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Southland Glut Fuels Drop in Gasoline Prices

Retail: Cost hovers near $1 a gallon in O.C., its lowest level since 1989. One station will charge 99 cents today.


FOUNTAIN VALLEY — Southern California motorists who got a nasty shock when fuel prices soared earlier this year are in for a nicer surprise now.

The price for a gallon of gasoline has been dropping steadily and is hovering at $1, the lowest level since 1989.

At one gas station in Fountain Valley, a gallon of self-service regular unleaded will go for 99 cents today, while nearby stations will be offering the same grade for about $1.19. The average price for a gallon of regular unleaded gas in Orange County is $1.09 while the statewide average remains at $1.32, according to industry figures.

The low price brought a big smile to Ruthie Scott when the Fountain Valley resident pulled into her usual Arco station Thursday and saw the $1.01 price for a gallon of regular.

"It's wonderful," Scott said, obviously enjoying the bonanza. "We were up in San Francisco and the Sacramento area several weeks ago, and the gas up there was more than $1.30 a gallon. It's nice to see it back down again."

Frank Itani, the manager where Scott bought her gasoline at Brookhurst Street and Slater Avenue, said the price will go down even further.

"We're going to 99 cents at midnight. We only make about 3 cents' profit for each gallon of gas and we have low prices so we need to deal in high volume," he said.

State experts said Thursday that the glut of gasoline is a Southern California phenomenon, and not being felt statewide.

"We're not seeing that in Central and Northern California," said Claudia Chandler, a spokeswoman for California Energy Commission in Sacramento. "It's more like $1.35 for regular unleaded in Northern California."

Chandler said that high volume dealers such as Itani are getting small profit margins because the wholesale price for gasoline was 72 cents a gallon on Oct. 17.

"You're telling me," Chandler said, "that with taxes, profit margins, transportation costs, and all the people in between, that it's selling for about a dollar? You're getting a good deal down there in Southern California. I want to fill up too."

Itani's business was so good Thursday that he was handling as many as 10 to 12 customers at a time. That kind of volume demands three truckloads of gas a day, he said.

But with so many customers, pumping gasoline causes delays and tensions to mount.

Joe Bensler, 62, of Fountain Valley said he was cut off and honked his horn at the other motorist. A heated argument followed.

"Can you believe that guy?" Bensler said. "He cuts me off, and he wants to argue with me because I honked my horn at him. Come on, I drive 20,000 miles a year and I wanted to pull into this station because I could use all the breaks I can get."

Motorists like Bensler haven't seen such low prices locally for seven years, although last January there was a low-cost spurt.

"Of course I saw the low price," said Bernard Hinson, 60, of Santa Ana, who filled up his compact at Itani's station. "That's why I pulled in here. I just paid $1.05 last week and two weeks ago I paid about $1.21 a gallon. It's been great! Keep it going."

The glut was probably caused by a simple but overwhelming market law: Gasoline production in the state's refineries is significantly exceeding demand--the opposite of conditions earlier this year when pump prices surged above $2 a gallon in some locations.

The spike--at a time of flat to declining crude oil prices--was worst in California but spread across the nation, outraging drivers, energizing politicians and spawning investigations in Sacramento and Washington.

The probes turned up little evidence of price gouging but cast a spotlight on California's tight refining market. Analysts said that closures of refineries over the years have left the state with little cushion when refinery production falls.

During the week of Oct. 7, gasoline output averaged 955,000 barrels per day, or 6% more than average daily demand of 900,000, according to the California Energy Commission.

Refineries' production levels last week averaged 96% of capacity after dipping as low as 80% earlier this year, the commission said.

Beginning in February, a series of refinery accidents and fires, shutdowns caused by state-mandated conversions to clean burning gasoline refining, and dislocations in the world price and availability of crude oil prices combined to drive up gas prices 30% over four months.

As of Thursday, the average price for an unleaded gallon of gas in the Los Angeles basin was about $1.05, said Automotive Trade Organizations of California, an Irvine-based group representing owners of more than 2,500 service stations in the state.

For Carla Fuchs, 51, of Irvine, the reason why the prices were low was not as important as finding a gasoline station.

"I was driving on the freeway and wasn't paying any attention to the gas gauge," Fuchs said. "All of a sudden I noticed it said empty, and I pulled off and headed for this station. But I'm glad I did, otherwise I wouldn't have found such low prices. You don't get good prices like this in Irvine where I live."

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