Electric bills down about 30% thanks to low gas prices - Hawaii News Now - KGMB and KHNL

Electric bills down about 30% thanks to low gas prices

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Carl Bonham Carl Bonham
Darren Pai Darren Pai
Nate Hagens Nate Hagens
HONOLULU (HawaiiNewsNow) -

U.S. oil prices on Wednesday dropped to about $28 a barrel -- the lowest price in 13 years. 

Right now, the price of crude costs less than the barrel itself. In just the last three weeks, prices have fallen more than 25 percent and experts believe it will keep crashing, if drillers keep pumping for an oversupplied market.

"Last year, demand for oil went up. Year before that, demand for oil went up. The reason oil prices have been falling is because of increases in supply,"
said Carl Bonham, executive director of the Economic Research Organization of the University of Hawaii and a professor of economics.

"We're the biggest oil importing state in the country. This is good news for Hawaii," said Bonham. 

Experts say Hawai'i consumes about 500 million gallons of oil a year. According to local economists, the decline in crude prices has meant close to a billion dollars in savings in the past year.

For the last several months, residents have enjoyed the benefits with lower prices at the pumps. In Spring 2014, the average price of a gallon of gas in Honolulu was about $4.40. It's now about $2.40.

But the biggest impact so far has been reflected in Hawaii's electric bills.

"When oil prices go down, that does have the benefit of lowering electricity rates. They've actually been going down pretty steadily over the last year as oil prices have fallen. Right now, they're the lowest they've been in five years," said Hawaiian Electric Company spokesman Darren Pai. 

Last January, an Oahu resident paid nearly 30 cents per kilowatt hour. This year, it's down to about 24 cents. Molokai residents had the highest kilowatt rate at 41 cents per hour, but that's been cut by 10 cents this year.

"It's always a good thing when our energy prices are low, but really in order to sustain this going forward for the long term, we really believe we
need to keep moving forward toward more renewable energy -- that's the way we're going to have long-term answers for our state's energy situation," said Pai. 

Energy experts say a long-term outlook is key to ensuring that Hawaii and the rest of the United States doesn't get blindsided when oil prices inevitably rise again -- just how much or when is anyone's guess. 

"We know oil prices are volatile. They've been as high as the hundred plus and now we're in the 20s so we know they can move a great deal, but most
analysts don't believe that we're going to see $100 a barrel oil prices again anytime in the near future," said Bonham. 

Energy experts say what adds to the market's instability is that there's a difference in the price (what we see at the pump) and the cost (what it takes energy companies to find and deliver crude).

They say countries like Saudi Arabia are selling oil for $30 a barrel, even though it cost them about $100 to produce.

"It's actually a crisis that doesn't look like a crisis because at $30 a barrel it's like, what's not to like about that? The issue is that it's not a permanent thing. It's a very temporary thing and it's an opportunity to use that cheap energy to do something of meaning," said Nate Hagens, director of the Bottleneck Foundation and board member of the Post Carbon Institute. 

In the meantime, experts say residents could continue to see the impacts of cheaper fuel with dropping prices for goods and services, including airfare.

"They're not going to change their flight prices every week based on where oil is, but I would guess that oil will cause plane tickets to get cheaper
in the next few months because of oil," said Hagen. 

Hawaiian Airlines sent Hawaii News Now the following statement regarding the recent drop in oil prices:

"A variety of factors influence airfares, but ultimately fares are a function of market supply and demand. The cost of providing service influences this equation, and fuel is an important piece of any airlines’ cost structure, but it is only one piece. As fuel prices skyrocketed over most of the last decade fares did not directly respond. We can’t comment on future pricing, but we have every incentive to provide competitive prices in any environment to attract demand. We do engage in some fuel hedging, which helps even out the peaks and valley of fuel prices. Over time, we pay market price for oil." 

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