GASOLINE—Decline in L.A. Gas Prices Lags Nation as Dealers Try to Recoup

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Gas station owners’ attempts to boost their profit margins after a tough spring are keeping Los Angeles pump prices high even as drivers in the rest of the nation start to see a substantial drop in the cost of gasoline.

The average price for self-serve regular gasoline in Los Angeles dropped only 1.4 cents to $1.94 during the week of June 11 the lowest decline among six major cities surveyed by the federal Energy Information Administration, which is the statistical arm of the U.S. Department of Energy.

San Francisco’s rates fell 2.1 cents, but the city had the highest prices in the nation, at $2.01 during the same period.

Overall, California motorists paid an average of $1.93 per gallon, down 1.7 cents, but still far higher than the national average of $1.60, down 4.6 cents per gallon.

Among the other cities surveyed, Chicago was at $1.70 per gallon, down 10.3 cents, Denver at $1.72, down 2 cents, Houston at $1.51, down 1.9 cents, and New York was at $1.76, down 2.1 cents.

Retailers appear to be making up for the losses they endured this spring when gas prices were soaring amid a shortage in supply.

“When the prices went up, (statewide) dealers it still being a competitive market out there didn’t increase their price as much as they were being charged,” said Jeffrey Spring, a spokesman for the Automobile Club of Southern California. “The result was they, on average, operated in the red during March and April. Now they are trying to make back some of that loss.”

California prices generally are higher than the nation because oil companies charge a premium of 5 to 8 cents per gallon to make up the additional cost of making reformulated gasoline, which is a cleaner form of fuel.

“But that doesn’t explain the 30-cent difference between us and the rest of the nation,” said Bob Aldrich, a spokesman for the California Energy Commission. “On a statewide level, the prices should be lower than they are now.”

The wholesale price for gas in California has dropped 40 cents to an average of $1.12 per gallon, taxes not included, over the past two months. But costs tacked on by retailers, which account for operating costs and would-be profits, went up about 24 cents to 32 cents per gallon over the same period.

California, with the most stringent clean-air formulation regulations in the nation, has become a boutique gasoline industry with its own code of standards. Refineries are required each spring to switch to a summer blend, where certain aromatic ingredients are reduced, decreasing the vaporization of the gas amid hot outside temperatures.

This year’s spring transition period, which includes switching equipment, experienced delays at some of the state’s 18 refineries, causing a shortage in supply.

“The problem with California is that it’s unpredictable,” Jay McKeeman, spokesman for the California Independent Oil Marketers Association, a trade group representing marketers and retailers. “All it takes is one refinery having a big problem and prices will jump up. Only California refineries make California fuel on a continuing basis. The balance between supply and demand is very tight.”

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