High fuel prices are puzzling

The middlemen who buy and sell fuel on the wholesale market have seen Los Angeles gasoline prices plunge more than 50 cents in the last two weeks.

Too bad drivers aren't seeing the full benefit at the pump.

On Friday, the most recent trading day, the wholesale gasoline price in Los Angeles hovered around $2.17 a gallon -- a figure roughly equal to a retail price of $2.77 a gallon after taxes and other costs were included.

But on Monday, service stations in the city were selling self-serve regular for an average of $3.221 a gallon. Consumer advocates and others smell a rip-off. As proof, they note that a few California refiners have reacted by cutting production, shutting down early for maintenance and lining up exports in an effort to shore up wholesale prices.

"The California economy has been penalized by high gas prices for months, and now, when the opportunity comes for a brief window of significantly lower prices, the workings of the market are being frustrated," energy economist Philip K. Verleger Jr. said. "The people who own refineries are doing everything they can to prevent [the declining wholesale price] from trickling down to the consumer."

Erika Zamora, a teacher at Breed Street Elementary School in Boyle Heights, is among the legions of drivers who yearn for a price break.

"It would be nice if we could get under $3," Zamora said as she paid $3.179 a gallon at a Boyle Heights Shell station Friday. Her commute from Chatsworth has gotten so expensive, she said, that "all I asked for for Christmas was gas cards."

A smattering of Los Angeles-area gas stations have begun to lead the way downward, with sub-$3 prices popping up Monday at Arco and no-brand stations in Bell Gardens, Downey and Santa Fe Springs, according to GasBuddy.com, an Internet site that posts price reports.

Joseph Sparano, president of the industry trade group Western States Petroleum Assn., acknowledged that "there seems to be a pretty wide gap between wholesale and retail" prices for gasoline. But he said that retail prices had begun to fall and that showed the California fuel market was working as it was supposed to.

"When supply is up and demand is down, the market will seek an outlet so that they come back in balance. That's still a fact of life in a capitalist system," Sparano said.

The downward pressure stems from several unusual conditions.