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HONOLULU — Warren Higa is prepared to walk away from the Shell station he has run in Makiki for the past 22 years. 

Shell is asking for a monthly lease that would reach $19,000 after two years, more than twice what Higa pays now. Shell is also asking that Higa sign a personal guarantee for the lease. If Higa were to walk away from the station before the three-year lease expires, Shell could go after his personal property, such as his home, to collect any amount owed on the lease. 

“That’s a real dealbreaker,” Higa said. “It works totally in favor of the oil company and totally against the dealer.” 

A Shell Oil Co. spokesman could not be reached for comment. 

Despite the passage of a 1997 state law that was supposed to protect Hawaii’s gasoline dealers from being replaced by stations run by oil companies, approximately 30 dealers have gone under since, according to the Hawaii Automotive Repair and Gasoline Dealers Association. 

There are various reasons for the decline. For example, Shell scarcely used company-operated stations before a 1998 joint venture with Texaco. 

But some local dealers blame loopholes in the state law, as well as a lawsuit over a portion of the law that restricts the amount the oil companies can charge to dealers for rent. 

Under the law, Higa estimates his rent should be about $14,000. The Shell lease gives him a choice of paying the capped amount of rent. However, if the state loses the lawsuit over the rent cap, Higa would be liable for the difference. 

The oil companies, which oppose the 1997 law, say dealers are going out of business because dealerships are a less efficient way of serving the marketplace. 

“People don’t choose where they buy their gas based upon saying this is a dealer or company-operated station,” said Albert Chee, spokesman for Chevron Corp. Consumers make their choices based on factors such as convenience, the type of services provided and price. 

Plus, the recent arrival of massive gas stations run by retailers such as Costco Wholesale is providing heavy competition. 

“We’re dying,” said Harvey Okamura, whose family has run the Aiea Shell dealership since 1969. His lease nearly doubled to $10,000 a month in 1998, though he plans to hang on. “I’m a diehard,” Okamura said. 

Consumers should be concerned about the situation, because the consequence of fewer dealers and more company-run stations will be higher gas prices, Higa said. Dealers are independent businesspeople, who can offer a variety of discounts and services to beat the dealer across the street, Higa said. 

“If you take out all the dealers, (the oil companies) can price the way they want to price,” Okamura said. 

During recent arguments in the state’s antitrust lawsuit against the major oil companies, attorneys for the oil firms repeatedly said Hawaii has high gas prices because just a few oil firms serve the local market. The companies are naturally discouraged from competing with each other, because they would collectively lose money. 

“I can guarantee that (the price is) going to go up and up and up and the state’s going to suffer,” Higa said. 

Chevron disputes that. There is no evidence of heavy price competition among the dealers to begin with, Chee said. 

Company-operated gas stations are more economically efficient than dealer stations, because the oil companies have more control over operations, said Ken G. Smith, Chevron’s marketing manager in Hawaii. Chevron benefits from the reduced costs and can pass savings on to customers, he said. 

Chevron, one of two companies in the state that refine gas, has increased its number of company-run gas stations. Two years ago, five of Chevron’s 48 stations on Oahu were run by the company, or about 10 percent, Chevron said at the time. Chevron now has nine company-run stations out of 38, or 24 percent. 

Some dealers, even those who have already lost their stations, defend the oil companies. “I don’t blame them,” said Mike Hamada, who walked away from his Shell dealership in November. “They’re in business to make money.” 

The dealers are in business to make money too, but they’re not making as much as they once did. Profit margins, which used to be more than 20 cents per gallon in the 1980s, are now closer to 3 cents per gallon, dealers said. 

“When business was good, nobody was grumbling,” Hamada said. 

Under the 1997 law, oil companies cannot build a new company-operated station within one-eighth of a mile of any dealership on Oahu. On neighbor islands, the distance is one-quarter of a mile. The rule represents a milder form of “divorcement,” a restriction that some states have imposed on company stations. Maryland has had an all-out ban on company-run stations since 1979. The U.S. Supreme Court has upheld the law. 

Chevron opposes divorcement as a restriction on the marketplace that leads to higher gas prices and poorer service, Chee said. It allows weaker, badly run dealerships to survive competition. 

“This may be hard to believe, but the oil companies are the most efficient player in the marketplace, and with those efficiencies, they are able to offer the best services and the best products at the best price,” Chee said. 

His point was supported by John Umbeck, a Purdue University professor who has studied the Maryland law. Umbeck also plans to testify as Chevron’s expert at the rent-cap trial. 

Divorcement leads to higher prices because it protects dealerships from competition by the leaner company-run stations, Umbeck said. “Typically the capitalist system allows you to come into the market with a better idea,” he said. 

But divorcement isn’t only about gas prices; it’s about protecting the other things that a dealer offers to a community, Frank Young said. A dealer conforms more to local customers than a company that has nationwide policies, he said. A dealer could open customized accounts for business customers or carry local foods. 

“There’s a more intimate relationship,” he said.