Price of gas may reach $3 a gallon

Article Last Updated: Tuesday, March 11, 2003 - 11:29:01 PM PST

www.dailynews.com209541237105,00.html By Evan Pondel Staff Writer

The average price of a gallon of regular gasoline in Los Angeles hit a record $2.076 on Tuesday and industry experts said it will keep rising steadily toward a once-unimaginable $3 a gallon.

The price has easily cleared the old record of $2.034 reached May 25, 2001, according to the Automobile Club of Southern California. And several factors, including a supply shortage, are poised to send prices even higher.

"It's going up, up, up," said Bob van der Valk, a wholesaler with Cosby Oil in Santa Fe Springs. "If there is no relief, it wouldn't surprise me to see prices end up at $3 a gallon."

Los Angeles drivers are not alone in their woes at the wheel. The average price of regular gasoline in Southern California hit $2.085 Tuesday, up 36 cents from the Feb. 11 average of $1.725. San Francisco motorists are spending an average of $2.140 for a gallon of regular gasoline, a 24-cent increase from last month.

"OK, enough is enough already. I've never really cared about the price of gasoline, but how can you avoid those numbers? You can't," said D'Artagnan Figueroa, 32, squeezing off a few gallons for his jet black Chevy Tahoe. "Between my Tahoe, my Impala and my van ... yeah, I'd say I'm spending a lot of money right now."

Prices are being affected by fears of war, rising crude oil costs and a petroleum workers strike in Venezuela.

But California's boutique blend of gasoline is the No. 1 culprit, said Rob Schlichting, spokesman for the state's energy commission.

To produce what is known as Carbob, or California Air Resources Board Oxygenated Blend, refiners must mix a complex gasoline and ethanol concoction to cut down on emissions. Carbob coupled with a seasonal change from a winter to summer-grade gasoline blend have tightened supplies and therefore raised the price at the pump, Schlichting said.

The switch in fuel has been amplified by the prospect of war in Iraq, causing many refiners to keep a tight rein on supplies.

Van der Valk said profit margins are rising with hikes in gas prices.

As of March 10, refiners' cost and profit margin was about 55 cents for every gallon of gasoline valued at $2.08. Whereas on Jan. 6, refiners' cost and profit margin was 27 cents for every gallon of gasoline valued at $1.58.

But rising gasoline prices aren't only a boon for refiners, as state and local government treasuries also are taking in a share of the increased prices at the pump.

"It's the silver lining to the black clouds right now," said Dan Blake, a professor of economics at California State University, Northridge.

Both the state and city collect sales tax on gasoline, which registers at 8.25 percent in Los Angeles. A majority of the tax goes to the state coffers, while the city keeps a fraction for transportation.

In 2000, California generated about $2.6 billion in sales tax revenues from gasoline, on approximately 14.7 billion gallons.

"Rising gasoline prices is definitely a windfall for the state," said Ron Roach, spokesman for the California Taxpayers Association.

Factoring a 50-cent increase in gasoline prices since last year, the state has churned about $500 million more in sales tax revenues thus far, Blake said.

"I suppose, depending on the situation, that number could increase substantially," he said. "But it's not nearly enough to offset the state's ($34 billion) budget deficit."