Southland Gasoline Prices Fall to Lowest Level in Years

The average price of gasoline in Southern California has fallen to its lowest level ever when adjusted for inflation, with some area stations cutting prices below $1 a gallon this week.

The fast-falling price could go even lower, some experts believe, as slack demand from economically troubled Asian countries contributes to a glut in the market.

“It would appear that at least for the near future, gasoline prices would continue to fall,” said Harry Johnson, manager of marketing price policy for Atlantic Richfield Co.’s Arco Products unit, California’s biggest seller of gasoline.

Prices are likely to rise in the spring, when demand increases and environmental rules require fuel that vaporizes less easily--a product that is more expensive to make than winter gasoline.

But for now, the price trend is “coming down, coming down, coming down,” said American Petroleum Assn. spokesman Chris Kelley.

Excluding money-losing promotions, the last time gas prices were below $1 a gallon in Southern California was in December 1991, said James Huccaby, Chevron Corp.’s national pricing manager.

Even today’s average gasoline price in Southern California of $1.12, if adjusted for inflation, would be cheaper than the 25-cent-a-gallon days of the 1960s.

Crude oil scheduled for March delivery closed at less than $16 a barrel Thursday on the New York Mercantile Exchange, compared with nearly $25 in January 1997.

Oil prices could fall an additional $1 to $2 a barrel, said Michael Mayer, an analyst at Schroder Wertheim & Co. in Burlingame. If so, prices at the pump “might come down another five cents a gallon if it’s fully passed through to consumers,” he said. “But it doesn’t always work that way.”

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Huccaby said refineries recently have been operating efficiently and at full capacity, and thus are increasing supplies of crude oil at a time when demand is soft.

Last year, prices dropped during the winter, but rebounded to about $1.50 a gallon by summer as weather improved and people started driving more.

“Will we rise to that level? You’re starting from an awfully low point,” Huccaby said. “It depends on what crude oil prices do and what the demand is.”

Customers like school maintenance worker Ricardo Medina took advantage of 99.9-cent-per-gallon prices Thursday at a Santa Ana Arco station, where he paid just $20 to fill his gas-guzzling pickup with 20.02 gallons of unleaded regular.

“Hopefully,” Medina said, “it’ll remain like this for a while.”

Californians pay some of the nation’s highest gas prices in part because gasoline and sales taxes account for 51 cents a gallon. Oil companies also pass on to consumers their expense in meeting more stringent environmental laws and higher real estate costs.

In lower-cost areas of the country, particularly the Southeast, prices at the pump have been below $1 a gallon for a few weeks.

That some Southland prices are also now below that benchmark “shows just how far prices have dropped the last few months,” said Mike Morrissey, spokesman for the AAA.

The auto club’s most recent national survey found that the average retail price for gasoline fell 5.7 cents from December to January. That’s the biggest monthly decline since January 1991, when the Persian Gulf war was nearing an end and prices plunged 12.2 cents from the previous month.

California gas prices have turned highly volatile in recent years as state requirements for less-polluting fuels created a market separate from the rest of the country, said analyst Trilby Lundberg, publisher of a survey tracking retail prices.

Prices in Southern California have plunged far faster of late than elsewhere in the state and country, in part because the region--the world’s largest market for gasoline--has so much competition, she said.

“L.A. has just got a lot of stations all trying to get their pieces of the pie,” Lundberg said.

The result has been a price whipsaw of late. In early January last year, the average self-serve price for regular unleaded gas in Greater Los Angeles was $1.21. It rose to $1.45 by Sept. 19, was still at $1.31 as of Dec. 5, then plunged to $1.12 as of Feb. 6, Lundberg said.

This week’s lower prices led to a spurt in business at Dan Wong’s Arco station in Santa Ana, where the volume of buyers rose 20% when he cut his price below $1 a gallon Tuesday.

At that price, “We make money--but not much,” he said. Then again, January and February are typically the slow times of the year. “So I just try to lower the price to keep busy,” Wong said.

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AAA’s Morrissey warned that the picture could change very quickly if the political stalemate with Iraq leads to a military confrontation. After Iraq invaded Kuwait in August 1990, retail gasoline prices surged more than 30 cents a gallon over the following few months.

“Anything that threatens the Middle Eastern supply of oil has a dramatic impact, almost simultaneously, on gas prices,” Morrissey said.

That possibility was also on the minds of drivers. At Wong’s station, Marcus Wyrosdick of Garden Grove, a sheet-metal worker, pumped 18.02 gallons of gas into his Chevy van for just $18, but said he figures the prices won’t last.

“You watch,” he said. “We’re pretty soon going to war [in Iraq], and you know what happens to the price of gas then.”

But John Mahedy, an analyst at Sanford C. Bernstein & Co. in New York, was doubtful any conflict in Iraq would cause a sharp price hike, saying the market is oversupplied with oil and any interruption in the flow from that region would likely be brief.

Mayer also said he doubts the Iraqi situation will result in sharply higher prices. “No one is talking about bombing any of their oil facilities,” he said, noting that the United Nations is in fact discussing the possibility of allowing Iraq to boost its oil exports.

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Lower at the Pump

Although the average price of regular unleaded gasoline has yet to fall below $1 a gallon, it has dropped to that level at some Southland stations.

Weekly average for regular unleaded gasoline since Jan. 1, 1997.

This week: $1.186

Source: U.S. Department of Energy, Energy Information Administration

Pump Prices

A biweekly survey of filling stations in Orange, Los Angeles and portions of Riverside and San Bernardino counties indicates how dramatically gasoline prices have declined from their 1997 high, reached in the fall. Average price per gallon for self-serve, unleaded regular gas:

1997

January 10: $1.21

September 19: 1.45

1998

February 6: 1.12

Source: Lundberg Pump Price Survey