Published Tuesday, May 1, 2001, in the San Jose Mercury News

$2 a gallon: Gas prices break records

BAY AREA HIT HARDEST; CONSUMERS LIKELY TO PAY EVEN MORE AS SUMMER COMES

BY GARY RICHARDS Mercury News

Gas prices hit an average of $2 a gallon for self-serve unleaded in San Jose on Monday, a record that is almost certain to be broken before Memorial Day.

``This doesn't bode well,'' said Bronwyn Hogan, who tracks energy prices for the California State Automobile Association. ``It may not be a happy summer.''

Prices have risen throughout California, with the Bay Area being the hardest hit. Gas is going for more than $2.10 a gallon at many stations along the Peninsula and in San Francisco, and it's next to impossible to find gas for under $1.90 a gallon even at discount stores.

The San Jose-area record, which is not adjusted for inflation, surpasses the previous San Jose high of $1.97 a gallon set last October. Motorists who pay for mid-grade or premium gas are shelling out as much as $2.29 a gallon.

Monday's auto club figures are a spot check of selected cities across the state and nation. San Francisco's $2.06 average is a penny below that city's record set in September, while the Santa Cruz average stood at $1.93, a nickel below records in that coastal town.

Updated prices for Peninsula and East Bay cities won't be available until mid-May. However many of those areas have seen prices reach well above $2 a gallon, almost certainly breaking records.

The question many are asking: Could prices soar to $3 a gallon, breaking even the inflation-adjusted mark of around $2.50 a gallon set during the Arab oil embargo of the early 1980s?

``My God, that's a definite possibility if there is some type of supply interruption,'' said Dennis DeCota, executive director of the California Station and Automotive Repair Association.

Prices have jumped 26 cents a gallon in Silicon Valley since February and nearly a dime in the past week, after a fire April 24 at a Tosco refinery in Carson. Although gas supplies were not affected, the fear of a shortage caused buyers for independent stations to bid up the price of gas on the spot market.

Tosco added to California's immediate woes when it began using ethanol in production, removing the fuel additive MTBE. That means it is unable to exchange gas with other oil companies that still are using MTBE in their process of reformulated gas.

Refineries are the winner, taking in as much as 75 cents on every gallon of gas to cover production costs and profits. That's 17 cents more a gallon than in March, according to the California Energy Commission. Exxon Mobil Corp. and Chevron Corp., the top two U.S. oil companies, said last week that first-quarter earnings rose by more than 50 percent, partly because of refining profits.

Dealers, however, are not reaping a big benefit, according to the energy commission. Some are making a penny or two per gallon, down from the dime they usually receive. The state agency reports that some independents are losing up to three cents on every gallon of gas.

``The independent guys are just eating it,' said DeCota. ``They're getting slammed, and it's getting ugly.'' Motorists are getting slammed, too, paying $3 to $5 more for a fill for a medium-size car than they were on Valentine's Day. Yet both the auto club and gas station association say outrage has been muted. ``I think they are numbed by it,'' said DeCota.

Gas was selling for $2.05 a gallon at the Shell station on The Alameda on Monday, but Javier Ramos was one of six drivers lining up for a tank of gas. ``Nothing you can do about these prices,'' said the San Jose man. ``I've paid two bucks before, and I'll be paying it again.''

Records are also falling in Southern California, where Santa Barbara, San Diego and Los Angeles reported all-time highs ranging from $1.81 to $1.96 for a gallon of self-serve unleaded fuel. Prices are approaching $1.90 a gallon in Chicago and other major cities across the country, and the national average of $1.63 for regular gas is a 19-cent jump from a month ago.

Many experts fear that repeated rolling blackouts this spring or summer could shut down gas production, leading to more spikes at the pump. But one glimmer of hope came Monday when industry watchers reported that some refineries were ready to boost production to take advantage of soaring prices. Inventories now are low -- down nearly 5 percent in California for the state's blend of reformulated fuel and 2.4 percent lower nationwide than a year ago.

The price of crude oil, however, remains around $28 a barrel, well below figures during last year's price spike or the $40 mark set during the Gulf War a decade ago.

-- Anonymous, May 01, 2001

Answers

On the plus side, I was finally able to convince the company I work for to alow me to work virtual office... (ie, from home)

The savings in gas and travel time alone more than compensate me for slightly higher electric bills, works great my being a single parent. For them, their electric bill goes down (higher commercial rate), phone bill goes down (no more charges for local calls, which are the bulk of my calls - free for residential service).... as almost 99% of my work and customer contact is telephone, e-mail, fax or internet, it was stupid to spend nearly 2 hours a day driving back and forth to an office I didn't need... more space for the screw- driver jockies who have to have a centralized place to work., etc...

Gas shortage and high prices... not a problem... turn the lights of for a couple of hours, ok, out to the pool or check out the surf, voice mail is tied to my pager, so if a customer calls, I'm back to them in 5 minutes (don't give out cell phone number to customers, just in case I need, or want, to avoid them)...

I love it :)

-- Anonymous, May 01, 2001