Gasoline Below $1 for First Time Since Gulf War

Cheering--and surprising--consumers and economists alike, gasoline prices at some Southland pumps have dropped below $1 for the first time since the beginning of the Persian Gulf crisis.

Marc Landry, a 38-year-old businessman from Orange, gasped in surprise as he discovered bargain rates at an Arco station in Costa Mesa on Tuesday: 95.9 cents a gallon for regular, 99.9 cents a gallon for unleaded.

“That’s incredible!” Landry exclaimed as he pumped regular unleaded gas into his black BMW. “Under a dollar! In these times!”

But Landry worried that low-cost fuel would be a temporary phenomenon--that if war with Iraq continued, prices could hit the roof.

“I think, if we don’t end (the war) by April, oil will be at $35, $40 a barrel,” he said.

And prices at the pump?

Recalling that prices in some European nations have hit $4 a gallon, Landry turned gloomy. “Heaven knows,” he sighed.

According to the authoritative Lundberg Letter, of the almost 1,600 service stations most recently surveyed in Greater Los Angeles, 111 were selling regular leaded gasoline at self-service pumps for under $1. That included “a smattering” of major-brand stations, as well as independents, publisher Trilby Lundberg said.

Prices are falling nationwide, although they are lower in Southern California than in other regions.

In its latest survey of prices, the American Automobile Assn. reported Tuesday that the nationwide average price of self-serve regular unleaded gasoline fell 4.2 cents in the last week, to $1.183, the lowest since Aug. 3, the day after Iraq invaded Kuwait. According to the latest Lundberg survey, the average price of self-serve regular unleaded gas in Southern California was $1.146.

In Orange County, the average price for a gallon of self-serve, unleaded gasoline was $1.09, a Times survey showed Tuesday. That is about 9 cents lower than the national average of $1.18. And it was a 12-cent drop since a prewar survey on Jan 11.

The survey of 24 stations also showed prices around the county ranging from a low of 99.9 cents a gallon of unleaded gas at a station in Fountain Valley to a high of $1.199 cents a gallon at stations in Irvine, Laguna Niguel and San Juan Capistrano.

With the current surplus of oil, many petroleum-market experts expected gasoline prices to remain low, or even drop more--an especially welcome turn, with the economy mired in a slump.

“It is great medicine for an economy in recession,” said Philip K. Verleger Jr., an economist who specializes in energy at the Institute for International Economics, a Washington think tank.

While some experts cautioned that lower prices could spur consumption, increasing both U.S. dependence on foreign energy resources and air pollution, others saw only good news in the price drop.

“I really think it’s better to have lower prices than we had later last year, because energy is a big cost in our economy,” said Ray Gibson, senior associate for Carl H. Pforzheimer & Co., a New York-based brokerage firm that specializes in oil.

“It’s not only people running back and forth to work,” Gibson said, “but it goes into the cost of everything you move by truck and rail. It’s a big item. And I think gasoline marketers (themselves) generally prefer stable and reasonable prices. . . . They really can be zapped by price volatility.”

At Aftad Ahmad’s Arco station in Costa Mesa, business has been brisk for the last two weeks--ever since regular and unleaded gas dropped below $1 a gallon. And Ahmad is delighted.

“It’s real busy in the morning, real busy in the evening, real busy in the middle of the day,” the 52-year-old businessman said cheerfully Tuesday evening as he watched a steady stream of commuters line up.

Since prices fell two weeks ago to their lowest levels in at least a year, “customers are happy,” Ahmad said.

Consumers interviewed Tuesday thought it only appropriate that prices were falling.

“I don’t know why the prices went up in the first place,” said Los Angeles resident Robert Randall as he pumped gasoline at an Atlantic Richfield station in the Westlake section of Los Angeles. “We have plenty of gas in this country. There’s no shortage.”

Randall said he drives only when necessary and--despite the drop in price--would not consume more gas. Regular unleaded gas was 99 cents a gallon at the station where he filled up.

Wearing black driving gloves that matched her black-trimmed suit, Costa Mesa accountant Cornelia Kerr, 36, carefully filled her car at the Costa Mesa Arco station on Harbor Boulevard at Gisler Avenue.

“I usually come here because of the low prices,” Kerr said. “Last time I came, I think it was $1.01.” But unleaded was even cheaper Tuesday: 99.9 cents a gallon.

Kerr said she is glad the price is so low. After all, she said, “if the prices are high, that causes inflation.”

Machine operator Jose Torres, 39, was at the Costa Mesa Arco station, filling his large blue van with $20 worth of gas for the weary drive home to Riverside.

“Yes, this is a good price,” said Torres, noting the 95.9 cents a gallon for regular gas. He said he paid the same low price for gas recently at stations in San Diego, San Ysidro and elsewhere in Southern California.

“It’s good for the economy,” he said.

Randy Waller, a Los Angeles process server, said he figured that the price fluctuations were a simple matter of supply and demand.

“This is part of the ebb and flow of the market,” he said, filling up at the Koreatown Shell station. “When there’s lots of gas--a glut--the price is cheaper. When the spigot tightens, gas prices go up.”

For the moment, the spigot is open, even as demand for oil has slackened worldwide. The Paris-based International Energy Agency said Tuesday that despite OPEC production cutbacks in January, oil was still clogging storage facilities. The IEA said there were 20 million more barrels in surplus stocks last month than in December.

“There’s still plenty of crude out there for the present demand,” said Thomas P. Blakeslee, an energy analyst with Pegasus Econometric Group, a Hoboken, N.J., commodity consulting firm. “And the refinery runs are beginning to increase. So you’re seeing plenty of product out there for the present demand. That’s why you’ve seen prices come down considerably over the last couple of weeks.”

The IEA said oil consumption in the United States dropped almost 10% in December, compared to a year earlier.

Blakeslee and other analysts attributed the slack demand to recession jitters, warmer temperatures around the nation and consumer indignation that prices had jumped in the months before fighting broke out.

Even experts, however, were puzzled by some of the moves in retail fuel prices.

“Gasoline has gone down and diesel has gone up. I’ve never seen anything like it,” said Stephen R. Shelton, executive director of the Southern California Service Station Assn., a retailer trade group.

“My personal opinion is that the oil companies have pushed the prices down on gasoline,” he said. “The public is very price conscious on gasoline, but no one monitors the prices of diesel and jet fuel and the other products, so I think the oil companies want to avoid the bad publicity and public reaction of having embarrassingly high profits while a war is going on.”

Economists have long been mixed on whether low gasoline prices are good or bad for the U.S. economy.

“Many people believe that a high level of oil imports constitutes a threat to the nation,” said Verleger. But he questioned the wisdom of artificially keeping prices high. “The economy benefits from free trade, whether the free trade be in automobiles, VCRs or petroleum,” Verleger said.

Blakeslee concurred that the low prices pose an economic dilemma.

“Oil prices we’re seeing now will prevent further investment in alternative sources of energy,” he said. “But at the same time, these lower oil prices might help us pull out of a recession quicker.”

Still, said Blakeslee, if such low prices persist, they will only build consumption and slow development of new energy policies to lower U.S. dependence on foreign oil. “Which is a scary thought,” he added, “seeing our men and women over there fighting for it now.”

At the Arco station in Costa Mesa, owner Ahmad said he does not know why gas is so cheap or how long the prices will stay low. “These are questions for Arco,” he shrugged.

But for now, “it is good for us,” he said. “And good for the consumer.”

Times staff writer George White contributed to this report.

ORANGE COUNTY GAS PRICES

Cash price of one gallon of self-service, unleaded gasoline Jan. 11: $1.21 8/10 Jan. 17: $1.20 7/10, One day after attack on Iraq Jan. 24: $1.15, One week after war begins Feb. 5: $1.09 1/2, Yesterday

While a gallon of self-serve, unleaded gasoline in Orange County could be found at some stations for under a dollar, a Times survey Tuesday found that the average cash price was $1.094, a 12-cent drop since a pre-Gulf War survey on Jan. 11. The Orange County average is about 9 cents lower than the nationwide average of $1.183.

Change Price Since City Company, Address 2/05 1/11 Anaheim Arco, 5700 E. La Palma Ave. $1.069 n/a Brea Thrifty, 718 S. Brea Blvd. $1.039 n/a Buena Park Shell, 5231 Beach Blvd. $1.099 -14 Costa Mesa Economy, 2021 Newport Blvd. $1.059 n/a Costa Mesa Chevron, 3000 Fairview Road $1.159 -5 Cypress Arco, 5012 Lincoln Ave. $1.099 n/a Cypress Texaco, 6000 Cerritos Ave. $1.079 -14 El Toro Mobil, 24362 El Toro Road $1.079 -8 Fountain Valley Exxon, 17474 Brookhurst St. $.999 -17 Fullerton Mobil, 2800 E. Imperial Highway $1.069 -13 Garden Grove Shell, 13542 Euclid St. $1.099 13 Huntington Beach Arco, 17502 Golden West Ave. $1.019 -13 Irvine Chevron, 18002 Culver Drive $1.199 -12 La Habra Unocal, 100 E. Whittier Blvd. $1.079 -12 Laguna Niguel Texaco, 28922 Crown Valley Pkwy. $1.119 -10 Mission Viejo Arco, 27682 Crown Valley Parkway $1.049 -11 Monarch Bay Unocal, 32842 Coast Highway $1.139 -16 Newport Beach Chevron, 3531 Newport Blvd. $1.139 -8 Placentia Shell, 1810 N. Placentia Ave. $1.079 -8 San Clemente Mobil, 600 Avenida Pico $1.099 -10 San Juan Capistrano Exxon, 28692 Camino Capistrano $1.199 n/a Santa Ana Independent, 2040 S. Bristol St. $1.099 -9 Santa Ana USA, 5122 W. 1st St. $1.059 n/a Tustin Unocal, 17280 E. 17th St. $1.059 n/a

N/A: Pre-war price not available

Source: individual stations --Researched by: DANNY SULLIVAN and JANICE L. JONES / Los Angeles Times