STEPHEN GAUT

Staff Writer

Gasoline prices continue to fall in California, with prices in most areas -- such as North County -- dropping by 5 cents per gallon since last week, while prices nationwide stabilized.

The declining prices are creating some big gaps within the state, with smaller cities in Central California charging 30 to 40 cents less than large coastal cities.

In the North County Times weekly gasoline price survey, the average price per gallon in North County is $1.74, down a nickel from last week. It could be found, however, at $1.61 -- one lucky consumer even reported it at $1.48, but with a wait of 10 minutes at Costco.

The average for Los Angeles and San Diego County as a whole is $1.78 per gallon, and the national average is 40 cents lower than that, or $1.38 per gallon, down 2 cents from last week.

And after several weeks of decreased gasoline production in favor of diesel fuel, gasoline inventories are declining to more normal levels but are still 19 percent above this time last year, according to reports from the California Energy Commission.

Diesel fuel production still remains high, 52 percent above last year for the week ending July 20.

"Conditions are such that we would anticipate prices to continue going down," said Paul Gonzales, American Automobile Association spokesman. "But refiners in California are trying to limit the amount of supply coming on to the market. It is an effort to stabilize, or even raise prices."

The decreased production has apparently caused an increase in the spot market price of gasoline: Los Angeles spot prices hit 80 cents per gallon in mid July (down from $1.40 in April) but have swung back to $1 per gallon in recent days.

That could mean that prices at non-branded independent stations like Costco, which rely on the spot market for fuel purchases, may have hit bottom and will increase in upcoming weeks. A wholesale price of $1 per gallon translates into about $1.60 at the pump after adding in taxes and fees (50 cents) and a healthy dealer margin (10 cents).

American Automobile Association surveys show big gaps in prices between various cities: the average in Fresno is $1.46 per gallon while 150 miles away in San Jose the average is $1.82. The average in Yuba City is $1.54 and Bakersfield is $1.62, the association reports.

Dennis DeCota, president of the California Service Station and Repair Association, said that areas like Fresno and Bakersfield have traditionally served as a "dumping ground" for excess gasoline in order to keep prices in big metropolitan areas high.

The gasoline price spikes that began in February and peaked in May turned some normal price relationships among California cities upside down. But with the declines of recent weeks, old patterns appear to be emerging.

Los Angeles prices are normally 5 to 10 cents per gallon below San Diego prices and in recent weeks have pulled even after being higher for almost two months. Prices in Southwest Riverside County and Orange County normally track Los Angeles prices.

There is no discernible reason for gasoline costing so much more in San Diego compared to other regions, such as the Fresno area. Gasoline is refined in Los Angeles and shipped into the county through a pipeline system that terminates in Mission Valley. Zone pricing, the practice of big oil companies charging more for gasoline in certain regions like San Diego, is a legal and widespread practice in the oil industry nationwide.

"Petroleum has been so highly overpriced for so long in California, we don't know what the right price should be; they (oil companies) have used California as a breadbasket."

DeCota said that given California's proximity to Alaskan crude oil supplies and the large refineries operating within the state (which export gasoline to neighboring states), gasoline prices in California should be among the nation's lowest rather than among the highest.

Contact staff writer Stephen Gaut at (760) 740-5412 or sgaut@nctimes.com.

7/31/01