The Oil Drum

The caps are based on a baseline price calculated from the five-day average of spot rates from three mainland markets: Los Angeles, New York harbor and the U.S. Gulf Coast.

The commission then adds on allowances for the cost of shipping to the state and for transporting gasoline from Oahu to more remote and less populated islands.

For example, under next week's cap wholesalers may not charge more than $2.3058 — about $2.86 including tax — for a gallon of regular unleaded gas in Hilo on the Big Island. Allowing for a retailer's markup, prices at the pump in Hilo could be close to $3 a gallon or more.

Federal, state, and county authorities each impose a fuel tax on wholesale gasoline. The state's excise tax is also imposed on gasoline at the wholesale and retail levels.

Frank Young, a member of Citizens Against Gasoline Price Gouging, said the price caps were pretty much in line with current market rates in the state.

"The purpose of the cap is so that we move with the rest of the country," he said.

I don't like the idea of a cap, but at least it seems they aren't being totally arbitrary about it.  Setting it every week they also have a lot of flexibility.  In other words, if the government is gonna muck with the market in this way (they do it in other ways all the time), at least they seem to have put a little thought into it.

Hopefully they've left themselves an out, if it backfires (like the lovely rolling blackout power plan in California) they should undo it in a big hurry.