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Gasoline Prices and Maui's Future

February 26, 2012 - Ray Tsuchiyama

February news have been a sudden return to the recent past of high gasoline prices: the U.S. national average for gasoline prices jumped by nearly 12 cents per gallon in a week, with state averages above $4 per gallon in Alaska, California and Hawai'i. Gas prices in Hawai'i rose by an average of 3 cents statewide this week to $4.24 for a gallon of regular unleaded. According to the American Automobile Association Hawai'i office, that figure is 17 cents higher than it was a month ago, and makes Hawai'i still the most expensive place in the entire 50 states for gas.

Based on AAA data, the average price of a gallon of regular unleaded in Honolulu this week was $4.13, which was 4 cents higher than a week ago, 23 cents higher than a month ago and 50 cents higher than this time last year. On the Big Island, the average price for a gallon of regular unleaded in Hilo was $4.45, which was 4 cents higher than last week, 19 cents more than a month ago and 71 cents more than a year ago.

As gasoline on Maui tops $4.50 per gallon, Mauians do what Mauians (or anybody else) do – try to tank-up as quickly as possible, so one can say “I put in gas Before the price increase.” But nobody can predict the future of gas prices (oil futures dealers do make bets, some going for higher prices, others lower on news from Iran or Middle East). In Hawai’i of summer 2008, there was a huge spike to – you guessed it -- $4.50 per gallon. By early 2009 the price dropped like a stone to <$2.30 per gallon, and everybody forgot about high prices again. A new Associated Press-GfK poll revealed that 7 in 10 Americans find higher gas prices a “deeply important” issue – who doesn’t think so?

The sad and frustrating statistics about oil and gasoline has not changed over the decades – which is sad and frustrating, given that we have had decades to explore and do other things that would have curtailed oil and gasoline usage.

Among all the nations on planet Earth, the U.S. with over 310 million well-fed citizens is the biggest consumer of oil at over 19.5 million barrels a day. Even though U.S. domestic oil production grew to >9 million barrels a day this year (Alaska, Texas, Gulf Coast -- yet maturing fields will yield lower oil output next year and years following), there is still a big gap no matter how you slice it – hence the enormous daily oil imports from Saudi Arabia, Kuwait etc. Since 1973 generous Americans have spent more than $14 trillion on imported oil, an amount just $1 trillion less than the current $15.5 trillion total U.S. National Debt – money that could have gone into education, health, housing, agriculture, roads, and elderly care.

In 1950 there were 150 million Americans, so in 60 years the U.S. doubled its gas-hungry population. At over 1.1 billion people, the People’s Republic of China is at second in terms of oil consumption at 9 million barrels a day; every day thousands of cars are bought by middle-class Chinese in Beijing, Shanghai, Guangdong -- and this figure – only half of the current U.S. oil consumption number – will increase dramatically in the future.

The argument that Americans/Mauians are entitled to cheap gas to fill-up cars and SUVs to fulfil lifestyles developed over generations – for taking ice coolers and hibachis to Kamaole Beach III, hauling 20 cases of Spam and Bud Lite from Costco’s, or driving 25 miles round-trip to the Kahului IHOP just for pancakes – historical “entitlement” (as superior Americans?) is not a logical argument to Chinese who are just buying their first car today and want to finally take off with grandparents for a ride into the Gobi Desert, and need gas -- and now have the yuan to pay for it.

No. 3 in daily oil consumption is Japan at 4.3 million barrels (125 million relatively wealthy people compared to China, and a non-growing population). India and Russia are both at about 3 million barrels a day, and India – with 900 million people – is also experiencing a car “boom” (Tata Motors has developed a “Nano”-brand gas-engine car, at a $2,000 price tag).

Other facts about Hawai’i oil have not changed over the last few years, as well. Hawai’i with slightly over 1 million residents and tourists is not California, with a population of nearly 40 million, so the Islands have a much smaller car population base (one rule of thumb is the car population more-or-less equals the number of working adults in the population, so maybe 100,000 cars on Maui out of 155,000 citizens, plus fleets of rental cars?).

There are still only two refineries for Hawai’i – and for every barrel of oil imported into Hawai’i (a mix from South Asian and Middle Eastern sources like Saudi Arabia, Kuwait and Indonesia, so the Fiftieth State in terms of the oil market resembles a far extension of the Philippines to being part of the Mainland U.S., which has access to domestic oil), the breakdown is about >60% for transportation-related usage (including 28% for aviation fuel, necessary for jet planes to re-fuel to return to Japan and Mainland, plus gasoline and diesel) and >30% for burning oil for electricity. Yes, for powering your HD SONY plasma TV to watch “Housewives of Orange County” or re-charging Electric Vehicles or to operate incubators for sick babies, oil must be fired up and electricity flowing to your house or business.

Finally, the ultimate gas price has to factor in the cost of doing business in Hawai’i. For example, think about land costs for building a gas station in downtown Honolulu or (ironically) the price of electricity to power the pumps or lights in the gas station office, or the medical/Workmen’s Comp for the gas station workers (no wonder there are fewer full-service stations in Hawai’i). Taxes also come into play – in the U.S. government taxes account for about a sixth of the gas price. In Canada, about 30% of the price is tax, and in most of Western Europe, where gasoline costs from $7 - $9+ a gallon, fuel taxes alone account for nearly the price of a gallon of gas.

However, in most Western European countries, there are excellent public transportation systems – except in Great Britain. I could get around easily in Amsterdam or Paris or Munich, but had a terrible 19th century experience in the London subway system. Fuel taxes are compared to cigarette taxes – trying to get people to stop their bad habits and walk /take public transportation – yet on Maui, the public bus system appeared only a few years ago (recently, on a bus ride to Kahului, there were quite a few riding the bus, and anecdotally, bus ridership has grown on Maui).

I spent 20 years in Tokyo, with one of the world’s best public transportation systems (the stationmaster actually apologizes when the train is 3 minutes late). I could set my watch by the Bullet-Train (Shinkansen) from Tokyo to Osaka (the newer trains make the one-way route in exactly 1.5 hours).

We had a car, yet drove only on weekends, and filled up about twice a month for around $150 total gas costs/month. Gasoline at a Tokyo service station was about $7 - $8 a gallon (in “metric” countries, like Japan and Western Europe, gasoline is sold by the liter; Canada used to go by the imperial gallon and now is also metric/liter for gasoline). We took subways or trains almost everywhere (unlike on Maui, I never drove to work). Of course, smaller cars predominated in Japan, with less taxes and registration fees for “ultra-compact” vehicles, so there is an incentive to buy more fuel-efficient cars. And Norwegians, Danes, French, Italians, Dutch, Belgians, British, and Japanese do not riot every day over gasoline at even $9 a gallon – they do drive smaller cars, drive less, walk, and take public transportation as much as possible – the high prices have been around for many years and people have adjusted their work/lifestyles.

What is the gas price trigger “number” for Mauians to really take drastic measures about their cars, gas mileage or put down a deposit for an Electric Vehicle? One friend in the auto tech industry said the number was “8 dollars a gallon” – people will adjust, scrimp, and not spend on other things at $5 or $6 or even $7 a gallon. Even at $200 a month for gas fill-ups for a compact car, people feel a tremendous bite at the end of each month, paying also for the MECO bill, cable TV, credit card balances, car loan payment, mortgage, food, children’s new jeans, a trip to Honolulu to visit one’s aged parents at Kuakini Hospital.

Taking a not-that-unusual example, say a Kula family of five owns a large-model, four-year old SUV with a gas tank of approximately 30 gallons. If the owner fills up the SUV 3 times a month, that means 90 gallons x $8 = $720 a month, or $8,620 per year. You could – again ironically – buy a good 2008 used car for that amount of money.

Will Mauians march to demand lower gas prices (nobody ever demonstrates for “better public transportation”)? In some countries, governments enact subsidies, so low-income citizens are not hit by high gas prices – whenever governments try to raise prices, like in Nigeria last year, people rioted and the low, subsidized prices remained the same (this evokes the AP survey on Americans’ feelings on gasoline prices at the beginning of this blog post).

So gas prices are no longer just a fuel issue – it becomes a political/social order issue. Should the government jump into the gasoline distribution business, so lower-income Mauians can buy subsidized gas at a lower price? (Does the government implement a “special price” pump at any gas station for Mauians accepted in the program? Who sets that special low price? What is the cut-off for income? What is used for proving income? US Tax Returns? What if people moved from Oahu or Big Island to Maui to take advantage of lower gas pricing -- exacerbating the jobs market? Would tourists accept higher gasoline pricing just for them, and another price for Mauians?)

Other countries, like Venezuela, an oil producer, just wants its people to like the government a lot – gasoline costs ten cents a gallon in Venezuela (that’s right, cheaper than imported mineral water, like Evian) – this is below fifty cents a gallon in Saudi Arabia. But cheap gas in a country headed by a mercurial leader like President Chavez may be a vastly preferable alternative to mass protests, general strikes, attacks on government and police offices. This is called "Buying Loyalty", and whatever one thinks about Mr. Chavez, he has keen insights to human nature, since higher and higher gasoline prices shall create a horrible spring into summer economic and political crisis for President Obama, and if unresolved by fall, may be a factor for a Republican comeback.

Historically, transportation planning was integrated in housing/commercial development in Japan, so there were first train stations built in the middle of large empty areas, then housing, then shops/offices around the train station, then a mall – an eventual build-out where one did not need a car (apartment rentals or home listings have numbers denoting how many minutes walking or via bicycle to the train station).

The car was the key to different lifestyles on Maui – higher incomes and the car liberated the plantation worker and his family from a close-knit community (for some families, “too close”) to the “Dream City” suburbs of Kahului, and Up-Country cooler living.*

Other Mauians wanted the option to live in tropical Haiku and not be bothered by neighbors, and just drive quickly in-and-out of Wailuku for business. And so demographics/communities -- and society -- changed throughout the Island based on the car . . . and cheap gas.

*My uncles and father were car-obsessed in the 1930s – my father even departing Maui for Detroit to study about cars (design, mechanics). My uncle B. worked for many years for Kahului Trucking and knew more about diesel engines than anybody else on Maui. As a hobby he bought old Ford trucks and refurbished them, including the entire engine block in his Wailuku garage – a Maui version of the TV “Pimp My Ride” program. I learned much from him about the internal combustion engine -- a technology paradigm from the late 1880s around the time of the Bayonet Constitution that stripped power from King Kalakaua.

Note: In a later blog post I shall delve deeper in transportation planning, and historical mass transit on Maui – the dream of Thomas Hobron and his Kahului Railroad and my father’s experiences boarding a sugar train every morning to his beloved Maui High in Hamakuapoko in pre-War Maui – a vision of a “What If . . .”


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