Gasoline prices on track for a record year of pain at the pump

U.S. motorists are on pace to spend $491 billion for gasoline this year, the most ever.

Fuel prices have been rising again because of expensive crude oil and increased exports of gasoline and diesel to other countries. Although gasoline prices may decline for a few weeks after the switch to winter blends, which are less costly to produce than summer blends, our pump-price woes won't be going away, fuel experts said.

"The 30 days between now and mid-October will be the most hospitable days in the country for dropping prices," said Tom Kloza, chief oil analyst for the Oil Price Information Service in New Jersey. "But then the drumbeats will start about fears of a second Arab Spring. Demand outside of Europe and the U.S. continues to rise. By spring, Americans will be wrestling with $4 gasoline in a lot of markets."

At one point this year, retail gasoline prices were rising faster than they were even in 2008, when average prices hit record highs of $4.588 a gallon in California and $4.114 nationally.

The run-up in 2008 was followed by the biggest-ever fuel-price collapse. By the last week of December, 2008, motorists had blissfully returned to the much more affordable prices of early 2005, with a gallon of regular in California selling for an average of just $1.810. Nationwide, the average price was $1.613 a gallon.

As a result, the average price nationwide for all of 2008 ended up only about $3.25 a gallon, according to Kloza. But this year, no collapse in the market is anticipated. The average price for the year is running at about $3.66 a gallon, putting the country on track to pay a record $491 million for gasoline for all of 2011, Kloza projects.

The current average price for a gallon of regular gasoline in California is $3.946, according to the AAA Fuel Gauge Report. That's the highest ever for mid-September, after the end of the summer driving season. Nationally, the average is $3.649 a gallon, also a record for this time of year.

Carol Hill, a 25-year-old Los Angeles resident who waits tables in a restaurant on the Third Street Promenade in Santa Monica, said she was disgusted that she had to pay $3.95 a gallon to fill up her 10-year-old Honda Accord at a BP-Arco station on Lincoln Boulevard near Ocean Park Boulevard.

"The price of gasoline always goes up every year and never falls by as much. So, every year the price is higher. There's always some excuse someone has. All I know is that I'll be very happy the day someone hands me the keys to an electric car," Hill said.

Another reason 2011 is turning out so costly at the pump: U.S. gasoline supplies aren't growing even though U.S. demand is weak.

The country's consumption of gasoline is running 157,000 barrels a day below 2010 levels, according to the federal Energy Department. But gasoline inventories in the U.S. currently total 208.8 million barrels, 16.3 million barrels below the same period last year.

The amount of gasoline on hand in the U.S. isn't rising because an increasing amount of excess fuel here is going overseas.

In fact, in recent months the U.S. has become a net exporter of refined fuels, according to Energy Department statistics. That's a sea change from as recently as May, when U.S. imports of refined fuels still exceeded exports by 800,000 barrels a day. The latest data show daily exports topping imports by 467,000 barrels, with much of the outgoing fuel heading to Latin America.

"We do know that there have been more sales overseas this year compared to previous years. That has been most evident in the Midwest. When we look at the BP Whiting refinery in Indiana, which is one of the largest in the country, you see the output is strong, yet we are still seeing a lot of high prices in the markets this refinery is serving," said Gregg Laskoski, senior petroleum analyst for GasBuddy.com.

"It's troubling for consumers to try to reconcile the high price they see at the pump when the seemingly local refineries that served them in the past" are sending more of their products overseas, Laskoski added.

Consumers may also find it hard to reconcile the pump prices they're paying with relatively stable domestic crude-oil prices.

This is most evident in states like California, which does not have access to pipelines that could bring it some of the relatively plentiful West Texas Intermediate crude, the U.S. benchmark for oil trading on the New York Mercantile Exchange.

This year, there has been a huge spread between the U.S. benchmark and its European counterpart, Brent North Sea crude, which is traded on the ICE Futures Exchange in London. The price of Brent crude has been volatile this year because of the so-called Arab Spring, which has brought regime changes in Tunisia, Egypt and Libya as well as with unrest in Yemen and Syria.

Brent futures rose 26 cents to $113.03 a barrel Monday while the U.S. benchmark rose 80 cents to $88.04 a barrel. That narrowed slightly the price difference between the two benchmarks, which hit a record $27.23 a barrel on Sept. 6.

U.S. motorists suffer from the higher costs of imported crude oil, particularly in states like California. In 2000, for example, California produced about half of its oil needs and got about one-fourth from Alaska. That year, as a result, the state imported just 26% of its oil.

But in an expensive reversal of fortune, California now produces just 38% of the oil it consumes and imports 48% from sources tied to the much higher price of Brent North Sea Crude. Alaska oil meets only 14% of the state's needs -- and it's gotten much more expensive, trading at $24 a barrel higher than West Texas Intermediate.

The bottom line: U.S. motorists will not see much in the way of price relief in the coming months.

"We're not going to see a big drop in gasoline prices," said Phil Flynn, an analyst with PFGBest Research in Chicago. "We are probably at the low point for oil prices right now, and there is too much going on in the rest of the world, from higher demand and from reduced exports from places like Libya, for oil not to work its way back up in the coming weeks and months."

ALSO:

Gasoline prices edge higher in California

Rising fuel exports keep U.S. gasoline prices from falling

-- Ronald D. White

Photo: Pump prices will probably decline only slightly in the coming weeks.

Los Angeles auto insurance executive puts $8 million into initiative campaign

 Los Angeles insurance executive George Joseph has raised the stakes in his years-long effort to change California's landmark automobile insurance law, known as Proposition 103.

On Friday, Joseph personally contributed $8.1 million to an initiative campaign called the 2012 Auto Insurance Discount Act, which is gathering signatures from registered voters in hopes of appearing on the June ballot. Earlier in the month, the secretary of state's office reported that Joseph gave an initial $150,000 to the committee, sponsored by the trade group American Agents Alliance in Sacramento.

The initiative, if it makes it to the ballot and is approved by voters, would change Proposition 103 to allow insurers to offer customers discounts if they can prove they were continously covered by any licensed insurance company for the last five years. A break in coverage of 90 days for whatever reason would not make the motorist ineligible for the discount. Neither would unemployment for periods of up to 18 months nor active military service.

Joseph has been seeking such a change in the state's insurance law in the Legislature, the courts and on the ballot for more than a decade. In 2010, Mercury spent $16 million on an unsuccessful initiative, Proposition 17, to offer so-called loyalty discounts.

Joseph and proponents of the initiative argue that the discount is meant to encourage responsible behavior by insured drivers.

Opponents, led by Consumer Watchdog, a Santa Monica activist group whose founder, Harvey Rosenfeld wrote Proposition 103, contend that Joseph's proposed initiative unfairly would rewrite the 1988 initiative to allow insurers to discriminate against drivers who are buying insurance after failing to have coverage during the previous five years.

"The measure would repeal Proposition 103's prohibition on insurance companies from considering a driver's coverage history when a motorist applies for insurance," Voter Revolt said in a statement Monday.

Joseph did not respond to requests for comment.

-- Marc Lifsher

Related:

Mercury General using guise of benevolence to assault Proposition 103 

Don't buy Amazon's argument, California

Mercury chairman backs another auto insurance discount initiative

 Photo: Mercury General Corp. Chairman George Joseph in his Los Angeles office. Credit: Wally Skalij / Los Angeles Times.

 

Complaints against airlines climb despite better on-time record

 

While the nation's airlines have improved their overall on-time performance, passengers are increasingly complaining about the services the airlines offer.

The nation's top 16 airlines landed and departed on time 77.8% of the time in July, up from a rate of 76.7% in the same month last year, according to the latest statistics from the U.S. Department of Transportation.

Despite the on-time improvement, passengers filed 1,285 complaints against domestic and foreign airlines in the U.S. in July, up 17% from 1,097 complaints in the same month last year, according to federal statistics.

In other categories, the nation's airlines had a mixed record.

The percentage of passengers who were bumped from overbooked flights dropped by 37% in the first six months of the year, compared to the same period in 2010. But the percentage of lost, delayed or damaged bags remained about the same in July, compared to the same month last year.

In July, the nation's carriers canceled 1.7% of their scheduled domestic flights, up from the 1.4% cancellation rate in July 2010 but down from the 1.8% rate of June, 2011.

-- Hugo Martin

Photo: Passengers at Los Angeles International Airport. Credit: Los Angeles Times.

9/11 anniversary advertising -- appropriate or exploitative?

 

The 10th anniversary of the Sept. 11, 2001, terror attacks on Sunday had advertisers stepping gingerly.

Many companies chose to eschew commercials, instead posting simple notes on websites or social network profiles.

Wal-Mart put up a photo of the American flag on Facebook — a post liked by more than 42,000 people. It also garnered nearly 2,000 comments, including one from Trina Littlefield Stratman: “Thank you for the flag, not an advertisement today.”

Some businesses put out “tribute” advertisements. Budweiser created a television spot featuring its team of Clydesdale horses trotting toward New York and then kneeling toward the city. State Farm and director Spike Lee assembled a group of New York schoolchildren and filmed them serenading local firefighters with Alicia Keys’ song “Empire State of Mind (Part II).”

More than 450 digital billboards owned by Clear Channel Outdoor observed an hour and 17 minutes of  silence Sunday. The company ran memorial ads once a minute for the rest of the day.

The terror attacks have always been tricky for advertisers to navigate.

One older spot from MTV shows a starving child on the Brooklyn Bridge with the World Trade Center on fire in the background and the caption “the world united against terrorism. It should also be united against ... HUNGER.” Consumers went nuts over that one, and most not in a good way.

Days ago, the Democratic Congressional Campaign Committee had to perform quick cosmetic surgery on a television campaign ad originally featuring an opponent’s corporate jet headed toward the Manhattan skyline. The current spot features just the plane.

What do you think of 9/11 advertising? Is it appropriate or exploitative?

 

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-- Tiffany Hsu

Videos: (top) Budweiser's 9/11 tribute.

(bottom) State Farm's 9/11 tribute.

Countrywide bankruptcy? Bank of America keeps its options open

Is bankruptcy possible for Countrywide Financial Corp., the Calabasas-based home lender whose acquisition has cost Bank of America Corp. tens of billions of dollars?

BofA Chief Executive Brian Moynihan didn't rule that out Monday in addressing an analyst conference in New York, though he didn't elaborate on the chance of such an extreme action either.

Moynihan instead focused on Phase 1 of his cost-cutting plan for the bank, which other corporate officials said Monday would eliminate about 30,000 jobs from a base of about 287,000.

The effort will shave $5 billion a year in expenses from the bank's consumer businesses and support operations when it is fully implemented in 2013, Moynihan said. The bank's shares rose 5 cents to $7.03 in early trading Monday.

Repeating his mantra, Moynihan said acquisitions by his predecessor, Ken Lewis, had burdened the bank with overlapping systems, "tens of millions of square feet we don't use," and businesses not focused on its core customers.

In one example of the divestitures he is making, Moynihan described the correspondent mortgage business, which buys loans from smaller lenders, as "simply enabling a competitor, and at high cost." 

The correspondent lending business was part of Countrywide, which Lewis acquired in 2008. Countrywide, once the No. 1 mortgage lender, had tried to dominate the market in high-risk loans along with more conventional products.  

Of six main Bank of America business lines, mortgages are the only one still losing money on operations. Moynihan said settling lawsuits related to investor losses on Countrywide's mortgage-backed securities would take years.

Asked if he would consider putting Countrywide into bankruptcy, he replied, "We look at all our options."

The $5 billion represents 18% of the current $27 billion a year in annual operating costs for the consumer businesses and support operations. Phase 2 of Moynihan's "New BAC" streamlining will focus on operations that handle large businesses and institutional clients such as pension funds.

Those operations have about $28 billion in operating costs. Moynihan said it wouldn't be possible to cut costs as much there as in the consumer and support areas because there's less physical infrastructure to go after and he's not changing the compensation for the high-priced bankers who work in those segments.

"It will not be as fruitful on a dollars-per-square-inch basis,"  he said, "but it will be fruitful."

RELATED:

Bank of America to cut at least 40,000 jobs

BofA CEO Brian Moynihan ousts two top execs

Moynihan on trying to tame the Mozilo monster

-- E. Scott Reckard

Photo: Bank of America Chief Executive Brian Moynihan's cost-cutting plan will shave $5 billion a year in expenses from the bank's consumer businesses and support operations when it is fully implemented in 2013. Credit: Chuck Burton / Associated Press

Consumer Confidential: Holiday sales, food prices, VW recall

Here's your mo'-money Monday roundup of consumer news from around the Web:

-- Merry Christmas. Retailers are already kicking the holiday season into gear. Christmas merchandise has been at Costco stores since Sept. 1 and will begin showing up on some Home Depot shelves Sept. 19. Kmart and Sears will begin selling Christmas trimmings Sept. 25. And Wal-Mart and J.C. Penney will start selling Christmas merchandise before month's end. More than 37% of shoppers — including 42% of women — plan to do some holiday shopping by Halloween, according to the National Retail Federation. Retailers are happy to oblige as they chase an estimated $450 billion of holiday spending. Ho ho ho.

-- But save some cash for your grocery bills. Food prices could rise next year because an unseasonably hot summer probably damaged much of this year's corn crop. The Department of Agriculture estimates that a surplus of 672 million bushels of corn will be left over at the end of next summer. The estimated surplus is down from last month's forecast and well below levels that are considered healthy. This spring, farmers planted the second-largest crop since World War II. But high temperatures stunted the plants. More expensive corn drives food prices higher because corn is an ingredient in everything from animal feed to cereal to soft drinks. It takes about six months for changes in corn prices to affect products at the grocery store.

-- Heads up: Volkswagen is recalling more than 30,000 Jetta sedans from the 2011 and 2012 model years because the tailpipes can stick out too far and burn people. The National Highway Traffic Safety Administration says stainless steel exhaust pipe tips installed at ports of entry and dealerships can stick out farther than the factory-installed tailpipes. If the tips are hot, they can burn people on the legs. Volkswagen received complaints of burns in July and began investigating. The company says the complaints came from fewer than 10 people. Dealers will inspect the recalled cars to see if the exhaust tips are too long and will replace them free of charge if necessary.

-- David Lazarus

Photo: Look who's already getting ready for work. Credit: CBS

 

Subaru recalls Outback and Legacy models

Subaru is recalling almost 200,000 vehicles to replace a component of a windshield wiper system that can overheat and start a fire.

The Japanese automaker said the recalls include 2010 and 2011 Outback and Legacy models.

The bottom cover of the windshield wiper motor may overheat. This could start a fire, and it also makes the windshield wiper system inoperable, which federal safety regulators said could cause a crash.

Meanwhile, the Associated Press is reporting that Volkswagen is recalling more than 30,000 Jetta sedans from the 2011 and 2012 model years because the tailpipes can stick out too far and burn people.

RELATED:

Check out our list of the top-selling cars in August

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-- Jerry Hirsch
Twitter.com/LATimesJerry

Photo: A Subaru Outback. Credit: Associated Press

Most say businesses and consumers are over-regulated, poll finds

Nearly three-quarters of voters think businesses and consumers are over-regulated by the government, according to poll results released Monday by the nonpartisan group Public Notice.

The survey also found that two-thirds of respondents said they think that regulations have increased over the last few years and that the regulatory burden has created uncertainty for small and large businesses. The result, according to 70% of the respondents: More jobs will move overseas.

The poll of about 800 likely voters has a margin of error 3.5 percentage points. It comes as lawmakers spar over the need for new regulations, particularly the hundreds of new rules coming from the Dodd-Frank financial-reform law.

Republicans and business groups have hammered the Obama administration for expanding the regulatory burden, saying it is stifling job creation. President Obama has called for agencies to weed out unneeded rules, and dozens have been identified after a broad review this year.

Public Notice is headed by Gretchen Hamel, who was a deputy assistant U.S. trade representative during the George W. Bush administration. The group has focused on the rising federal budget deficit and has been critical of government overspending.

"The American people know what's going on and plaguing this economy.  More spending and unnecessary regulation isn't the solution -– it’s the problem," Hamel said. "Policymakers should listen to the American people, cut the red tape and put in place policies that will finally put us on the road to a true, sustained recovery."

The poll's key finding, that 74% of respondents say they believe that there is too much regulation, included a breakdown by political affiliation. Republicans felt strongest on that point, at 91%, followed by independents at 75% and Democrats at 58%.

RELATED:

White House unveils streamlined business rules

Obama administration moves to cut unneeded regulations

Passage of financial overhaul is only half the battle

-- Jim Puzzanghera

Photo: Banners spelling out "JOBS" hang in front of the headquarters of the U.S. Chamber of Commerce in Washington. Credit: AFP/Getty Images

 

The Green Jobs Numbers

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

Now, more than ever, prospects for “green jobs” are being treated as a red flag in partisan debate.

Today’s Economist

Perspectives from expert contributors.

Media Matters, a nonprofit watchdog group, has documented a Fox News report proclaiming that the costs of green jobs exceed the benefits. A recent New York Times article, pointing to lackluster programs in California, concluded that “public efforts to stimulate creation of green jobs have largely failed.” A column by David Brooks in The New York Times was pointedly titled “Where the Jobs Aren’t.”

Perspectives from expert contributors.

In reaching for bipartisan support in his jobs speech on Thursday, President Obama avoided the word “green” altogether, though his proposed increase in infrastructure spending could involve investments in improved energy efficiency.

But green jobs still hold considerable promise. While it’s not hard to find examples of programs that haven’t lived up to expectations, considerable evidence demonstrates the actual and potential employment impact of efforts to improve environmental sustainability.

Not that green jobs are easy to define. The Bureau of Labor Statistics is currently in the process of developing an official measure, but employment that either saves energy or increases use of energy generated from renewable sources clearly falls into the category.

In February, the Economic Policy Institute and the Blue-Green Alliance released a comprehensive analysis of the employment impact of American Recovery and Reinvestment Act expenditures aimed in this direction, dominated by efforts to improve energy efficiency in buildings and to promote low-carbon transportation.

The study estimates an increase in direct employment of about 367,000 jobs, while indirect employment effects came to about one million – not a cure-all for an economy with more than 14 million unemployed, but a significant contribution.

The cost per job created varied considerably, and not all programs have moved forward as quickly as they should have. But as a report from Think Progress carefully documents, sensationalized assertions of a million dollars or more spent per job are misleading. Overall, the costs of green jobs creation, whether funded with public or private dollars, are lower than those in most other sectors of the economy, at an average of about $60,000 each. These jobs are likely to last for years, generating private cost-savings and important public benefits.

Retrofits to improve the energy efficiency of our existing building stock offer a particularly high rate of return.

A recent Brookings Institution report calls for broader attention to “clean jobs,” defined as those in establishments that produce or add value to goods and services with an environmental benefit, such as reducing pollution or natural resource depletion.

By this definition, the clean economy is a pretty small slice of the United States economy, accounting for only about 2 percent of all jobs. But it’s now bigger than the dirtiest slice, related to production of fossil-fuel based energy.

The analysis by Brookings of employment trends on the county level between 2003 and 2010 shows that jobs in wind energy and solar photovoltaics represent a small but rapidly expanding part of the larger clean economy.

The report also points to a growing share of private venture capital moving in this direction: 16 percent in 2010, from 2 percent in 1995.

So why not rely entirely on the private sector? The biggest gains from investments in new renewable-energy technologies are not easily captured in private transactions, because they produce environmental services that are largely unpriced. Companies can sell consumers with a conscience a “share” in global greenhouse gas reduction – that’s what the growing business of carbon offsets is all about. But consumers who don’t pay also get the benefits, creating a strong temptation to free ride.

Companies can’t market to the consumers likely to benefit most, because they haven’t yet been born. Conventional fossil fuels are cost-effective now only because the environmental costs are dumped into a global commons that imposes costs on other people and future generations.

Public policies could remedy this problem, by imposing a tax on carbon emissions so that their market price better approximates their social cost. Adopting clean-energy standards would also increase demand for clean and green production, giving private companies greater incentive to invest.

The Brookings report explains that Germany, carrying out such policies, attracted investments from major American corporations including Google, First Solar and Good Energies. Between 2004 and 2009, German employment in renewable energy increased to more than 300,000 from 160,000.

Globally, the green jobs numbers look pretty strong. Unfortunately, in the United States, the possibilities for bipartisan collaboration still look very weak. Flag-waving is so much easier.