O.C. Drivers Get More Smiles per Gallon

Gasoline prices in Southern California fell below 90 cents a gallon in some locations this week, driven down a dime in the last three weeks by conditions as varied as El Nino’s rains and Asia’s economic woes.

These and other elements have left the world swimming in crude oil--at least for a little while. And from the commuter at the corner gas station to the airline company pumping millions of gallons of aviation fuel into its jets, consumers are cheering the cheaper fuel prices.

“I drive everywhere because it’s so cheap,” said Kim Hua, a Garden Grove resident who was filling her car Friday afternoon with 89.9-cents-a-gallon regular grade gas at Jim’s Arco in Westminster. She said she’s increased her driving substantially in recent weeks as gas prices have tumbled.

Even at $1.04 a gallon, which is about average for regular unleaded gas in the Los Angeles Basin this week, a 20-gallon fill-up is $8.20 cheaper than it was Sept. 19, when regular gasoline hit a high of $1.45 a gallon. Just three weeks ago, the average in the region was $1.12, according to the Lundberg Survey of retail gas prices.

Those savings are nothing compared with the breaks air carriers are getting. Aviation fuel in the Los Angeles region is at its lowest price in almost a decade, said Jonathan Leak, fuel administrator for Phoenix-based America West Airlines. The carrier saves $4 million each time the cost of fuel drops a penny a gallon, he said, and America West is paying 19 cents a gallon less than it paid a year ago.

Trucking companies, taxi firms and limousine rental businesses also are seeing big savings in their fuel bills.

But fuel prices, especially those at the gas pump, aren’t expected to fall much farther. Industry insiders say that as the weather warms up and people start traveling more, fuel prices should stabilize and then start climbing again.

“We are running out of time,” said Michael Morrissey, spokesman for AAA, formerly the Automobile Assn. of America. “Summer travel will push up demand,” and demand for gasoline helps dictate its price, he said.

In November, the 11-nation Organization of Petroleum Exporting Companies raised its output quota by 10% to 27.5 million barrels a day.

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All that oil came to the market just as the Asian economic crisis hit, cutting demand for gasoline, diesel and other petroleum-derived fuels throughout much of the Pacific Rim.

At the same time, warmer-than-usual winters in North America and Western Europe cut back on demand for heating oil, which comes from the same crude oil used to produce gas and diesel fuel. As refineries pumped out less heating oil, the output of gasoline and other fuels increased.

Finally, motorists on the West Coast--especially in sodden Southern California--curtailed their driving during the recent rain-soaked months. Southern California is the single largest gasoline market in the world, with about 12 million cars and trucks. When the weather turns sour and vehicles stay in the garage all day, millions of gallons of gasoline go unsold.

Some analysts, however, say the decreased demand for gasoline in recent weeks, combined with falling crude oil prices, may help stabilize prices, at least through the early part of the summer. On Friday, contracts for high-grade crude oil to be delivered in April hit a four-year low of $14.91 a barrel.

“Surplus inventory has grown from 10 million barrels two weeks ago to 17 million barrels now,” said analyst Tim Evans of Pegasus Econometric Group in New York. “That will add to the availability of gasoline during [the summer’s] peak driving months.”

In addition, several refineries that have cut production for seasonal maintenance are coming back online, which will add to gasoline production, he said.

Not everyone is happy, though.

Many service station owners feel pressured by tumbling prices, which they blame on oil company efforts to eliminate independent operators.

Ira Newman, a 36-year veteran of the gas station business, says his cost for a gallon of regular grade gas is 94.8 cents when he adds his overhead and state and federal taxes to the 80.5 cents a gallon he pays the refinery.

“When the guy down the street is selling it at the pump for 92.9 cents a gallon, you know something’s wrong,” Newman said. He suggests that oil company-owned stations can drop prices because there’s no middleman to support and because they can shoulder short-term losses as part of a long-term plan to drive competitors out of business.

Newman sells regular grade at his Union 76 station in Anaheim Hills for $1.079 a gallon and doesn’t apologize for it. “I try to make a gross profit of 12 cents a gallon,” Newman said. That helps cover his utilities, mortgage, taxes and inspection, environmental and licensing fees. A booming auto repair and maintenance business pays the rest of the bills and provides his income.

“I don’t claim to be really smart,” Newman said, “but I can figure out that you can’t make money selling your product for less than it costs.”

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Arco stations generally have been the first to lower prices in each round of cuts this winter, but Arco Products spokesman Paul Langland says there is no nefarious plot.

“We tend to be low because we want to be market leader,” he said. “We try to price under the competition and make it up on volume. Our average station pumps 200,000 gallons a month, compared to about 135,000 gallons at other brands’ stations.”

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Times correspondent Leslie Earnest contributed to this report.