Gas Prices Fall in Southland to Near $1 Mark

The dramatic run-up in gasoline prices that angered California motorists and triggered investigations early this year has been wiped out by a surge in refinery production that has driven pump prices down to near the $1-a-gallon mark in Southern California--and below it in at least one case.

Frank Itani, who runs an Arco station in Fountain Valley, was poised to drop the price for a gallon of self-serve regular from $1.01 to 99 cents at midnight Thursday, believed to be the lowest level seen in the region since 1989.

“It’s wonderful,” said motorist Ruthie Scott as she pulled in to the station earlier Thursday. “We were up in San Francisco and the Sacramento area several weeks ago, and the gas up there was more than $1.30 a gallon. It’s nice to see it back down again.”

Southern Californians weren’t so chipper at the pumps in February, when events conspired to send prices on a two-month tear. A series of refinery accidents and fires, shutdowns caused by state-mandated conversions to clean-burning gasoline refining, and dislocations in the availability of crude oil drove prices up an average 30% in less than three months --and above $2 a gallon in some cases.

The spike--at a time of flat to declining crude oil prices--was worst in California but spread nationwide, outraging drivers, energizing politicians and spawning investigations in Sacramento and Washington.

The probes turned up little evidence of price-gouging but cast a spotlight on California’s tight refining market. Analysts said that closures of refineries over the years have left the state with little cushion when refinery production falls.

From a statewide peak of $1.55 a gallon in late April, prices edged down through the summer, normally a time of rising prices, as supply and demand began to normalize.

Now, for reasons that were not immediately clear, gasoline production in the state’s refineries is significantly exceeding demand.

During the week ended Oct. 11, gasoline output averaged 955,000 barrels per day, or 6% more than the average daily demand of 900,000, according to the California Energy Commission.

Refineries’ production levels last week averaged 96% of capacity after dipping as low as 80% earlier this year, the commission said.

As of Thursday, the average price for an unleaded gallon of gas in the Los Angeles Basin was about $1.05, said Automotive Trade Organizations of California, an Irvine-based group representing owners of more than 2,500 service stations.

But experts said Thursday that the glut of gasoline is a Southern California phenomenon not being felt statewide. The statewide average is $1.32, according to industry figures.

“We’re not seeing that in Central and Northern California,” said Claudia Chandler, a spokeswoman for the Energy Commission in Sacramento. “It’s more like $1.35 for regular unleaded in Northern California.”

Chandler said that high-volume dealers such as Itani are getting small profit margins because the wholesale price for gasoline was 72 cents a gallon Oct. 17.

“You’re telling me,” Chandler said, “that with taxes, profit margins, transportation costs, and all the people in between, that it’s selling for about a dollar? You’re getting a good deal down there in Southern California. I want to fill up too.”

Said Itani: “We only make about three cents profit for each gallon of gas and we have low prices, so we need to deal in high volume.”

Business was so good Thursday that he was handling as many as 10 to 12 customers at a time. That kind of volume demands three tanker-loads of gas a day.

But with so many customers, delays and tensions mount.

Joe Bensler, 62, of Fountain Valley, who said he got cut off, honked his horn at the other motorist and then got into a heated argument.

“Can you believe that guy?” Bensler said. “He cuts me off and he wants to argue with me because I honked my horn at him. Come on, I drive 20,000 miles a year and I wanted to pull into this station because I could use all the breaks I can get.”

“Of course I saw the low price,” said Bernard Hinson, 60, of Santa Ana, who filled up his small compact at Itani’s station. “That’s why I pulled in here. I just paid $1.05 last week, and two weeks ago I paid about $1.21 a gallon. It’s been great! Keep it going.”

For Carla Fuchs, 51, of Irvine, the reason why the prices were low was not as important as finding a gasoline station.

“I was driving on the freeway and wasn’t paying any attention to the gas gauge,” Fuchs said. “All of a sudden I noticed it said empty, and I pulled off and headed for this station. But I’m glad I did, otherwise I wouldn’t have found such low prices.”

Contributing to this report was Times staff writer Chris Kraul.