Oil Watchdog

Advice to motorists: If you’re holding off the summer road trip waiting for cheaper gas, your moment has arrived.

A cooling of demand, an increase in supply and what some say is
political pressure have driven down gas prices by 18 percent from their
all-time high of $3.50 a gallon three months ago.

All this while crude oil prices have been rising, which typically drives prices at the pump higher.

With sub-$3.00 prices now the norm, gasoline almost looks like a bargain.

The region’s average price for regular is $2.86 a gallon,
according to the Utility Consumers’ Action Network. That’s down from
$2.94 one week ago and $3.10 last month on this date.

Despite the recent declines, motorists should note that it
still pays to shop around because prices continue to vary
substantially, even between stations a short drive apart.

While an Ocean Beach Shell station yesterday was retailing
regular for $3.09 a gallon, a Mission Hills Arco was selling the same
grade for $2.75. In many cases, prices also vary within the same brand.

Anita Mangels, a spokeswoman for the Western States Petroleum
Association, said this reflects zone pricing, a practice she said was
common in other industries.

The differences can be accounted for by variations in business
models, with some stations deriving greater profits from such things as
convenience-store sales or car washes that allow them to sell gas more
cheaply, she said.

In other cases, Mangels said, price differences may be
attributed to when a service station was purchased, with more recently
acquired stations generally having higher overhead costs. Then there
are differences in sales volume, she said.

"Chances are that prices for higher volume dealers are cheaper," Mangels said.

Charles Langley, who oversees gasoline monitoring at UCAN, said
dealers have little leverage in cutting deals for their fuel from major
oil companies.

"The only thing that sets the price of gasoline — outside of oil prices — is the refinery pricing manager," he said.

Or as Judy Dugan, research director for OilWatchdog.org, put it: "They charge what the market will bear in a particular area because they can do it. No one is going to stop them."

There are signs that gas prices could be rising again soon.

Dave Whitlow, owner of Spirit Auto in Lakeside, an independent
retailer, said yesterday that his wholesale gasoline costs had jumped 6
cents from the previous day. Whitlow added that it appears today’s
wholesale prices for gasoline will be even higher.

Then there’s the matter of gasoline demand, whose flattening
appears to have contributed to the falling prices in recent weeks. With
the end of summer looming, many motorists are likely to be topping
their tanks for a final road trip of the season, pushing fuel demand
back up at least briefly.

But Langley doesn’t expect a spike in the next few weeks.

"I see stable to declining prices from now until Labor Day,
unless there are major political tensions or natural disasters,"
Langley said.

Across the country, the federal Energy Information
Administration says a combination of slower gas demand growth and
relatively high supply have depressed prices in all markets. The
administration said yesterday that the national average for gasoline
fell to $2.77 a gallon, down 7 cents in the past week.

Although gasoline supplies in California and across the country
have been falling, an energy administration analyst said they’re not
declining as quickly as they typically do at this time of year. But
Douglas MacIntyre, a senior analyst with the energy administration,
said what’s been happening with demand is perhaps more important.

"Typically, we’ve been seeing growth in gasoline demand of 1.5
to 2 percent," said MacIntyre, referring to a four-week moving average.
"But for most of this summer, the growth has been 1 to 1.5 percent.
Lately, we’ve seen that fall to 0.4 percent."

Langley of UCAN also said he believes that major oil companies
have been under political pressure to keep retail gas prices down while
Congress considered an energy bill. He noted that despite rising crude
oil prices — historically a reason for raising gas prices — pump
prices have fallen.

Those crude prices have risen about $10 a barrel since May.
Crude settled yesterday at $72.80 a barrel, down 53 cents in trading on
the New York Mercantile Exchange.

The major petroleum companies have in effect absorbed the cost
of higher crude prices by cutting back on profits from refining,
Langley said.

But conditions for higher prices could be forming. Statewide
gas inventories fell nearly 10 percent last week, while refinery
production slipped about 8 percent. National inventories slipped 1
percent.