Region’s Gas Price Hikes Expected to Slow

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Fuel: Ample West Coast supplies should help keep the average per-gallon cost well below $2, analysts say.

Los Angeles Times

The surge in average gasoline prices around Southern California–nearly 30 cents a gallon in January–isn’t over yet, analysts said Friday. But they predicted that increases would moderate soon, holding costs at the pump well below the $2 level that alarmed consumers last spring.

The run-up in prices since the beginning of the year–when average prices in Los Angeles County were the lowest in years, at 98 cents a gallon–is expected to slow largely because gasoline inventories on the West Coast are ample.

Still, analysts say, more increases are coming due to the annual switch this time of year from winter-grade to summer-grade gasolines, which are more expensive to produce. In addition, they said, gas station owners are eager to boost prices to reverse a recent trend of squeezed profit margins.

“I think you’ll see prices continue to march up, maybe a dime to 15 cents over the next four to six weeks,” said Fred Rozell, retail pricing director for the Oil Price Information Service, a Lakewood, N.J.-based firm.

Rozell’s firm reported Friday that prices climbed to an average of just more than $1.26 for a gallon of self-serve regular gasoline in Los Angeles County. That was up 4.5 cents from a week earlier but down nearly 23 cents from a year earlier.

Gasoline prices also rose to $1.26 in Orange County and were several cents higher in the Inland Empire and San Diego and Ventura counties.

In early 2001, gas prices were on an upward spiral that took the price at the pump to a record $2.04 in May in L.A. County before tumbling over the next seven months to the lowest price in years.

The price gyrations reflect the increasing volatility of the national and state gasoline markets. The wide swings, some consumer activists contend, stem from price manipulation by the handful of big companies that increasingly dominate the refining and marketing of gasoline, particularly in states such as California.

“When these guys get this big, there’s very little control over them,” said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, a nonprofit watchdog group in Santa Monica.

Most analysts and industry officials attribute the price fluctuations to free-market forces. They cite the dwindling number of refiners and marketers but also government environmental standards requiring varying blends of gasoline for different regions of the country and intensified financial speculation by traders in the energy market.

Also, they say, the increasing efforts of oil companies to cut costs by keeping inventories comparatively low lead to price spikes when production is disrupted by refinery fires or other problems.

Although oil prices in international markets jumped Friday, they are down one-third from a year ago. Gasoline prices nationally have been relatively stable over the last month, hovering around $1.12 a gallon in recent days.

The California attorney general’s office has investigated the possibility of gasoline price fixing since 1999, but no charges have been filed. At the national and state levels, “there have been a number of investigations over the years … but no one has ever proved anything,” said Herschel T. Elkins, the office’s consumer chief.

California has long had its own smog-fighting specifications for gasoline, so its gasoline prices traditionally have been particularly volatile. In the state, “prices whip around, not necessarily in connection with national trends,” said Joseph Tovey, a New York investment banker specializing in the energy industry.

That, analysts say, makes predicting price trends in California hazardous. “We think any price swing upward will be moderate–barring any refinery outages,” said Jeffrey Spring, a spokesman for the Automobile Club of Southern California.

“I don’t see $2-a-gallon gasoline happening this year, unless something major occurs,” Spring said.

Analysts said refinery maintenance work that curbed gasoline production on the West Coast in recent weeks contributed to January’s increase in prices, but they added that the work should be complete soon. What’s more, few analysts expect a big jump in the price of crude oil in coming months, given the weak demand for energy in the global recession.

As a result, the likelihood appears slim that rising gasoline prices could substantially hinder the local economy’s recovery from the current slowdown.

“It certainly looks to me like the increase we’ve had in gasoline prices in January is pretty mild,” said Tom Lieser, a UCLA economist specializing in California issues. “In historical terms, it’s still a fairly moderate range for gasoline prices. I don’t like to see them going up again, but I think it’s a matter of degree.”

Still, some consumers who had gotten accustomed to the lower gasoline prices said they were dismayed by the recent increases. Maribel Ponce, who filled up her SUV at an East Los Angeles Mobil station selling regular unleaded for $1.19 a gallon, said she has cut back on socializing to drive less.

“The only thing I do now is go to school and work,” said Ponce, 20, a UCLA student.

Bob Johnson, 58, said the increase in gasoline prices is hitting him hard because he has a 100-mile daily commute between his home in Riverside and his city job in downtown Los Angeles.

“I still have to come to work every day,” he said while filling up his white Mustang. To save money, Johnson said, he’s taking fewer trips with his mobile home.

But at a another Mobil station downtown, Michael Arseneault, 33, said that the days of prices below $1 seemed too good to be true. “That was wonderful,” said Arseneault, who works as a building concierge for an accounting firm. Still, he said, current prices feel more normal.

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