Falling gasoline prices may not pacify angry consumers

DANA POINT, Calif. -- Gasoline prices finally appear to be falling, just as the nation heads into peak driving season, but the profits oil companies are earning on refining may keep anger welling up in consumers.

Some motorists are changing vacation plans to use less gas and some are complaining the prices won't come down as fast as they went up.

Stop by Don Davis' Unocal station on Pacific Coast Highway here, halfway between Los Angeles and San Diego, where Bob Palmer pumped regular unleaded into his pickup truck at $1.579 a gallon Monday.

The truck was carrying cabinets from the San Diego company Palmer works for, and he handed over a corporate credit card to pay; no problem there. But ask him about gas prices and his plans to drive his family to Alabama for an August vacation and the story is different.

"I was going to borrow a motorhome to drive across country, but now we're taking a small car instead," Palmer said. "It's just way too expensive -- it would be astronomical."

The national Lundberg survey found pump prices fell last week for the first time since November 1995, to an average 136.86 cents per gallon for all grades. That was down 1.21 cents from the previous week. The drop was attributed to lower crude oil prices and the end of a supply shortage.

As the summer smog season strikes California, oil companies here also are recovering the costs of re-engineering refineries to produce a cleaner formula gas required under new state rules. That contributed to prices soaring nearly 40 cents a gallon from February to their peak in May.

Unocal Corp. Chairman Roger C. Beach told shareholders last week that, largely due to refining profits, Unocal will earn as much in the first six months this year as it did all last year.

"I think that's inexcusable, really," Palmer said. And he predicted any price decline will be far less swift than the runup.

"They'll never go back down as far as they were," he said."They'll take advantage of the situation, even if they lower them some."

Edwin Rothschild, director of energy policy at the Citizen Action consumer group in Washington, said Palmer has it right, and predicted refining profits would swell the bottom lines of big oil companies nationally.

"There is a significant drag or lag effect on the way down (in prices)," he said. "And the primary reason for that is the lack of competition in many markets," especially California, where independent refiners and retailers have been driven out of business.

Nine oil companies were sued Friday in San Diego state court for allegedly artificially inflating the price of the cleaner-burning gas in California; the conspiracy suit seeks triple damages on antitrust grounds. Oil companies have acknowledged supply shortages but deny any wrongdoing.

Unocal spokesman Barry Lane said his company's profits follow a tough time for refining operations. Unocal lost $7 million on refining during the first quarter, and it wasn't until mid-April that the company raised prices enough to offset higher crude oil and cleaner gasoline costs, he said.

The Dana Point filling station, leased by operator Davis, has had only an average year after poor profits throughout the `90s, Davis said. He recalls trying to explain to an irate customer that she was yelling at the wrong person about higher gas prices.

"I just told her to check Unocal's quarterly profit to see who's making the money," Davis said.

Some customers had no complaints: Jochem Sprethe of Germany was delighted by the prices; German gas costs twice as much."Wonderful!" he said before whizzing away in a rented red convertible on a 1,500- mile U.S. vacation.

Copyright 1996
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