Gas prices, refiner profits shoot higher
www.nctimes.net Dan McSwain North County Times
Retail gasoline prices continued to surge higher Monday amid indications of soaring profits for some oil refiners and reports of scattered shortages at wholesale tanker terminals in Southern California.
In North County, the average gallon of regular cost $2.11, up 8 cents in a week, with only a handful of stations still selling for less than $2, according to a survey of 218 stations by the North County Times.
California's average was $2.08, a full 37 cents a gallon higher than the national figure of $1.71, reported a survey by the U.S. Department of Energy.
Energy analysts and gasoline traders said that North County's average is almost certain to shoot past $2.35 in the next week or so as California's oil industry reduces supplies during a technically difficult transition to a new grade of low-emissions gasoline.
North County drivers have swallowed increases of 55 cents a gallon since Christmas, a premium that costs the average, two-car family an extra $55 a month, according to state driving estimates.
"We have been expecting some bumps in California as people figure out how to handle this product going from winter to summer," said Joanne Shore, senior analyst at the U.S. Department of Energy. "Unfortunately, those bumps come on top of already high prices."
Powering retail price hikes were the state's seven dominant oil-refining companies, which have imposed dramatic increases in their charges to gas station owners.
Wholesale gasoline has jumped from around 70 cents a gallon in early January to nearly $1.50 on Monday. After accounting for 51 cents a gallon in federal, state and local taxes, the increases have forced dealers to fill empty storage tanks with fuel costing more than $2.
Oil economists say that about half of the increase is explained by higher world costs for crude oil, which have surged 50 percent since December in the wake of a political instability in Venezuela and war clouds in the Persian Gulf. The other half appears to have gone directly to U.S. refining giants.
Refiners averaged 53 cents in revenue from each gallon sold in California last week, up 96 percent from the 27 cents they earned in January, according to an estimate by the California Energy Commission, a state planning agency.
Station owners received an average 15 cents a gallon last week, while the cost of crude oil accounted for 89 cents, officials estimated.
Oil industry executives have generally attributed the recent rise in retail prices to underlying increases in crude oil costs. But on Monday officials acknowledged earning wider "refining margins," a term that describes the piece of each gallon sold that companies retain to cover operating costs and profits.
"Refining margins are obviously much better today, but they were negative on the West Coast last year," said Mary Rose Brown, chief spokeswoman for Valero Energy Corp., a San Antonio refining giant that owns two facilities in California.
Nicole Hodgson, a spokeswoman for ChevronTexaco Corp., the state's largest refiner, said that the firm has had no supply problems and is simply charging as much as consumers will pay.
"Like any good business, we charge what is competitive in the marketplace," Hodgson said. "If that's competitive, then people will come in and buy some gas."
However, there were signs Monday that consumers could be in for a breather. State officials say that gasoline imports increased in recent days, and oil industry officials say that an end to annual refinery maintenance could soon boost supplies and force down wholesale prices.
"My guys tell me that somewhere between the 9th and the 13th (of March), things will get back to normal," said Brown, the Valero spokeswoman.
Brown and other insiders say that a huge Arco refinery in Carson has been shut down for maintenance for two weeks longer than expected, panicking a market already rattled by rising crude oil prices and worries about supplies.
California drivers are no strangers to seasonal price spikes: Five of the last six years have featured sharp increases at the pump that began in February or March, according to the Energy Commission. However, the previous episodes have each been preceded by supply problems, typically from breakdowns at refineries.
Yet this time, analysts say that supplies are generally abundant according to federal inventory figures, although some truck terminals have reportedly run out of gas in the last week.
"I just can't imagine that there would be any shortage, anywhere, of gasoline right now," said Margaret Felts, a veteran refining analyst who heads MC Felts Corp. "What that means is that they (oil companies) are trying to make it look like a shortage."
Shore, the Department of Energy analyst, said that refiners may be experiencing short-term disruptions as they draw down storage tanks in order to avoid mixing winter grades of gas with a new, summer grade of low-emissions fuel. Under orders from Gov. Gray Davis, refiners are switching to ethanol, an agricultural product, and halting use of methyl tertiary butyl ether, or MTBE, an additive that burns cleanly but fouls groundwater.
Gasoline traders say they have been nervous about the transition for months, because ethanol takes up less volume than MTBE, forcing refiners to either produce or import 5 percent more gasoline, an enormous amount in the supply-constrained state.
Indeed, buyers for independent, "unbranded" stations say that local markets have been roiled by a series of mysterious spot shortages at refueling terminals for tanker trucks.
"There is no gas available in L.A.," said Bob van der Valk, manager of bulk fuels for Cosby Oil Co., an independent wholesaler in Santa Fe Springs. "We're lined up at the rack and sucking it out faster than they can put it in the tank."
Contact staff writer Dan McSwain at (760) 740-3514 or dmcswain@nctimes.com.
More on gas prices at www.nctimes.net/gas 3/11/03