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RECORD GAS PRICES SOME ANALYSTS PREDICT $3 A GALLON BY YEAR'S END.

Byline: Brent Hopkins Staff Writer

Los Angeles gasoline prices hit a record $2.178 a gallon for regular on Monday - up more than 50 cents since Jan. 1 - and some analysts openly talked about it hitting the once-unthinkable mark of $3 a gallon, possibly by late this year.

The Automobile Club of Southern California reported that the price of gas soared 40 cents in the past month, putting it more than 22 cents above price a year ago and 1.1 cents higher than the previous high of $2.167 on March 21, 2003.

Ventura County, Santa Barbara and the Inland Empire all saw record highs over the weekend or Monday.

Still, consumption has remained as high as ever, despite the price hikes, and industry experts say only a reduction in gas consumption will have much impact in the months ahead.

Refinery shutdowns to switch from winter to summer formulation gasoline pushed the spot market up dramatically two weeks ago, yanking retail prices along with it.

While the spot market has calmed somewhat, settling near $1.40 on Monday according to the Oil Price Information Service, the retail market continues to rise.

``I'm at my all-time high in 25 years in business - $2.179 for the cheap stuff,'' Chuck Mercier, who owns a Burbank Union 76, offered with a wry chuckle. ``Hah! The 'cheap' stuff.''

He saw hope in sight, however, as his wholesale costs for gas have stopped their tremendous acceleration, rising only a penny a day, rather than several cents. He said he expected prices to plateau, then slowly drop a few cents a week until summer, a supposition mirrored by many industry watchers.

The recent spike foreshadows what likely will happen in the months ahead, according Tom Kloza, chief oil analyst for OPIS.

``This isn't the $3 run; that'll come in August,'' Kloza said. ``This is a little bit of a false start. This is like getting excited when the L.A. Clippers start the season 10-2; it's not going to last.''

Wholesaler Bob van der Valk, manager of bulk supply for Santa Fe Springs-based Cosby Oil, said lingering problems at oil refineries have left the spot market jumpy, leading him to predict additional hikes of up to 20 cents in coming weeks.

``We're way ahead of the schedule from last year,'' he said. ``We're already at $2.17, and it's only March 1. We're not going to see any relief anytime soon.''

In Southern California, where high-powered sports cars fight for freeway space with huge sport utility vehicles, Auto Club spokesman Jeff Spring said he doubts drivers will heed repeated suggestions to watch their pump consumption unless prices keep rising. Though prices have climbed 52 cents since the beginning of the year, demand has not slackened at all, suggesting drivers have merely adjusted to the higher costs.

``California has this 'been there, done that' frame of mind,'' Spring said.

``We've been here before, so it doesn't seem as painful. If this is a temporary increase, people can gut it out, but if we're over $2 a gallon for a long time, we'll hear more complaints, and see some changes in the way people drive.''

That would be one of the few ways for prices to drop because supplies aren't getting any more plentiful. California already imports millions of gallons of gasoline every day, as its refineries are already operating at maximum capacity.

With an initial investment of a billion dollars per new refinery, the industry's trade group, the American Petroleum Institute, doubts any will be built anytime soon.

``You'd think: Why don't they build more?'' said Rayola Dougher, a senior policy analyst for the API. ``Certainly, the investment cost is huge, and it's also very difficult to expand refinery capacity, both environmentally and because of the not-in-my-back-yard mentality.''

Brent Hopkins, (818) 713-3738

brent.hopkins(at)dailynews.com
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Publication:Daily News (Los Angeles, CA)
Article Type:Statistical Data Included
Date:Mar 2, 2004
Words:641
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