Rising Gas Prices

Picture of a gas pump

By: Jeff Todashi 

Gasoline prices are on the rise in Hawaii and are expected to continue rising throughout the remainder of the year.  We are not just feeling the pain at the pumps.  Grocery and electric bills are also rising.  These pains are also connected to rising gasoline prices.  Now is not the time have another heavy log laid onto the sustained pyre of pandemic economic burdens.  There are still nearly 60,000 Hawaii residents collecting unemployment.  This is three times Hawaii’s unemployment average.  Tourism is at about one-third its peak for this time of the year.  We are still not making enough money either for ourselves or for the state.  Revenues to run the government are down because not enough taxes can be collected.  What is driving up gas costs? 

Gasoline prices in the United States are primarily driven by four components: crude oil prices, refining costs, retail distribution and marketing costs, and taxes. Since taxes and retail distribution costs are generally stable, the two biggest factors in gasoline price trends are changes in oil prices and refining costs.  The largest determining factor of U.S. gasoline prices historically is the trend in crude oil prices, whose pandemic recovery rally has pushed up gasoline prices more than in previous years.   It was in November that crude oil prices started to rise following the first good news about vaccine candidates.  Most of the increase at the pump have been the result of rallying crude oil prices, the component with the highest weight in the way prices are calculated. Rising gasoline demand compared to the pandemic induced March and April lows of 2020 is also driving prices higher as more Americans travel with the warmer weather and vaccination rollouts.  

Another key component of the U.S. gasoline price—the cost of producing the fuel—is also at play this year, as it has been for most of the past two decades. The switch from winter to summer-grade gasoline drives gasoline prices higher. Summer gasoline is more expensive to produce than winter-grade fuel because of a longer production process and more costly blending components than the fuel sold in the winter.  Typically, prices are going up ahead of the refineries’ switch to summer-grade gasoline. In around 90 percent of past years, gasoline prices in America rose between January and May, with 2020 being an exception due to the pandemic and the collapse in crude oil prices led to significant declines in gasoline prices.  

Due to all the explained factors, the average price at the pump nationwide has climbed 46 cents just since November 20, 2021 – only a few weeks after Joe Biden’s election.  At the end of March 2021, U.S. gasoline prices had increased for 17 consecutive weeks—the longest streak of rising national average gasoline prices since 1994.  Here in Hawaii, the statewide average price for a gallon of regular gas is $3.75 – 50 cents more when compared to prices one year ago.   The average price for a gallon of regular gas in Honolulu is $3.65. This price increased four cents in the last week; represents a 20-cent increase since the end of March 2021; and is a 57 cents difference in Honolulu gas prices when compared to last year.    

Our own governments are to blame for the recent increases.  Joe Biden campaigned promising to rejoin the Paris Climate Accord and to roll back Trump era American oil production policies.  Biden’s victory gave gas companies an excuse to raise prices due to a forecasted decline in American petroleum production.  In Hawaii, state taxes are the amongst the two highest in the Union (California being the other).  Hawaii and Honolulu county already respectively tax a gallon of gas at 16 cents per gallon 16.5 cents per gallon in Honolulu.  The county tax is even higher on the other islands: 17 cents in Kauai, and 23 cents in Maui and on the Big Island.  Hawaii does not have a sales tax; instead, we have the General Excise Tax (GET), which is assessed on all business activities. The tax rate is 0.15 percent for Insurance Commission, 0.5 percent for Wholesaling, Manufacturing, Producing, Wholesale Services, and Use Tax on Imports for Resale, and 4 percent for all others.  The Oahu GET is slightly higher than the other islands due to the Honolulu Rapid Transit project.  Gas stations raise their prices to account for the GETs that they owe.    All the taxes, speculations, policies raise the price of gasoline and all other consumable goods.  These heavier burdens land squarely on the backs of lower- and middle-class Americans who are already struggling and frustrated with Coronavirus.