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Ripple effect on economy as prices rise at pump

... and the cost of gas may keep rising through the rest of the year.

Posted: May 3, 2008 5:00 a.m.
Updated: July 4, 2008 5:02 a.m.

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Local gasoline prices were only a few cents from the $4-dollar-a-gallon mark for regular unleaded heading into this weekend, and at least one expert said he doesn't see a halt to skyrocketing prices until the end of the year. According to a gas-price survey compiled by Randy Cressall, owner of Valencia Auto Spa, the average price for a gallon of regular unleaded stood at $3.93, up four cents from last week's average, late Thursday.

The survey of local gas stations showed three stations are already charging $3.99 a gallon for regular unleaded. Those stations are the Mobil and Shell locations, both on Lyons Avenue off Interstate 5, and the 76 location on Lyons Avenue and Newhall Avenue.

The Valencia Auto Spa had the cheapest find for gas - if bought in conjunction with a car wash - at $3.79 for regular unleaded.

Pain at the pump
All 34 stations surveyed Thursday were charging $4 a gallon or more for premium grade.

The average price for a gallon of premium stood at $4.14, and a gallon of mid-grade was at $4.03, the survey reported.

At the Exxon station on San Fernando Road on Friday, consumers were lining up to fill their tanks.

While gassing up his Volkswagen GTI, Brandon Harvey said the high gas prices have affected him.

A month ago, he was paying $40 to fill his car. Friday's bill was just over $55.

"It hurts," the Newhall resident said, noting that he's especially cash-strapped because he's a student.

Harvey said he hasn't changed his driving habits, but he's started working more "in order to sustain my lifestyle."

He believes that until the switch to using alternative fuels is made, gas prices will be high and consumers will pay.

John Kuzma of Saugus said gas prices have changed his driving habits - he now takes fewer trips outside the local area. But that could translate into less income, since he's a salesman.

It costs him $500 a month to fill his Jeep regularly, Kuzma said.

One solution he sees is increasing the amount of oil drilling.

"There's not a shortage of fuel," he said; the problem is a need for more refineries.

Carmen Blanchard of Valencia was filling up her recently purchased GMC Yukon.

Her personal spending habits haven't changed with the high gas prices, but she said her husband has cut back on how often he goes out to lunch at work.

Although it costs her $100 to fill her car, Blanchard, a stay-at-home mom and physical education teacher, said she needs the Yukon's room; the hybrid SUVs are too small for her family.

Regardless, she doesn't like the high gas prices.

"I can't stand it," she said. "I hate it."

The result
Jack Kyser, chief economist for the Los Angeles Economic Development Corp., views the rising gas prices as money that's being taken out of the economy because the dollars normally spent on leisure activities are going elsewhere.

"This is causing a lot of changes in the way people consume," he said.

The economist also points out that diesel prices have been on the increase, forcing businesses that deliver goods via truck to pass along their price hikes to consumers.

"There's upward pressure throughout the whole economy," he said. "It is not good news."

Cressall said people tend to view gasoline as a necessity, just like food, leaving them to pay the high prices and cut costs elsewhere.

"Instead of buying steak, we buy hamburger," he said. "Instead of a trip to grandma's, we stay home."

The cause
Price-watchers at the Automobile Club of Southern California say the current high prices are part of an annual trend.

"Probably starting eight or nine years ago in California, we have seen this sort of phenomenon that happens every year," said Marie Montgomery, spokeswoman for the association.

Spring months usually mean vendors switch to selling the "summer blend," which Montgomery said burns cleaner and emits less pollution into the air.

Additionally, the summertime peak driving season increases demand.

"All of those things combined caused the prices to really hurtle up in the spring time," she said.

Another factor is investors treating gasoline as a commodity in the face of the dollar's tumble in value.

"All of these commodities were seen as a safe investment," she said, referring to oil, crude oil and wholesale gasoline.

"This year's price spike was driven exclusively by that."

Kyser also views the decline in the dollar's value and investment opportunities as causes for the increase.

At the same time, he said, the countries of India and China have increased their demands, along with the ongoing threats to petroleum supplies, which Kyser said drives the price of gas.

When will it end?
Meanwhile, motorists are wondering when prices will level off - or even decline.

Kyser believes gas prices will increase until the end of 2008.

Montgomery isn't as sure.

"There's always an end in sight," she said. "It's just a mystery as to when it's going to happen."

Cressall said he believes the recent cuts to the federal interest rate and economic stimulus rebate checks will make a difference.

"That's a lot of money. It really is," he said. "It's bound to have an effect."

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