Daily News of Los Angeles
For months, Southern Californians have worried that the looming war in Iraq could drive up fuel prices and force them to rethink their gas-guzzling ways.
Now that worry has turned to frustration as gas prices break the $2-a-gallon barrier and keep climbing.
All motorists are feeling the pinch, and some are starting to change — or at least think about changing — their driving ways.
“I’m dying,” said Scott Sobel, a single parent and independent locksmith in Woodland Hills who drives his Ford Arrowstar minivan hundreds of miles a week to jobs as far away as Bakersfield, Palmdale, Long Beach and Ventura.
“I fill up at least three times a week. I — just yesterday — filled up, and it cost me $40, and I didn’t even fill up all the way.”
Every dime increase in a gallon of gas adds an extra $100 to the typical California household annual budget, according to a regional study released last week by the University of California, Los Angeles’ Anderson School. That means consumers have seen an annualized increase of $480 in their fuel bill in the first two months of the year.
If gas prices hit $2.50, the increase approaches $1,000 per household.
California, with the highest gas prices in the country, has felt the impact of a 50-cent-a-gallon rise since January. In just the two-week period that ended Monday, prices in California spiked more than 16 cents, compared with an average increase nationwide of just 5 cents.
Jitters about war with Iraq and labor strife in Venezuela, both major exporters of crude oil, affected the whole country. Prices in California were further affected by “clean” fuel requirements. This month, for instance, stocks of winter-weight fuel are being switched to summer-weight using a new formula — adding to price pressure, said Rob Schlichting, a spokesman for the California Energy Commission.
Sobel, the locksmith, said he could pass the increases on to his customers, but he’d rather wait and see whether prices drop before taking that step.
“I’m not a good thief; I’m a good locksmith,” he said. “My business is to try to save people as much money as possible.”
But other small businesses are increasing delivery charges and other fees to help offset the increased cost of gas.
Elegant Entrees, a three-employee catering company in Redlands, is planning to add an extra $1.50 per delivery to cover the higher cost of filling the Ford Taurus station wagon used for deliveries, said Debra Gaude, a cook and server with the company.
“We do daily deliveries through Redlands up to Highland and school district meetings as far as Rancho Cucamonga,” she said. “It takes a toll.”
Independent truckers are feeling the pain as well.
Their diesel fuel, which isn’t affected by the formula-switching for regular gasoline, is still vulnerable to skyrocketing crude oil prices and profit-taking by suppliers.
Dempsey Cutchen, a trucker from Alford, Fla., expressed his frustration over the situation last week at the TravelCenters of America truck stop near the intersection of Interstate Highways 10 and 15 in Ontario.
“I’ve been driving for almost 44 years, and this is the worst I’ve ever seen,” he said. “The government is letting oil companies raise their prices as high as they want.”
Last Tuesday, the truck stop’s diesel fuel was selling for $ 1.96 a gallon, compared with $ 1.99 for regular gas and $ 2.19 for premium.
Cutchen’s Freightliner Classic has two fuel tanks that together hold 500 gallons of diesel fuel.
“You just hope you can make your truck payment … and your house payment,” he said, adding that at these prices, a trucker has to wonder whether it’s worth the drive. “I just ran this trip for free.”
Higher diesel and gas prices could eventually ripple to prices away from the pump, as vendors pass on the higher cost of transporting goods.
“It hasn’t hit us yet, but it will soon,” said Craig Underwood, a produce grower in Somis.
He said increases in diesel and gasoline, plus higher prices for natural gas, which is used to make fertilizer, will have a dramatic impact on transportation and cultivation costs. For now, however, he can’t pass on the increases to buyers because they would go buy from some other grower willing to absorb the costs in the short term.
“If a supply shortage comes because people go out of business over time, prices will rise. But that takes time. It’s not like today the price of fuel goes up, and tomorrow the price of lettuce goes up.”
Still, with fuel prices heading nowhere but up, consumers could see prices rise on all kinds of products down the line.
“When gas prices go up, it affects every company involved in a nonvirtual business,” said Jamie Court, director of the Santa Monica-based Foundation for Taxpayer & Consumer Rights, which released a report in August alleging that West Coast gasoline refiners are manipulating supplies to keep gas prices artificially high.
“Fruit companies are going to be a little loath to raise prices, but they’ll do the weigh-out where they take a 10-ounce bag and make it an 8-ounce bag at the same price.”
For now, though, worries about the future are being sidelined by more pressing issues, such as what to do about nonessential travel.
South Pasadena resident Marisa Zaycher said she has already cut down on out-of-town trips. She used to drive her mid-1990s sedan to Barstow once a week to see her mother, but with a one-way trip consuming half a tank of gas, she has cut her visits to once a month.
“I’m trying not to drive as much,” said Zaycher, a student at Pasadena City College who uses her car to run errands for a mechanic.
She also switched to cheaper 87-rated octane, instead of 89, and has even considered trading in her car for a hybrid.
“If gas prices keep going up, I’m going to have to. I can’t afford to fill it three times a week at $25. That’s my whole paycheck.”
Like Zaycher, many of today’s drivers weren’t even alive the last time the country experienced such a collective uncertainty about fuel prices.
“The last time we had this kind of change in the consumer mind-set was in the ’70s, when we had gas rationing and the oil embargo,” said Jack Plunkett, chief executive officer of Plunkett Research Ltd., publisher of Plunkett’s Energy Industry Almanac.
“Standing in line to get gas will really make you think twice about what kind of car you drive.”
February auto sales offer strong evidence that people are thinking that way, he said. Last month’s data show declining sales of some popular sport utility vehicles, including the Ford Explorer, and double-digit increases in sales of Honda Civic and Toyota Prius hybrids.
“I’m thinking of getting a smaller truck when I get my income taxes back,” said Jose Ramirez, a mason-block layer in Highland who drives a Ford F-150. “This one used to cost about $20 to fill up and now it costs $40.”
The good news, though it might not make consumers feel any better, is that gas is still a relative bargain. Compared with other consumer products, price inflation of gas is tame. Gasoline has only doubled in price in the past 25 years, said Plunkett.
And even in a worst-case scenario — say if Saddam Hussein torched Iraq’s oil fields as he did Kuwait’s — backtracking to 1970s rationing isn’t a real possibility because the United States has 600 million barrels of oil in its Strategic Petroleum Reserve, said Peter Zipf, editor of Platts’ Oilgram News.
In fact, the reserve was created after the ’70s energy crisis specifically to avoid such a recurrence.
During the Gulf War invasion in January 1991, oil prices shot up but then fell back down the same day that the Strategic Petroleum Reserve released 17 million barrels.
This time around, however, there are some additional factors at play, such as the Venezuelan production strike, which could slow a rapid return to lower oil prices. And if there is no release of reserves, prices could eventually hit $80 a barrel, twice what they are now, said Jack Plunkett. That could double pump prices to $4 a gallon.
Uncertainty about where prices could be headed is causing as much anxiety as where they are now.
“Whenever it goes over that $2 price, everybody starts getting nervous,” said Lynne Craig, president of Standard Catering Inc. in Paramount. “And we don’t know where it’s going to go from here.”
She said the increase might force those operating delivery trucks, which run on propane, which is also up — to $1.50 a gallon from $1.35 — to park or consolidate their routes.
“But you can’t start raising the price of burritos,” said Craig. “Nobody will buy your food.”