Gasoline Prices Finally Shift Into Reverse
The price of gasoline has peaked in California and is now slowly slipping lower, but there is a faster way to cut your gas bill: Go to La Habra.
The average price of gas in California fell about 3 cents a gallon last week as the state’s refineries worked around the clock to produce the expensive, super-clean gasoline mandated here, which became short in supply and high in price after various refinery mishaps.
Some wholesale prices are falling even faster than retail prices, although major oil refineries continue to pull in fattened revenues--as much as triple the normal rate--from the unusually tight market for gasoline in the last several weeks. Prices are dropping despite a run-up in world prices for crude oil in the last several days.
But in La Habra, gas prices for months have been consistently lower than in other Southland towns, according to the Automobile Club of Southern California. Regular unleaded self-service gasoline in La Habra averaged about $1.48 a gallon in the club’s latest survey, compared with about $1.61 a gallon in all of Southern California.
Nobody is exactly sure why. It could be the competition. La Habra, which grew up around the agriculture and oil industries, has an awful lot of gas stations for a small city (but nary a working farm, orchard or oil well anymore).
It could be the relatively low commercial rents in a middle-class town with no major malls and a profusion of single-family homes. Or it could be something altogether different.
“It’s probably just the oil companies’ way of thanking La Habra,” quipped City Manager Jerry Bankston, noting that Orange County’s northernmost city is celebrating its 75th birthday next year. “I honestly don’t have any idea.”
Meanwhile, California’s gasoline supplies are building as prices are dribbling lower despite rising crude oil prices. The average price of regular unleaded self-service gas fell 3 cents to about $1.59 a gallon for the week that ended Monday, the California Energy Commission said.
That price peaked the week before at nearly $1.63 a gallon, up about 51 cents during a seven-week span that saw explosions and fires at the Tosco Corp. and Chevron Corp. oil refineries in Northern California, and lesser problems at three other of the state’s 13 large refineries.
The U.S. average for regular unleaded self-service fell half a cent to $1.135 for the week that ended Monday, after rising nearly 23 cents since late February, according to the Energy Information Administration.
California’s gasoline prices can gyrate wildly because the state’s cleaner-burning gasoline is produced by very few refineries outside the state. So when refinery problems disrupt supplies, the price spikes.
Some wholesale prices have declined dramatically, with gasoline now selling on the spot market in Los Angeles for about 62 cents per gallon, down 39 cents from its peak. But the price that gasoline dealers pay for fuel delivered under contract from major brands is still running between 90 cents per gallon and nearly $1.20 per gallon depending on brand and location, gas station owners say.
“The worst is over with now,” said Ron Appel, president of Gardena-based United Oil Co., which operates 80 gasoline stations under various brand names in Southern California. “You’ll see prices starting to drop.”
Dennis DeCota, executive director of the California Service Station & Automotive Repair Assn., said political pressure is helping to ease prices.
State Atty. Gen. Bill Lockyer last week widened an investigation into the way gasoline prices are determined. State Senate committees on energy and transportation are planning a joint hearing on gas prices Wednesday, with testimony from industry officials and the California Energy Commission.
“The oil companies can’t use refinery problems as an excuse anymore,” said DeCota, who runs two 76 brand stations in Marin County.
He pointed to California Energy Commission figures, released this week, showing that refineries are bringing in margins of 58 cents to 70 cents per gallon, while dealer margins have, in some cases, been less than zero. Normal refinery margins are about 20 cents a gallon. (A refinery margin or dealer margin is not profit, but the amount of money available to pay all costs. A large margin would leave more for profit than a small margin would, although some oil companies with refinery problems have had to fill production gaps with more expensive, imported products.)
Chevron spokesman Fred Gorell said the price of gasoline is determined by the supplies available, the demand and competition in individual markets.
Gasoline prices probably will not fall back to pre-spike levels because California is switching to the more expensive gasoline required during summer and because of rising crude oil prices after a new round of OPEC production cuts.
On Friday, West Texas Intermediate for June delivery settled at $17.94 a barrel, off 24 cents, on the New York Mercantile Exchange.
Back in La Habra, a town with 55,000 residents and more than 20 gas stations, gasoline can be sleuthed out at $1.439 a gallon at a few stations.
“I really notice the prices when I drive,” said La Habra resident Gloria Veyda, who was filling up her Toyota with $19.50 worth of Mobil gasoline at $1.459 a gallon. Before the price jump, $10 would fill the tank, she said.
“When you need it, you need it,” she shrugged. “You pay whatever you have to pay.”
La Habra Unocal charges $1.439 for self-service regular unleaded, but still maintains a single full-service pump, currently at $1.899.
“At $1.43, I’m losing about half a cent a gallon,” lamented co-owner Henry, who has received too much grief from customers and his suppliers to give his last name. “It’s the competition. There are too many gas stations in La Habra.”
