPLIT

Meanwhile, Hawai'i consumers are split on whether they want the gas cap back.

"I'd like to see them revisit the idea," said Mike Bilby, a finance director living in Mililani. "I was initially dead-set against it, but I think it did what it was supposed to do and I think it was cut off way too early."

Other drivers, such as Lloyd Ignacio of Kailua, don't want to see the cap return.

"It's an artificial way of setting prices and if prices are set artificially, down the road something else will go wrong," Ignacio said, adding that the cap could eventually cause oil companies to leave Hawai'i, jeopardizing jobs and gasoline supplies.

The cap, which took effect Sept. 1, 2005, was a victim of bad timing then, and that continues to be the case.

The lawmakers who supported the cap, most of them Democrats, hoped it would win popular approval by making Hawai'i's traditionally high gasoline prices move in line with those on the Mainland.

However, the cap took effect just when Hurricane Katrina struck the Gulf Coast and gasoline prices on the Mainland soared to new highs. The cap, which was tied in part to Gulf prices, assured that Hawai'i prices spiked along with those on the Mainland.

PRICE SWINGS HURT

Weekly swings in prices and concerns that the cap was causing high pump prices ultimately helped turn public sentiment against the price ceiling. A March poll by OmniTrak Group Inc. found that 68 percent of 700 Hawai'i adults surveyed said the gas cap was not working for consumers.

Lawmakers, fearful that the cap could hurt their re-election chances, suspended the price controls.

The cap was killed at a time when it would have pushed pump prices down.

State lawmakers created the price cap law amid concerns that the oil industry earned excessive profits, which resulted in high gasoline prices. Oil companies have said the high prices in Hawai'i, which usually top the nation, are due to high taxes, geographic isolation, lack of wholesale competition and a relatively small market.

Price caps "don't address the real reasons prices are high" such as taxes and government regulations, said Melissa Pavlicek, a spokeswoman for the Western States Petroleum Association, which represents ChevronTexaco, Shell Oil and Tesoro Petroleum. "We should be looking at some of the root causes prices are higher, rather than putting in an arbitrary cap."

WAS PUBLIC BETTER OFF?

While the cap was in place, it was difficult to determine whether consumers were better off. That's because it was impossible to tell what prices would have been without it. Proponents argued the cap lowered prices while critics contended it resulted in higher prices by giving oil companies an incentive to charge the maximum prices allowed by law.

The cap also caused large weekly price swings. Those fluctuations didn't sit well with some consumers, said David Hackett, president of Stillwater Associates of Irvine, Calif., an oil industry consultant.

Under the cap "prices rose faster than they would otherwise and they fell faster than they would otherwise," Hackett said. "Consumers don't like volatility. I don't know any consumers that are happy when prices are going up and down all the time."

WHOLESALE LIMIT

The cap that was suspended limited only the price of gasoline at the wholesale level and left retailers free to set their own prices. The wholesale price cap was based on an average of wholesale prices in three Mainland markets — New York, Los Angeles and the Gulf Coast. Wholesale prices in those markets have fallen this month.

The Advertiser's cap estimates assume that retailers make a 15-cent a gallon margin and wholesalers charge the highest price allowed under the cap.

The Advertiser calculations do not take into account an increase in the cap to account for the added costs of blending gasoline with ethanol. The cap was suspended before that increase was implemented.

The ethanol factor would have increased this week's cap by about 2 cents a gallon. Even with the small increase, prices under the cap would still have been lower than actual prices for most of the summer.

While regular averaged $3.25 a gallon in Honolulu yesterday, some retailers sold it for much less, signalling there may be room for others to drop their prices. Costco was charging $2.999 at its pumps in Iwilei yesterday.

Reach Sean Hao at shao@honoluluadvertiser.com.