Oil's fall not reflected at the pump

Gas prices bucking the trend of following crude

By David W. Hill
dhill@modbee.com

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Many people are likely to hit the road this weekend in search of some rest and relaxation in the wake of all the depressing economic news.

But they won't get any farther than their first refueling stop before realizing these holiday road trips are going to cost more than they thought because falling oil prices aren't translating into lower prices at the pump.

The price of gasoline in the Northern San Joaquin Valley and the rest of the state is on the rise despite falling crude oil prices, the AAA of Northern California reported this week.

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The average price for a gallon of regular gas in California jumped 22 cents to $2.23 in the past month, according to AAA's February survey of average prices at service stations statewide. It was released Tuesday. The the last AAA survey was Jan. 10.

"Historically, gas prices follow the path of oil prices," Matt Skryja, a spokesman for the AAA, said in a report on the survey. "But that hasn't been the case so far in 2009."

The culprit appears to be the refineries, he said.

"Refiners have cut back on the amount of gasoline being refined due to the lack of demand and the poor economy," Skryja said. "That cutback has had an impact on supply, pushing retail prices higher while oil prices have leveled off in the $40 per barrel range."

Oil prices plummeted to less than $36 on Wednesday on more evidence that U.S. storage facilities are bulging with unused crude.

Light, sweet crude for March delivery fell $1.99 to settle at $35.94 a barrel on the New York Mercantile Exchange. Oil closed at less than $40 on Monday for the first time in several weeks and has closed lower every day since.

Inventories are up

A report from the Energy Information Administration showed crude inventories jumped by 4.7 million barrels for the week ended Feb. 6.

"In most Northern California markets, the average price for a gallon of gasoline continues to rise despite government figures that show eroding demand," Skryja said, adding that demand will remain weak if prices remain at more than $2 a gallon.

In Modesto, the AAA reported the average price per gallon was $2.23, up 20 cents from a month ago.

"They figured it was close to a holiday so they think they can make a little more money," motorist Lorrie Changaris of Modesto said about the recent price hikes.

Changaris, who was buying Chevron gas at the USA Auto Service Center at 3300 McHenry Ave. on Wednesday, said she doesn't usually shop around, opting instead for convenience. The Chevron station is around the corner from her house.

Station owner Dennis Slewoo said most of his customers remain loyal to Chevron as long as the price isn't 10 cents higher per gallon than the gas unbranded stations are selling. Chevron knows that, he said, and tries to keep prices within that 10-cent window.

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"I start hearing frustration from customers when it's $3 a gallon and up. That's when they start shopping around," he said. "Where it is now isn't as a much of a worry."

Modestogasprices.com, a fuel price tracking Web site, put the average price for a gallon of gas in the Modesto area Wednesday at $2.21, up 12 cents from a week ago and up 4 cents from a month ago. But Tuesday's price on the Web site was down dramatically from a year ago, when it was $2.95 a gallon.

Best price in Santa Rosa

According to the AAA, Northern California gas prices are averaging $2.24, up 20 cents from a month ago. Bay Area motorists are paying $2.25, up 19 cents. The least expensive price in the region was $2.15 in Santa Rosa, while the highest was $2.49 in Eureka.

The higher prices got the attention of Modesto motorist Michael Cintron on Wednesday at the Chevron pumps.

"Gas was down to $1.55. Now it's $2.15 and a barrel of oil is around $45," Cintron said. "It's outrageous what we're being charged."

Planning a trip to San Francisco for the holiday weekend, Cintron was resigned to paying more for gas to make the trip. "I have to, my family's there," he said.

Bee Business Editor David W. Hill can be reached at dhill@modbee.com or 578-2336.