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Gas prices headed higher

By: GIG CONAUGHTON - Staff Writer

Analysts reported in the middle of the week that gas prices started hitting $3 a gallon in some parts of California. Now analysts say that motorists in the state could be lucky to find anything less than $3 a gallon ---- and that summertime prices could top last year's record high of $3.41 a gallon.

Charles Langley, a spokesman for the Utility Consumer Action Network, a San Diego consumer interest group that conducts a weekly gas survey for the North County Times, said that by today local independent gas dealers could very well have to sell gasoline at $3.13 a gallon ---- just to break even on their costs.

"Prices have gone from atrocious to horrible," Langley said Thursday. "Just to give you an idea of the severity of what's going on, on the 28th of February ---- 15 days ago ---- our calculation for the break-even point for independent dealers was $2.80 cents. Now we think it will be $3.13."

Independent dealers, who aren't attached to specific major oil companies, make up about 18 percent of San Diego County's gas stations, and usually have the lowest gas prices.

Langley said the gasoline "spot market" jumped 10.75 cents Thursday and a whopping 22 cents in 48 hours Wednesday and Thursday. He said the last time he'd seen such a jump was in April and May, just before California saw its highest gas prices in history.

The spot market refers to the price speculators and traders pay for unbranded gasoline.

Since Jan. 4, the average retail price of gasoline in North County had increased from $2.63 for a gallon of regular unleaded gasoline to $2.91 by Wednesday ---- and Langley predicted Thursday that the average price could soon be well over $3 a gallon.

By contrast, the average price per gallon in North County was just $2.45 a year ago ---- a year that saw gas prices climb to the all-time record of $3.41 a gallon in May, fallout from the 2005 devastation that Hurricane Katrina wreaked on the Gulf Coast's oil refineries.

Susanne Garfield-Jones, a spokeswoman for the California Energy Commission, said the government agency believed the spiking gasoline prices were caused by several factors, including:

- An unusually high, "premature" nationwide gasoline demand caused by milder-than-expected weather that led to people driving more.

- Increasing prices of crude oil ---- which has increased from a 2007 low of $50.48 a barrel Jan. 18 to $61.64 Thursday.

- Shortened supplies created because oil refiners were in the midst of switching from "winter blends" of gasoline to "summer blends" ---- which are designed to slow gasoline's ability to evaporate from scorching California heat and reduce pollution.

- Oil companies shutting down refineries for routine maintenance, and then getting caught short by the increased gasoline demand.

- Trouble getting some refineries back on-line.

Tupper Hull, a spokesman for the Western States Petroleum Association, a trade association which represents Shell Oil and dozens of other drillers, refiners and marketers, said the gasoline price spikes in California showed that the market was becoming "increasingly volatile."

"We're seeing greater, larger and more rapid swings in prices than we've ever seen," he said.

Hull said part of that was because California's gasoline demand had gone up "50 percent in the last 20 years," while the number of refineries in the state had dropped from 32 to 14.

"With our supply and demand so finely balanced, it doesn't take very much to see pretty dramatic changes in pricing," he said.

But Langley said that even though the price of crude oil had increased recently, it was still lower than it was a year ago. Langley said he thought the gas market was being "manipulated," and likened the spiking prices to electricity prices that jumped out of control in California's 2000 energy crisis.

"Last year the price of crude was $63 a barrel," he said. "And today the price of crude is ($62). That means we have lower oil prices and higher gasoline prices.

"What's really troubling is that the price of gas has become disconnected from the price of oil," Langley said.

Crude oil accounts for roughly half the cost of a gallon of gas, according to the U.S. Department of Energy. Experts say that every dollar added to the price of crude oil translates to an increase of about 2.5 cents per gallon at the gas pump.

Hull said that over time, the price of oil and gasoline prices generally "track almost identically."

Hull said one way that California could reduce its gasoline "volatility" was to build more refineries ---- but that it was unlikely to happen because of environmental regulations and governmental permitting processes.