Local Pump Prices Level Off; Alaska Tanker Nears L.A.

Prices at the gas pump in Los Angeles showed signs of stabilizing Wednesday as the first Atlantic Richfield tanker from Alaska to reach California since the March 24 oil spill prepared to dock today in Long Beach and more crude oil and gasoline steamed this way from other ports.

Industry and government officials said Southern California could even face an oil glut and a steep drop in prices in two to three weeks as extra oil, lured by the fat prices commanded for petroleum in the region since the oil spill, arrives along with regular Alaska shipments.

But for now, some critics said, business operators at several levels of the intricate commercial oil network--with the exception of some gasoline station dealers--have profited handsomely from what most describe as an unwarranted price run-up.

“The only ones who were hurt were the otters in Alaska and the consumers in California,” said Fereidun Fesharaki, an expert on Pacific Rim oil trade at the government-funded East-West Center in Honolulu.

The prices charged by area refiners remained flat for a second straight day, while futures prices for gasoline contracts traded on the New York Mercantile Exchange tumbled by 3 cents a gallon.

Atlantic Richfield said the Arco Alaska, carrying 1.3 million barrels of crude, was due to reach Long Beach today to replenish stocks at Arco’s 230,000-barrel-per-day refinery in Carson and an adjacent Shell refinery, which Arco also supplies.

Traders hoping to cash in on the inflated local prices bought up cargoes of crude from Ecuador, Mexico and the Far East to supplant the anticipated shortfall in California, which normally gets nearly all its oil from Alaska and its in-state oil fields. Meanwhile, the California Energy Commission estimated that 2 million barrels of gasoline was also bound for California.

The energy commission said the influx of oil could lead to a temporary glut and a tumble in prices in two to three weeks.

A Los Angeles oil trader said: “A lot of traders have gone out and acquired cargo, speculating that the market will continue to go up. The first guys will make a fortune, but the later cargoes might overtake the market. They might get here and find the Alaskan crude is flowing again.”

The flow of oil through the trans-Alaska pipeline reached its full capacity of 2 million barrels per day Wednesday and was replenishing storage tanks in Valdez, the port near where an Exxon supertanker struck a reef and spilled 10 million gallons of crude oil. But tanker traffic from the port was interrupted once again while the tanker Valdez was being refloated.

Crude Unproduced

An estimated 12 million to 14 million barrels of crude oil went unproduced since the spill because tanker traffic was halted and then only partially resumed. The interruption led to cutbacks at three large West Coast refineries as Arco, Exxon and BP America told dozens of customers they would be unable to supply all the oil that was ordered.

But Dennis Ekloff, a former Exxon official who is now analyst at Cambridge Energy Research Associates, said crude oil inventories at the time of the spill were normal in the five-state Western region and “could be drawn down by at least 12 million barrels without encountering operational problems.”

Despite the lack of any true shortage, analysts and industry and government officials said the fear of shortages, coming on the heels of steadily climbing crude oil and gasoline prices and near-capacity operations at refineries here and elsewhere, touched off panic, greed and other responses.

One week before the oil spill, the Los Angeles market had been hit by a particularly steep run-up in wholesale gasoline prices that wasn’t duplicated anywhere else, trade publications suggest. Independent refiners boosted the prices they charge for gasoline by a full dime, to 72 cents a gallon, in the six days before the spill.

Consultant James McDonald said this set the Southern California market apart, and he said it was caused by one of the occasional maneuvers by major oil companies to squeeze independent dealers by tightening supplies of the gasoline they normally sell “out the back door” of their refineries to independent distributors.

With distributors suddenly short of supplies, independent dealers had to scramble for alternative sources of gasoline. This was already happening at the time of the oil spill.

“The independent refiners saw them coming, and they jacked up their prices,” said McDonald. “So they were having this private war and then Alaska fell right into their laps. Since then, everybody’s been making hay.”

Prices charged by independent refiners soared by an average 27 cents a gallon, while prices charged by major brand refiners climbed just 10 cents on average in the 10 days after the oil spill. That stacked the deck against independent dealers.

“I’m paying $1.13 a gallon to my distributor for gasoline and the Chevron dealer down the street is selling his for $1.03,” said Bernie Svalstad, owner of Campus Gas in Irvine.

That imbalance creates an opportunity for price increases by the majors--for the stated purpose of closing the gap between major and independent stations so that motorists don’t all converge on the major brand station and empty its tanks.

An Arco spokesman said, “If you stay too far below the market in a low-inventory situation, you’re dead.” Consultant McDonald called that “a legitimate concern, and they cry all the way to the bank.”