Gas Prices Fall; Hearing Points to Higher Costs

U.S. and California gasoline prices are down for the fourth week in a row, but persistently high pump prices could still cost the state’s drivers billions of dollars during this year’s spring and summer driving season, a local congresswoman said Monday.

According to the government’s weekly price survey released Monday, the U.S. average price for a gallon of self-serve regular gasoline was $2.186, down 4.9 cents from the previous week but up 24.5 cents from a year ago.

The California average was $2.516 a gallon, down 4.4 cents from last week but up 29.3 cents from a year ago. California prices have come down only slightly after hitting a record of $2.592 a gallon on April 11.

At a congressional hearing in Long Beach, U.S. Rep. Diane E. Watson (D-Los Angeles) issued a staff report suggesting that if prices remained at current levels, California drivers could spend $5.5 billion more on gasoline during the peak April-to-September driving season than they did in 2003 -- with about one-third of that borne by motorists in the Los Angeles area.

“Commuting is a necessity here in Southern California, and record gasoline prices are taking their toll on my constituents,” Watson said at the hearing conducted by Rep. Darrell E. Issa (R-Vista), chairman of the energy and resources subcommittee of the House Committee on Government Reform.

Much of this year’s rise in gasoline prices can be attributed to the soaring cost of crude oil, which accounts for about half of the final pump price, an industry representative and three government officials testified. With the price of crude oil lingering above $50 for much of this year, retail gasoline prices have set record highs nationwide and in California.

In addition, soaring world demand, fueled by booming economies in China and India, and a shortage of domestic refining capacity also have pumped up prices.

On Monday, crude oil for June delivery rose $1.07 to close at $52.03 a barrel on the New York Mercantile Exchange, reflecting continuing concerns that petroleum supplies will fall short of demand.

Asked by Issa whether petroleum companies were gouging their customers, John Cook, head of the Energy Information Administration’s petroleum division, said the high prices were “a symptom of an industry that is seeing supplies tighten further and further.”

Cook said requirements by states such as California for special, cleaner-burning gas also had pushed up prices. California currently has the highest pump prices in the nation.

The inability of oil producers to boost production to meet surges in demand has been the key recent change in world markets, Cook said. However, he said, barring an unexpected jump in demand this summer, gasoline prices may have peaked for the time being.

Watson said she found it hard to believe that the oil industry was not better prepared for the increased demand from China and other rapidly developing countries.

“Something is missing from all of your testimony,” Watson said.

In recent weeks, President Bush, under pressure to come up with a plan to deal with sky-high prices, has floated several proposals for diversifying supply and reducing U.S. reliance on foreign crude oil.