Crude oil prices drop three times in two weeks, but gasoline prices climbing.

Crude oil prices drop three times in two weeks, but gasoline prices keep climbing

Prices posted for crude oil produced in Los Angeles County dropped by 50 cents a barrel last week, the third time prices have dipped in the past two weeks. The three cuts combined have reduced the price of crude by $1.50 a barrel.

Lower crude prices sometimes mean lower gasoline prices, but retail prices of gasoline have continued to mount here. This paradox of slipping crude prices and spurting gasoline prices is fattening local refiner profits while cutting into the royalties of L.A.-area well-owners, drivers and trucking companies.

A mid-Wilshire Arco station, for example, last week was charging 93.9 cents a gallon for unleaded gasoline -- 4 cents more than last month. The higher retail gasoline prices here reversed a slide that began last May and continued through November when the same Arco station charged 81.9 cents a gallon for unleaded.

"It does seem as if the prices (of crude and gasoline) are moving in opposite courses," said Harry O. Johnson, a marketing manager at downtown Los Angeles-based Atlantic Richfield Co. "But you must remember the situation was going in the opposite (crude up and gasoline down) for a while."

The quick three crude price cuts dashed hopes of independent producers, royalty holders and oil well servicing companies, who previously were encouraged by a series of increases from December until late February. Increased cash flow from higher crude prices had encouraged producers to hire oil well servicing companies to reopen a number of the more than 20,000 California wells that were closed, said Charles E. (Ed) Malmgreen, the assistant vice president of the 700-member California Independent Petroleum Association. "Postings began dropping the last week in February as buyers adjusted their prices to reflect national and local conditions," Malmgreen said.

L.A.-based Unocal Corp., for example, cut its posted price for 17-degree gravity crude from the Wilmington field by 50 cents a barrel to $16.10 effective March 13. That followed Unocal's cuts of 55 cents March 8 and 35 cents Feb. 23 for Wilmington crude after its price had mounted steadily to $17.50 on Jan. 23 from $14.80 Oct. 17.

(The higher the gravity is, the lighter or thinner the crude. When refined, lighter crudes produce more "top-of-the-barrel" products -- such as gasoline and jet fuel. Heavier crudes with lower gravity numbers contain more "bottom-of-the-barrel" products -- such as heavy fuel oil and ship's bunker oil. A barrel contains 42 gallons.)

Unocal likewise cut its posted price for lighter, 29-gravity crude from the Long Beach/Signal Hill field by 50 cents a barrel to $17.65 effective March 13. That followed Unocal's cuts of 75 cents March 8 and 25 cents Feb. 23 for that field's crude after its price had climbed to $19.15 in January from $16.65 last October.

Among other companies that cut their crude prices similarly here. Malmgreen reported: San Francisco-based Chevron Corp., which intiated the pared postings, followed quickly by Koch Oil Co.

This is far from reassuring to independent producers who remember crude prices started slipping last May and did not stabilize until September. Dimming the outlook are the lofty stocks of crude oil both nationally and on the West Coast, Malmgreen suggested, and product inventories have been rising, too.

"We can expect softening for some time," he said, "because refiners are stocked up on crude, heating oil and gasoline." Meanwhile, he observed, refinery turnarounds (temporary closings for maintenance) have not reduced the lofty product stocks.

Adding to hefty crude inventories have been warmer weather on the East Coast, depressing demand for heating oil, and excessive crude production by members of the 13-nation Organization of Petroleum Exporting Countries. OPEC production in February is estimated at between 23.2 million and 24 million barrels a day although the cartel's self-imposed quota system is supposed to limit production to 22.5 million barrels a day, Malmgreen said.