Gas Stations Get Slick to Fight Price Wars

Call me prejudiced, but I’ve never been one to associate high IQs with muscle cars, those high-powered gas-guzzling machines that certain young men, and some women, regard as the ultimate in motoring. Red tends to be the color of choice, even though it catches the eyes of cops everywhere and makes a fast car look even faster.

Certainly that was true when I drove my old red Mustang ragtop. Older and wiser, I now drive a car that is dark green--or, as Nissan describes it, “black emerald.”

For all I know, the faculty lot at Caltech may be crammed with red Trans Ams and Camaros. My gut tells me, however, that the young man I saw tanking up his big red demon at the Texaco station at Ventura Boulevard and Corbin Avenue on Tuesday afternoon will never be in contention for a Nobel.

Why? He had paid at least $1.43.9 per gallon--and probably $1.65.9 for premium. A few blocks in either direction, the low-octane gas was priced just below $1 a gallon, about 20 cents more for premium. That morning, I filled up at an Arco for a lovely 89.9 cents a gallon, which had me feeling pretty smart.

I wanted to ask the young man if he realized he had just been ripped off. I wanted to brag about how I’d just filled up for at least 55 cents less per gallon. I was thinking about this while the cashier inside the Texaco’s little center-island booth was assuring me the owner was planning to lower his gas prices. Then I heard a big engine start to purr, and when I turned around, the young man was pulling away.

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Freaky might be the best word to describe what’s been happening to the price at the pumps lately, but it’s a nice kind of freaky. There is no metropolis in the world more dependent on gasoline, no people who do as much driving as the people of Southern California. Detroit may have built the car, but L.A. built a culture around the car. If Rene Descartes had been born in modern L.A. instead of 16th century France, he might have said, “I drive, therefore I am.”

So gasoline can seem almost as necessary as water, and driving as necessary as breathing (even if burning fossil fuels makes breathing that much harder). As the young man at Texaco demonstrates, filling up is so routine that some motorists are oblivious to the price at the pump.

But most of us aren’t. We are cost conscious, especially when it goes up, as it did last May, when the average gallon price of unleaded regular in Southern California spiked at $1.57. When a $20 bill wasn’t enough to fill up the typical sedan, consumers rebelled. Now the price has fallen so low it’s gotten attention in a nice way.

As Times business columnist James Flanigan noted last Sunday, the dropping prices are all the more surprising considering the sound of war drums echoing out of Washington and Baghdad. We’ve come to expect Middle East tensions to make prices go up--or even lead to rationing and long lines at the pumps.

The macroeconomics have changed. Venezuela has been aggressively developing its oil reserves, angering other OPEC nations. Middle East countries retaliated against Venezuela by putting more oil on the market, adding to the surplus. And while America presses tougher economic sanctions, Iraq has been able to sell more of its oil to its market allies--another ripple in the oil bazaar.

Asia’s financial crisis, meanwhile, has depressed sales there, adding still further to the surplus. And then there’s the El Nino angle. A generally warm winter has dropped the demand for heating fuel throughout the northern hemisphere. And stormy weather even has us car-happy Californians driving less, pressuring prices down. All told, the price of crude fell from about $23 a barrel to $15 a barrel, roughly what it was in 1973.

“It’s one of these flukes,” said Jan Speelman, executive director of the Automotive Trade Organizations of California (Auto Cal). “It’s like the moon and the stars and the planets all lined up.”

Auto Cal is a nonprofit trade organization that represents gas stations and agitates against what it portrays as Big Oil’s unfair dominance of the business. Another reason gas usually costs too much, Speelman says, is the way oil giants control the gasoline market from the wells to the pump.

Oil giants routinely offer wholesale discounts based on geographic areas that may be as small as a few city blocks. The industry contends that such “zone pricing” protects the consumer, but Speelman calls it “economic redlining” that further depresses competition.

For a lesson in the microeconomics of pump prices, I drove back to the Arco AM/PM Minimart at Plummer Street and Corbin. The night before, I had almost filled up when I noticed the sign touting a price of 93.9. The next morning, I saw 89.9 and pulled in.

Bahman Kian, owner of this Arco franchise, explained that he was taking advantage of the low prices and undercutting other nearby stations in hopes of attracting new customers and getting them in the habit of using his station.

While I was there, Kian reminded one of his employees to make sure the El Sabroso Pork Cracklins were on display. Kian hopes customers might pick up a snack or other goods. The gas may be a good deal, but you won’t find supermarket prices at a minimart.

From Kian’s station I drove south on Corbin, comparing low-octane prices along the way. This was Tuesday. At Nordhoff, a Chevron was at 99.9. At Parthenia, Mobil was at 97.9 and Union 76 was at 99.9.

Farther down Corbin, at Sherman Way, there was another Mobil at 97.9.

Then I got to Ventura Boulevard and the Texaco with prices that seemed about 6 months old.

The cashier told me the owner had already lowered the price at his other Texaco at Ventura and Lindley. I drove over and sure enough, it was at 99.9. But then, so was the Chevron across the street. And the Arco at the other corner was at 94.9.

The Texaco at Corbin has no competition within view.

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So why would somebody pay $1.43.9 a gallon now? Perhaps it’s that, as one station owner put it, 30% of customers aren’t “price cognizant.”

A friend of mine who lives on the Westside may fall into that category. When I asked her if she’d been noticing gas prices lately, she told me the last time she filled up it seemed awfully high.

Then she told me how, as she was leaving her local station, an attendant rushed out with gifts--a bottle of Aquafina for her and two big lollipops for her kids. “This gas station is great!” her son declared. “Let’s come here all the time.”

And when I returned to Ventura and Corbin on Wednesday morning, Michelle Carlson of Sherman Oaks was paying for a fill-up on her mother’s Mercedes. She told me she realized too late that the price was so high.

But she took solace in the fact she had her mom’s car and not her own.

“I drive a Suburban,” she explains. “It takes 42 gallons.”

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Scott Harris’ column appears Tuesdays, Thursdays and Sundays. Readers may write to him at The Times’ Valley Edition, 20000 Prairie St. , Chatsworth CA 91311, or via e-mail at scott.harris@latimes.com Please include a phone number.