State’s Drivers May See Lower Gasoline Prices Just Around the Corner


California gasoline prices, which have climbed 15% this year in another run-up that confounded whip-lashed consumers, may have turned the corner and should start heading down over the next couple of weeks--barring unforeseen refinery problems, experts say.

Over the last two weeks, wholesale prices have decreased by 5 cents and spot prices, a more volatile measure, by more than 15 cents. That has occurred as the state’s gasoline inventories--which hit a 13-year low in early April--bottomed out and started to rise. All are signs that prices should soon head down at the pump.

That would be welcome news indeed for California motorists, who as of Monday were paying an average $1.38 a gallon at the pump for self-serve unleaded, compared with a national average of $1.20 per gallon, according to a U.S. Department of Energy survey.

It has been a volatile 12 months. As recently as December, Californians could find gasoline for less than $1 a gallon if they looked hard enough. Yet as recently as a year ago, they couldn’t find it for less than $1.50.


“It’s ridiculous,” said Jerry M. Kelly, a 27-year-old chauffeur for Pegasus Limousines who was pumping gas Monday at a Unocal station in Costa Mesa. “Prices have been going up like crazy.”

Now, with the summer driving season approaching, any price drops will probably be limited to perhaps 10 cents a gallon and be short-lived--if prices drop at all, some industry observers warn. They say the state’s geographically isolated gasoline market, subject to strict environmental controls and served by relatively few refiners, will remain less competitive than other parts of the country.

In short, Californians had better get used to paying higher gas prices over the long term, said Alan Kovski of Petroleum Intelligence Weekly, a New York-based trade publication.

“The West Coast is a world unto itself. Its geographic isolation and clean air requirements mean you can’t easily resupply it from another place,” Kovski said. “The result is that while refiners compete, they don’t compete as much. They don’t have to worry about others undercutting their prices.”

This year’s gasoline price spike has been especially maddening for California motorists because retail prices in most of the United States have gone down, not up. Average U.S. prices over the first quarter of 1997 fell 4% to 6%, while world crude oil prices have fallen 25%--from $26 a barrel to $19.

“California is bucking a trend in a big way. Gas prices in just about every other market have dropped over the last three months by a penny or so a month,” said Ben Brockwell, editor of Oil Price Information Service of Rockville, Md., a weekly petroleum trade newsletter.

The price run-up--reminiscent of last year’s, which refiners blamed on production hiccups while converting refiners to make cleaner-burning gas--illustrates the fact that California has barely enough refining capacity to meet demand.

In a drop some experts blamed on fires and other troubles at refineries operated by Texaco, Tosco and other firms, West Coast gasoline inventories this spring tumbled to 25 million gallons in early April from 31 million on Jan. 31, according to American Petroleum Institute figures.


Finally last week, those inventories rose to 26 million barrels, easing the pressure on wholesale prices. California Energy Commission officials said Monday they expect those inventories to climb further still.

But skeptics insist that the supply-demand imbalance has little to do with accidents. Competition in the state has become so weak, due to the shutdown of several refineries and the mergers of gasoline retailers, that big oil companies can manipulate the market at will, said Jan Speelman, executive director of Automotive Trade Organizations of California, an Irvine-based group representing 2,000 gas station operators.

“There has been no reason for gas price increases. . . . What has happened is, there is less competition,” Speelman said.

Times researcher Jennifer Oldham and correspondent Melinda Fulmer contributed to this article.