Jump at the Pump : Southland Gasoline Prices Rise 7 Cents, Could Go Higher

Southern California gasoline prices have jumped an average of 7 cents a gallon at the pump in the last month because of a sharp rise in crude oil prices, the lowest crude supplies in 19 years and the higher cost of making new state-mandated cleaner-burning fuels.

And analysts don’t expect prices--which have surged as much as 10 to 12 cents a gallon at some service stations--to drop in the near future.

“We’re heading into the summer travel season . . . [and] prices tend to peak in the summer,” said Michael Morrissey, a spokesman for the American Automobile Assn.

For motorists like Antoinette Mongelli of Pasadena, the increased costs add up. Mongelli commutes 60 miles a day for her job at UCLA, spending as much as $100 a month on gasoline.

The pump price hikes have added $10 to her fuel bill: “That’s lunch money for me for two days,” she said.

The average retail price of regular unleaded gasoline in metropolitan Los Angeles has increased about 7 cents a gallon since the middle of February, according to the Computer Petroleum Corp. in St. Paul, Minn.

As of Thursday, the price stood at $1.252, up from $1.228 on March 16 and $1.181 on Feb. 10, Computer Petroleum reported.

Nationally, the average price of unleaded gasoline was $1.17 on Thursday, up 4.3 cents since Feb. 10, the firm said.

The main reasons for the sharp price hikes:

* Crude oil prices have been rising since early February, in part because weather-related demand for heating oil in the Midwest and East has outstripped supplies worldwide.

In addition, fear that the United Nations may soon permit Iraq to begin limited oil exports for the first time since the end of the Persian Gulf War has led refiners and others to slim down inventories of crude.

U.S. crude oil inventories last week hovered near a 19-year low at 299.7 million barrels, down 8% from a year ago, the American Petroleum Institute reported Tuesday.

As a result, the spot market price of light crude oil spiked by $5 a barrel, or nearly 26%, since the beginning of the month to a peak of $24.30 on Tuesday, its highest level since the Gulf War, before falling later in the week, the API reported. On the futures market, contracts for crude oil climbed to three-year highs Friday.

* Refiners were required to begin producing cleaner-burning reformulated gasoline by March 1 under California Air Resources Board rules.

Such gasoline requires more crude oil per gallon compared with conventional gasoline, and also includes new components that make it 5 to 15 cents a gallon more expensive to produce, the board has estimated.

Though such gasoline is not required at wholesale terminals until April 15, and isn’t scheduled to make it to service station pumps until June 1, the additional cost of producing the gasoline is apparently being built into the price of conventional gasolines as well, analysts said.

“As the [reformulated] product moves into the distribution system, the higher cost of production will follow it to the pumps,” said J. Scott Susich, an analyst with Computer Petroleum.

In addition, “We’re told more than half of California service stations are selling it already,” said Daven Oswalt, spokesman for the air resources board.

Other factors have driven prices up as well. Prices normally move upward about 5 cents a gallon around April or May in anticipation of the summer driving season.

At the same time, refiners normally switch to producing gasoline with a lower vapor pressure for the summer as required by the government, a process that uses more crude oil per gallon of gasoline.

And supplies of gasoline are relatively tight. U.S. gasoline inventories last week were 209 million barrels, compared with 218 million barrels a year ago, API reported. On the East Coast, supplies were squeezed by the closure of a troubled refinery owned by Connecticut-based Tosco Corp.

“A shortage of gasoline developed during the crunch conversion period surrounding March 1, causing prices in [gasoline import markets] Phoenix and Tucson, for example, to leap,” the Lundberg Survey reported in its March 14 Lundberg Letter. “The shortfall was caused both by California suppliers’ new output constraints and system problems at two refineries outside California.”

Service station owners are passing on the price hikes to customers.

A Chevron station in Seal Beach raised prices last week for regular self-serve unleaded gasoline to $1.23 a gallon from $1.19, the manager said.

“When [wholesale] prices go up, we try to delay [raising ours] for a couple of days to stay competitive,” said the manager, who asked not to be identified. “But that’s as much as I can afford.”

Carroll Hansen, owner of a Shell station in Bel-Air, said his prices have gone up nearly 5 cents a gallon in the last two weeks.

“The bad part of it is, it’s a terribly competitive market here in Southern California,” Hansen said.

Awad Camille, manager of a Unocal station in Fullerton, said he has had to raise the price of unleaded regular gasoline by 4 cents a gallon in a week, to about $1.27.

“Our customers bring it up,” he said, “and we say it’s because we have to convert the gas. They say, ‘OK.’ After all, they have to buy gas . . . and it’s nothing under our control.”

Higher gasoline prices are more than just an inconvenience for Eagle Rock Florist on Colorado Boulevard.

Each of the flower shop’s two delivery vans makes at least 10 deliveries a day, traveling more than 150 miles. The florist also rents extra delivery vehicles when needed, and has a couple of cars.

Last month, the shop’s gasoline bill was about $1,000. This month, it’s $1,125, said manager Alan Flowers.

With Secretaries Day and Mother’s Day deliveries coming--the store’s busiest time--the florist must soon decide what to do about the higher costs. One likely option: raising delivery charges to $9 from $8.50, Flowers said.

“Customers are going to complain,” he said with exasperation. “But when gasoline goes up, . . . Everything goes up.”

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Price Gusher

A spike in crude oil prices, dwindling supplies and new California clean-air regulations have combined to send gasoline prices up sharply over the last month in Southern California. Don’t look for relief soon.

Gasoline Prices:

Weekly average price for unleaded gasoline in the Los Angeles area, per gallon:

March, 1996: $1.25

*

Crude Oil Prices:

Weekly oil prices, nearest-month futures, in New York, per barrel:

March, 1996: $21.95

Sources: Computer Petroleum Corp., Bloomberg Business News

Researched by JENNIFER OLDHAM / Los Angeles Times