Pump Prices Expected to Fall Slightly

California’s average gasoline price hit a new record of $2.157 a gallon Monday, but market watchers predicted it would drift lower in the coming days and weeks before climbing again.

The statewide average for self-serve regular, up 3.1 cents from the previous week, topped the earlier peak of $2.145 reached on March 17, 2003, according to the federal Energy Information Administration.

Despite the uptick at the pump, the wholesale price of gasoline on the Los Angeles spot market fell more than 12 cents in the last week, and that should be passed on to service stations and motorists. Monday’s wholesale spot price of $1.38 should soon produce a retail price of just less than $2 a gallon, including transportation costs, taxes and dealers’ profits, according to a formula used by Tom Kloza, chief oil analyst at the Oil Price Information Service, a company that tracks fuel markets.

“The worst of it should be over until you get into the summer time,” he said. Then, Kloza and officials from the EIA said, high crude-oil costs, rising demand and low inventories would push gasoline prices nationwide to new highs during the peak driving season.

Bob van der Valk, bulk fuels manager for Cosby Oil Co., said Shell Oil Co. already had begun cutting the price it charges its dealers for tankers of branded gasoline.

“I think we’ll see it going down 3 cents or 4 cents a week as long as we don’t have any refinery problems,” he said of retail gasoline prices.

But diesel prices haven’t fallen on the wholesale market: Monday’s wholesale spot price for diesel was $1.525 a gallon in Los Angeles, up from $1.018 less than a month ago, according to the Oil Price Information Service.

“It’s very obvious that we now have a diesel crisis,” van der Valk said, “as well as a gasoline crisis.”

Nationwide, the average price for a gallon of self-serve regular inched up less than a penny to a new record of $1.786, according to the EIA’s weekly survey. The figure was 19 cents above the year-ago average.

Meanwhile, traders in New York on Monday sent crude-oil and gasoline futures soaring after the Paris-based International Energy Agency raised its estimate of demand for crude oil, adding to worries about summertime supplies.

The cost of the nation’s benchmark grade of crude for May delivery surged 70 cents to $37.84 a barrel on the New York Mercantile Exchange, while regular gasoline rose almost 3 cents to $1.18 a gallon -- a new record.

The sustained rise in retail prices has fueled calls for hearings and investigations, but motorists, while willing to complain, seem unable to cut back on driving. Federal figures show gasoline demand in March was 4% higher than a year earlier, well above estimates.

Strong demand and high prices have pumped up margins at refineries, especially in California. Publicly available margin figures include profit as well as a variety of operating costs, though not the cost of crude, but are nonetheless indicative of how high profits have climbed, because operating costs don’t change substantially over short periods.

For example, at Shell’s Bakersfield refinery, which is slated for closure Oct. 1, the refining margin was $23.01 per barrel of gasoline produced on April 5, or $16.78 above the company’s projection. At Shell’s Los Angeles refinery, the margin was $22.93, while at its Martinez refinery in the Bay Area, it was $21.82; these were $17.54 and $15.95 above projections, respectively.

Analysts are anticipating record first-quarter profits from Shell and other major refiners.