Gasoline Ticks Up but Likely to Slide
Gasoline prices inched up in California over the last week as markets reacted to the cutback in production at BP’s Alaska oil field, but a recent run of upbeat news may mean relief is in sight for motorists.
A gallon of self-serve regular gasoline cost an average of $3.211 statewide Monday, according to the federal government’s latest price survey, up from $3.192 a week ago. Nationwide, the average price dropped to $3 a gallon from $3.038 a week ago.
The uptick in California ended a three-week string of falling prices and followed BP’s announcement Aug. 6 that it was closing its giant Prudhoe Bay oil field because of severe corrosion discovered in pipelines that serve the field.
But the British oil giant said late Friday that it would be able to keep crude flowing from half of the Prudhoe Bay field. That helped keep a lid on oil and gas futures in New York on Monday, as did the cease-fire in Lebanon, renewed oil shipments from Nigeria, an uneventful start to the hurricane season and generally smooth operations at the nation’s refineries.
“It’s been an extraordinary streak of good news,” said Tom Kloza, chief oil analyst for Oil Price Information Service, a New Jersey company that tracks energy markets. “That’s about as good as it gets.”
Further, with the summer driving season nearing its end, analysts say pump prices are poised to fall across the country. Barring new supply disruptions or other market-rattling events, Californians could see significantly lower prices over the next 10 days, industry consultant Andrew Lipow said.
“We have falling crude prices and we have falling gasoline prices” on the New York Mercantile Exchange, Lipow said, “and both of them are good for the consumer.”
Oil for September delivery fell 82 cents to $73.53 a barrel on Nymex on Monday, while the near-month gasoline contract slid 7.28 cents, or 3.6%, to $1.991 a gallon.
Oil hit a record $78.40 on July 14 amid fears that the fighting between Israel and the Hezbollah militia in Lebanon could ignite a wider conflict in the oil-rich Middle East. Prices approached that level again last week on news of the Prudhoe Bay closure.
The field on Alaska’s North Slope accounts for 8% of U.S. oil production and provides 20% of the crude used by West Coast refineries. Some analysts feared that shutting down the field could lead to supply shortages and $4-a-gallon gasoline in California.
Those concerns have proved unfounded -- in part because half of the field’s 400,000-barrel daily output will continue to flow south but also because West Coast refiners already have lined up alternative sources of crude. According to Lipow, Ecuador, Colombia, Brazil, Angola and Persian Gulf nations are among the backup suppliers.
“There’s enough crude out there to fill the gap” from the loss of Prudhoe Bay, he said.
But fallout from the problem in Alaska still may be propping up West Coast pump prices, said Phil Flynn, senior market analyst with commodities trader Alaron Trading Corp. in Chicago.
He noted that Exxon Mobil Corp. and ConocoPhillips, BP’s partners at Prudhoe Bay, told customers last week that they might not be able to fulfill contracts for delivery of Alaskan crude. That notification, an instance of force majeure, “might keep prices elevated a little bit,” Flynn said, although he expected relief to come soon for California drivers.
The Prudhoe Bay debacle created a flap on Capitol Hill. The latest blast came from Sen. Barack Obama (D-Ill.), who called on the Federal Trade Commission on Monday to examine the effect BP’s pipeline shutdown would have on retail prices.
BP executives also are expected to be summoned to Washington when Congress reconvenes after Labor Day to explain their actions. BP didn’t return calls seeking comment.
Analyst Kloza cautioned that the encouraging outlook for motorists could change abruptly.
The situation in the Mideast remains unsettled, he noted, and refineries that have been running full-bore all summer are due to be taken off line for maintenance, potentially keeping supplies tight.
Meanwhile, unrest continues in Nigeria, where four foreign oil workers were kidnapped Sunday, two days after production restarted at a major oil field there. And although the Caribbean has been quiet, the peak season for hurricanes is just beginning and runs through late October.
“I think it would be premature to say this is the end of the 2006 gasoline bull market,” Kloza said. “The next 30 days still bring tremendous risk to the upside.”
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Times staff writer Richard Simon contributed to this report.
