Gasoline hits record high in Bay Area - $2.19 for regular unleaded in S.F.

www.sfgate.com Verne Kopytoff, Chronicle Staff Writer Wednesday, March 5, 2003

Gasoline prices climbed to record highs across the Bay Area Tuesday, topped by San Francisco, where regular unleaded fuel cost an average of $2.19 a gallon, a new survey showed.

The milestone, based on daily data, puts a big exclamation point on three straight months of increasing costs at the pump. Though unaware of Tuesday's historical significance, drivers filling their cars knew one thing: They were paying too much.

"It's ridiculous," said Sandra Cerrigan, a sales assistant for an investment bank who had just paid $2.23 a gallon to top off the tank of her Land Rover at a Chevron station in San Francisco's South of Market neighborhood. "We're getting gouged."

Gas prices, which had been just shy of record levels since last week, leaped several cents overnight, according to a daily survey by AAA of Northern California. It was enough to break records in Bay Area cities and in California as a whole.

In addition to San Francisco, historic highs were reached in Oakland, where regular averaged $2.09, AAA said. In San Jose, the new peak was $2.08. Vallejo's was $2.04. Statewide, the new high was $2.04.

California's previous record was $2.03, set May 13, 2001, according to AAA. San Francisco's high, on a monthly basis, was in June 2001 at $2.17.

Tensions over a potential war in Iraq, cold weather on the East Coast and a strike in Venezuela are blamed for the soaring gas prices. They have pushed the cost of crude oil to $36.70 a barrel, just shy of a 12-year high reached last week.

Sean Comey, a spokesman for AAA, said gas prices may go even higher. After all, winter is usually among the cheapest times to fill up your car, he said.

"Typically, March is the beginning of what we consider to be the summer driving season," Comey said. "Prices usually head up from here."

Analysts said a U.S. attack on Iraq would almost certainly cause prices to rise, at least temporarily. They point to the Gulf War in 1991 as a model.

During the war, oil prices jumped for a couple of days until victory seemed assured. At that point, they plummeted.

When taking into account inflation, current gas prices aren't actually as high as they seem. A gallon of gas today would have to cost $2.70 to surpass what drivers paid in 1981.

That was after President Ronald Reagan deregulated gas prices. Pump prices shot up briefly but then returned to earth.

Nationally, gas prices averaged $1.68 Tuesday, according to AAA. The record is $1.72, set on May 15, 2001.

CALIFORNIA'S SPECIAL BLEND

California's gas is usually more expensive than most states. One reason is that fuel taxes here are higher than elsewhere.

But another factor has to do with California's special blend of lower-smog fuel. Refineries in the state produce just enough gas to satisfy the state's demand.

That increases the likelihood of shortages if a refinery catches fire or undergoes maintenance.

Refineries are switching from making winter gas to a different blend used during the summer to help reduce smog, which modestly curtails production.

San Francisco, in particular, has some of the Bay Area's most expensive gas.

The explanation given by station owners and analysts is the high cost of doing business in the city and the lack of highly profitable mini-marts.

The rise in gas prices has raised concerns among some politicians and consumers about collusion in the oil industry. A handful of U.S. senators and state officials have asked the Federal Trade Commission to investigate the matter.

A spokesman from the FTC declined to comment.

Sen. Barbara Boxer, D-Calif., has asked her staff to look into the issue of high gas prices but has not gone so far as to request an investigation by the FTC, according to her spokesman David Sandretti. He said that she'll announce something about gas prices within the next day or two.

Susan Hahn, a spokeswoman for the American Petroleum Institute, an oil industry trade group, insisted that the higher prices aren't a consequence of profiteering. She said that they are determined largely by crude oil prices and other factors.

"Various versions of this type of concern have been voiced many times," Hahn said. "And there have been many investigations at various levels of government, and they always come back showing that the No. 1 one thing that affects the price of gasoline is the basic factors of supply and demand."

But many consumers are convinced otherwise. At the SoMa Chevron station, drivers offered explanations ranging from an effort by President Bush to enrich his oil industry friends to manipulation by the service stations.

Virtually all the drivers complained that they have no alternative. But most also said that they try, within reason, to shop around for the lowest price.

SHOPPING AROUND

Susan Watson, a state Health Services Department worker from Oakland, said she tries to buy from some cheaper service stations near her gym in San Leandro. This time, however, she had no choice, because her motorcycle was running close to empty.

"It cost $10 to fill up my tank, and that's for a motorcycle," Watson said. "I used to pay $6."

Watson, who also owns a car, said she is thinking of buying a hybrid car, which runs on a combination of gas and electricity, to save money in the future.

Sam Van Vactor, president of Energy Insight, an energy consulting and research firm in Portland, Ore., said that gas prices are high enough that some consumers may indeed change their driving habits. They may ultimately buy more fuel-efficient cars or take public transportation.

But Van Vactor added that it takes time.

"Typically, people use credit cards," he said. "They have to wait until the bills start to pile up."

E-mail Verne Kopytoff at vkopytoff@sfchronicle.com