Trump’s war on Iran is about to show up on your Electric Bill

Islanders are already suffering at the pump as the US and Israel continue their war with Iran, but when it comes to their electricity bills there will be a slightly slower response.

Despite efforts to transition to 100% renewable energy in the future, Hawaiʻi remains the most oil-dependent state, relying on fossil fuels to generate nearly three-quarters of its electricity. With world oil prices rising due to the complete closure of the Strait of Hormuz, it was only a matter of time before those costs were passed on to island taxpayers.

Jim Kelly, spokesman for Hawaiian Electric Co. – which supplies electricity to most of the state – said rates are expected to increase by 20-30% starting this month on O’ahu, then in May and June for neighboring islands.

While consumer gas prices rose immediately after the war began, Kelly said, there is usually 60 days between the time Hawaii Electric purchases the fuel oil and when those costs appear on ratepayers’ bills. He said how long the higher tariffs last will depend on the length of the war and its continued impact on world markets.

“We pass all the fuel costs on to the customer, which means we don’t use any kind of fuel savings,” Kelly said. People have a lot going on in their lives, and I know this is not what they want to deal with.

The last time geopolitics had this kind of effect on electricity tariffs on the islands was in 2022 after Russia invaded Ukraine. But that increase – which ranged from 10-20% – slowed down significantly over the course of several months, Kelly said, while the rate of ratepayers is dropping very rapidly during this period.

“The scale is comparable,” Kelly said. “The opposite is the suddenness.”

Kelly said that the whole situation, especially related to electricity, emphasizes the need to continue investing in renewable energy because it can eliminate the uncertainty caused by dependence on foreign fuels.

“The whole idea of ​​getting renewable projects online is not just about the price we pay, it’s also about sustainability,” he said.

In Kauaʻi, where renewables make up a larger share of the energy sector, ratepayers should not be too alarmed. Beth Amaro, a spokeswoman for the Kauaʻi Island Utility Cooperative, said in an email that rates are expected to increase in April from $0.38 to $0.43 per kilowatt hour, which equates to about a 13% increase. He said for the average customer, this would result in an additional $25 per month.

“Fortunately, 50% of KIUC’s energy is produced from renewable sources that are not affected by global oil prices,” Amaro said. “This protects our members from these spikes and will be even more effective as we move towards 100% renewable generation.

An Unforeseen Accident

Although none of Hawaiʻi’s oil imports come through the Strait of Hormuz, the islands remain subject to ongoing world market pressures related to the Iran conflict.

Eric Wright is the president of Par Hawaii, which operates the only oil refinery in the country, and is the only supplier of crude oil to the islands. He said that Hawaiʻi’s fuel supply is stable for the near term, but he expects prices to remain high for the foreseeable future, although it can be difficult to predict given the constant changes in the market.

“The market is very dynamic and things happen every hour,” Wright said. “And I don’t like to predict because who would have said this?”

One of the islands’ main risks has been jet fuel, he said, because Par can produce about half of its government and military supplies at its refinery from the oil it imports. The rest is shipped in, mostly from South Korea. But as global supplies tighten, countries across Asia that depend on oil coming through the Strait of Hormuz, including South Korea, have implemented export controls aimed at keeping some of the precious fuel closer to home.

Jet fuel prices have doubled since last month, according to the International Air Transport Association, and airlines have accepted that they will have to pass those costs on to customers.

At the expense of the rise in refined fuel, Alaska and Hawaiian Airlines are trying to reduce the impact on passengers, according to the spokesman Alex DaSilva, raising the fees “about 10%” to account for the increase in the price of fuel.

“This offer is available on our network, including fares to and from Hawaii,” he said.

The prospect of flights being canceled and residents unable to travel between the islands due to a lack of jet fuel was a “totally unacceptable outcome,” Wright said, so Par began pushing for the limited Jones Act to bring in fuel from the United States.

The Jones Act is a century-old maritime law that requires cargo shipped between US ports to be loaded on US ships. But its critics, including economists and politicians, such as US Rep. Ed Case, have argued that its restrictions hinder domestic trade and lead to higher prices. Par also has fewer options to bring in jet fuel from the mainland, Wright said, because there aren’t many Jones Act-compliant tankers.

Par ultimately did not require a special waiver, however, because President Donald Trump granted his 60-day vacation from the law in order to lower prices.

Trump’s withdrawal effectively solved the jet fuel crisis, Wright said, at least for now. Without it, he said, he’s not sure what would have happened.

He said: “I don’t know exactly what it would have been like, but we would have done everything we could kick and scratch to get jet fuel and make sure the country doesn’t run out because that’s our job.”

As for what’s to come, Wright said he sees higher prices continuing for the next few months even if the war ends tomorrow.

“I can’t predict the future,” he said, “but it sounds like this isn’t something that’s going to be solved overnight. You’ve got all these ships docked in the Middle East, idle oil production and rigs going on, so I think we’re going to see higher prices for a few months.”