Gas Prices in Southland Soar 13% in Summer Rush
Just in time for that last car trip of summer, gasoline prices in Southern California have jumped more than 13% in the last month and are not expected to drop until after Labor Day.
Prices are now hovering in the mid $1.40-a-gallon range in Southern California, and richer grades of gasoline have been spotted selling as high as $1.95 a gallon.
Blame high end-of-summer demand crashing into California’s inelastic supply situation.
A healthy economy means more people are taking vacations, but the state’s refineries can produce only so much of the state-mandated reformulated clean-burning gasoline, resulting in a price spike. Independent gasoline dealers contend that reduced competition in the state accentuates price moves.
Whatever the reason, consumers are upset and gasoline station dealers are worried.
“I fill up every day, and it’s $40 to fill up,” said Robert Aguilar, as he studied a map while pumping fuel into his airport shuttle service van at a Highland Park Mobil station.
“That’s $10 difference every day for 60 bucks a week. That eats into my profits,” said Aguilar, an independent contractor with Prime Time.
The suddenly higher prices are “out of this world,” said Orange County auto salesman Fred Andrade as he filled his Jeep with $1.48-a-gallon regular at a Costa Mesa Chevron, “but you gotta buy it anyhow. They’ve got us.”
And gas station operators are feeling the effects too. Shell dealer Bob Hanna said customers are complaining, but he says oil companies have raised the price he pays for gasoline.
“I’m losing a lot of customers,” Hanna said, staring at the deserted pumps at his Northeast Los Angeles station. “They’re not filling up. They’re buying $2 or $3--enough to get home.”
And the oil companies? They cite supply and demand forces--refineries are operating close to capacity at a time when motorists are driving more--and competitive pressures to keep prices in line with other operators.
“The bottom line of the entire equation is we take the marketplace as we find it and we set the price to be competitive,” said Fred Gorrel, a Chevron spokesman.
But independent gas station operators say that a concentration of the market in the hands of only a few large oil companies keeps prices artificially high in times of high demand.
“We have only a few big oil companies that make California reformulated gasoline . . . and they also happen to be the companies that own most of the retail stations,” said Janet L. Speelman, executive director of the Automotive Trade Organizations of California, which represents independents and franchisees.
After a midsummer respite, gasoline prices have again rocketed into the stratosphere.
In late July, Southern California motorists were paying $1.2358 for a gallon of unleaded gasoline, according to the Lundberg Survey, a Camarillo company that samples 850 gasoline stations in Los Angeles, Orange, Riverside and San Bernardino counties. On Aug. 22, the most recent data available, the per-gallon tab had jumped to $1.3950 and prices have continued to rise since then.
But the state’s average price this week of $1.38 a gallon for regular unleaded gasoline is the highest price of the year. Nationwide, the average price for regular unleaded gas this week is $1.24 per gallon, according to the U.S. Energy Information Administration.
The latest prices do not come near highs of May 1996, when the average price in California hit the $1.54 a gallon mark caused by refinery slowdowns that decimated reserves just as summer demand was growing.
This month’s increases trace back to last spring, when California production was hurt by fires at several refineries that forced local gas companies to tap their reserves. As summer traffic brought increased demand, oil companies responded quickly by repairing the refineries and pumping up production and imports.
Oil companies overadjusted, however, and last month, oil reserves in California sunk to a five-year low, said Scott Berhang, editor of Oil Price Information Services. That temporary shortage has driven West Coast fuel prices’ rise more quickly than in any other market in the world, he said.
Now output at most California refineries has reached maximum levels as oil companies try to restock their reserves and fuel Labor Day traffic. Berhang predicted prices will again drop as refineries overshoot their goals.
“California will be swimming in gasoline in another three weeks,” he said.
But for now, Mamdouh Hassan’s Shell station is losing money.
In the 12 years Hassan has owned this franchise he has seen gas price increases scare off his customers before, but this was one of the sharpest rises he has ever faced. In order to meet his bottom-line, Hassan says he has to charge $1.45 for regular gasoline--that is well above the state average and is 3 cents higher than gas at the 76 station across the street.
“The suddenness of the rise is what made a big effect,” cutting business by 20%, he said. “In one week the price increased by 10 cents. People got shocked, and we lost some customers because of competition.”
The price increase is particular frustrating because of the timing. Officials at the Automobile Assn. of America estimate a record 34 million motorists will be on the road this Labor Day nationwide. There will be 7 million drivers west of the Rocky Mountains, AAA said.
Ron Zachow of Reseda poured $42 worth of fuel into the mammoth tank of his Winnebago camper. Perhaps more than most, Zachow feels the pinch at the pump, but he said it would not change plans to take his family on a road trip to Northern California.
“The companies know people are going to be going out on the road and going out of town,” he said. “I mean, it’s the same old gasoline, isn’t it? So why the big price increase?”
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Times staff writer John O’Dell in Orange County contributed to this report.
