Pump prices stuck on ‘up’

Published on

The San Diego Union-Tribune (California)

Gasoline prices in San Diego continue climbing to record highs and show no sign of coming down soon.

Regional gasoline prices yesterday averaged $3.13 a gallon for regular, up 16 cents in the past week and 41 cents in the past month, according to a survey by the Utility Consumers’ Action Network.

That shatters the previous record of $3.07 per gallon UCAN found in a survey just last Thursday.

The run-up prompted Gov. Arnold Schwarzenegger yesterday to call for a state investigation into the oil industry, while a state legislative committee narrowly approved a windfall profits tax on the industry.

Meanwhile, oil companies this week are expected to begin reporting another round of record or near record quarterly profits.

About the only glimmer of hope for motorists is that market watchers have at least begun speculating on when prices might fall.

Charles Langley, who oversees UCAN’s gas monitoring project, said he expects a softening of prices a week from now, as some refineries now operating at reduced capacity come back to full production.

But the Auto Club of Southern California sees no reason to anticipate a break in what have become record gasoline prices.

In Oceanside, one dealer of unbranded gasoline said wholesale prices had eased from about $3.26 to $3.19 a gallon but remain at levels that make it difficult to compete.

The dealer, Mohsen Arabshahi, said his wholesale costs remain well above retail prices at some branded dealers. “Everybody says it will be a tough summer,” he said.

Karen Matusic of the American Petroleum Institute said gasoline supplies remain tight because of refinery problems.

Domestic refineries are producing at about 87 percent of capacity, compared with 94 percent at this time last year, she said. “In the summer, the refineries push to 97 or 98 percent of capacity,” Matusic said.

She said the lower output is attributable to refineries still recovering from hurricane damage, as well as reduced production from plants that had been undergoing maintenance but were called on to help fill production gaps caused by the storms.

But consumer groups, such as the Foundation for Taxpayer and Consumer Rights in Santa Monica, say the industry has sought to limit refinery output and keep gas supplies tight.

“Of the 60-cent increase in gasoline prices this year, 42 cents is entirely attributable to refiner profits,” said Doug Heller of the foundation. “That’s not a supply issue or a crude issue. It’s a gouging issue.”

The foundation is calling for a windfall profits tax on the industry, among other measures.

The call for an oil profits tax got some support yesterday when the Revenue and Taxation Committee of the state Assembly voted 4-3 to support a measure to levy a 2 percent tax on oil-company income of more than $10 million.

Proceeds from the tax would be used to help low- and moderate-income senior citizens pay for prescription drugs.

Assemblyman Johan Klehs, D-San Leandro, accused oil companies of taking advantage of the Gulf Coast devastation caused last year by hurricanes Katrina and Rita to increase gasoline prices.

“The only thing I can think of why prices are going up is pure and simple greed,” he said. “The way oil companies can avoid paying this tax is (by) reducing the price of gas at the pump.”

An opponent of the proposed measure, Joe Sparano, president of the Western States Petroleum Association, blamed pump prices on taxes, business costs, limited refinery capacity and the requirement that California gasoline be the “cleanest on the planet.”

“The bottom line is this bill is likely to bring higher prices and no increase in energy supplies, which is the real problem,” Sparano said.

Schwarzenegger, meanwhile, asked the California Energy Commission to investigate whether gasoline prices are rising because of price gouging. He also wants the state to look into the finances of “big oil companies.”

“The citizens of California deserve a vigilant watchdog over this market and a full-blown analysis to determine to what extent the behavior of big oil companies is driving these record-high prices,” Schwarzenegger said.
The Associated Press and Reuters contributed to this report.

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