Gas prices in California fall 7.1 cents

Gasoline prices continued to slide over the past week, down another 7.1 cents on average in California and off by 3.6 cents nationally, the Energy Department said Monday.

But the trend might end within a week, analysts said, as refinery problems add up and high Labor Day demand draws down inventory.

The average price of a gallon of self-serve regular reached $2.791 in California, according to the weekly nationwide survey of gas stations by the Energy Department’s statistical arm, the Energy Information Administration.

That was 30.7 cents below the state average the same week a year ago and 19% below the record high of $3.461 on May 7.

The average price nationally fell to $2.749 a gallon. That was 9.6 cents below the same week a year ago and 15% below the record high of $3.218 on May 21.

But gas supplies have dropped sharply, down 5.7 million barrels in a week to 196.2 million barrels as of Aug. 17, which was 9.6 million barrels below the level on Aug. 17, 2006. Analysts expect the Energy Department to report another decline in inventories later this week.

That, coupled with the news of problems at Citgo’s 156,000-barrel-a-day refinery in Corpus Christi, Texas, and at Chevron Corp.’s 330,000-barrel-a-day Pascagoula, Miss., refinery could result in the unusual situation in which prices fall through the Labor Day weekend, then begin to rise again.

“That’s very rare thing that could happen. We have shown that our refineries are still playing catch up and they are prone to problems. With demand still running high, the more we ask of them the more problems we will have,” said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago.

Analysts blamed the same refinery problems for Monday’s 88-cent rise in crude oil futures for October delivery to $71.97 a barrel on the New York Mercantile Exchange.

The good news for motorists in California and the rest of the West: Refineries here have avoided the problems that have been occurring in the Gulf Coast region.

“The West Coast is a little better off on supply. Refineries have been running well all summer and when we do see problems, they have been relatively minor in scope,” said Denton Cinquegrana of the Oil Price Information Service in New Jersey.

But the experts were split on the course of oil and gasoline prices for the rest of the year.

Some, like Mike Fitzpatrick, vice president for energy for Man Financial Inc. in New York, said that the Gulf Coast refinery problems could signal a new round of production difficulties that might not be discovered until more refineries retool to switch to winter blends of gasoline. With supplies tight, that could signal new price hikes.

“That’s when the refineries discover things they didn’t know about. This is aging plant and equipment that hasn’t gotten any younger over the summer and there could be problems,” Fitzpatrick said.

Others expected prices to fluctuate, showing no real pattern in the coming months.

“The leading edge prices by the major players may drift a bit higher, but there are no big moves in sight. It’s difficult for gasoline to have a meaningful rally during the last 125 days of the year,” said Tom Kloza, also of the Oil Price Information Service.

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ron.white@latimes.com