Why no relief at the pump?

Q & A: Some states are enjoying a decline in gas prices, why not Southern California?

July 20, 2000

From staff and news-service reports

Gasoline prices in some parts of the country are sinking, but don't expect to see any declines at Southern Californian pumps. Drivers here are actually paying more for gasoline now than they were a month ago.

While the Midwest has seen prices drop as much as 30 cents per gallon since June, Southern Californians are shelling out 10 cents more per gallon for an average of $1.72. The national average for a gallon of gas is $1.59, but in some parts of Indiana, for example, consumers are paying as low as $1.27.

Experts say California is once again a victim of rising oil costs and the old "supply-and-demand" issue. But shouldn't the rest of the nation be suffering the same price spikes, too? Not necessarily. Here's a look at why prices in the Midwest are declining and why they're rising here.

Q. A few weeks ago, gasoline prices in states such as Indiana and Illinois jumped to more than $2 a gallon. Why are those prices dropping now?

A. Pipeline problems caused the summer spike in Midwest gas prices, with the industry saying it couldn't deliver enough fuel to keep prices down. Now those pipeline problems have been fixed. More fuel is making its way to the Midwest, so prices have declined.

Q. But wasn't the Midwest also using a cleaner-burning fuel? Wouldn't that keep prices high, like here in California?

A. Stricter EPA pollution-reduction rules did go into effect in parts of the Midwest and East Coast this summer. In the Midwest, ethanol is used to make gas burn cleaner, and that's expensive. Combined with the pipeline glitches, prices were sure to soar, and they did. Last month, a gallon of unleaded gas averaged $1.98 in Illinois. In response, some states temporarily suspended their gas taxes. Today, a gallon of gas in Illinois is $1.59, the same average price found in Huntington Beach. In Illinois, the 5 percent gas tax won't be added back on until next year.

Q. Why have gasoline prices in California jumped?

A. For starters, the reaction to the shortage in the Midwest cramped supplies here, said oil-industry analyst Phil Verleger.

Gas supplies from the Gulf Coast that otherwise would have come to California were diverted to places such as Chicago, which saw prices hit $2.13 a gallon. At the end of June, California's gas stocks were 6 percent below average, says the Energy Information Administration. With such tight inventories, any glitches with refineries here mean an uptick in prices at the pump. In recent weeks, some refineries in California have experienced minor problems, but production is back to about 1 million barrels a day, close to capacity, said Rob Schlichting, a spokesman with the California Energy Commission.

The cost of oil is also part of the problem, Schlichting said. Oil has been running about $30 a barrel. Oil companies are paying almost 30 cents more per gallon in oil costs this year, compared to a year ago, Schlichting said, when Californians were paying $1.47 a gallon.

Q. Isn't OPEC supposed to start producing more oil? Wouldn't that help the tight supplies?

A. Yes, but consumers won't see relief for a while. Earlier this month, Saudi Arabia began to pump more oil shortly after it said OPEC would add 500,000 barrels of crude oil a day to the market. Saudi Arabian officials have said they favor a per barrel price of $25 and would boost production to achieve that target. But Tuesday, those plans were dealt a blow when OPEC's president said the cartel would not increase production for at least 20 days. Still, some experts predict that once the summer driving season ends and OPEC does increase production, consumers - even those in California - should see prices drop again.

Register staff writer Diana McCabe, The Associated Press and Knight-Ridder Newspapers contributed to this report.

-- cin (cin@cin.cin), July 20, 2000

Answers

I've heard there may be a new process for obtaining crude**go to all animal shelters and get all the cats and put them a vat and boil them down** its a new process and should work and lord knows there a plenty of useless cats for supply***its too bad their meat is so stringy***plenty to feed the hungry**

-- less cats (more better @ shelter now.com), July 20, 2000.

I know it's cliche but...get a freekin life.

-- cin (cin@cin.cin), July 20, 2000.

Record high gas prices in Northern California, too. Strange, since there are numerous refineries up and down the coast.

-- Flash (flash@flash.com), July 20, 2000.

STILL at 1.75 for regular. grrrrr

-- cin (cin@cin.cin), July 26, 2000.

Less:

That's a purrrfect solution.

-- FutureShock (gray@matter.think), July 26, 2000.

$1.399 at a nearby Amoco station yesterday, here in the Midwest near Lake Michigan. Down 70 cents since a couple of months ago.

-- No Spam Please (nos_pam_please@hotmail.com), July 26, 2000.

Better yet...we could just use all cat-hating and animal abusing people in the vats. Throw in all of the woman-beaters too. And how about attorneys and overpaid-unerworked corporate executives who get ALL holidays off WITH pay, and perhaps all of those IRS and census folk. And politicians? yea, you bet. Great idea. {major eye roll}

-- cin (cin@cinn.cin), July 26, 2000.

Cut-that out, Cin. My wife's an attorney. Should I consider this a threat? LOL.

-- FutureShock (gray@matter.think), July 26, 2000.

Still $1.89 for 87 octane in Silicon Valley. Too bad they have to ship so much of our locally refined gas to distant places where there's apparently too much already. Californians are such idiots to tolerate such outragerous profiteering. There are at least 3 refineries within 30 miles or so of here.

-- Gasman (Gman@more.idiots.every.day), July 26, 2000.

I do not get any relief with my pump until I am finished pumping you up.

-- Arnold Schwarznegger (I.want.to@pump.you.up), July 26, 2000.