By KATHY DAY

Herald Writer

Area service stations are delivering a bit of holiday cheer to those filling their gas tanks for the trip to Grandma’s house.

The latest survey of prices compiled by the American Automobile Association shows prices in the Puget Sound area have dropped on average by 4.6 cents for a gallon of unleaded fuel since the most recent survey just before Thanksgiving.

The numbers show an even better drop in the pocketbook for Everett consumers where the average price this week is $1.62 a gallon, compared with $1.68 a month ago. In Lynnwood, the tab for a gallon is about $1.66, compared with $1.73 a month ago.

Chuck Worthington, who owns 10 service stations in the area, bears out the auto club figures. He said he’s seen the prices he pays to the oil companies drop from 6 to 8 cents.

Even so, the market is tough, he added. While an ARCO near one of his Texaco stations is charging $1.45 a gallon, he’s paying Texaco $1.46 — before he puts his costs into the price.

Although declining pump prices seem to be good news for consumers, the other side of the coin is that since December 1999, prices on average are 23 cents a gallon higher, with Everett and Lynnwood stations charging an average of $1.40 a year ago.

The auto club’s analyst, Geoff Sundstrum, said in a press release Monday that falling crude oil prices have contributed to the decline as have increasing inventories.

In addition, he said, "economic data, including sales of new vehicles, continues to show a weakening economy, which had the potential to reduce overall energy consumption, as well as fuel prices."

Bill O’Grady, an industry analyst for A.G. Edwards in St. Louis, also said Monday that the main reason for the decline in gasoline prices is the drop in crude oil.

"For every dollar (decline) worth of crude, the price of gas drops about 2.5 cents," he noted.

The price for a barrel of crude oil topped $33 earlier this year and has moved back to less than $28. On Monday, crude was trading in the $29.70 range, he noted.

Explaining the price drop is "a hard one," O’Grady said. "Market fundamentals are bullish, inventories are still tight and Saddam (Hussein) is not selling crude."

While he said it won’t be known for certain for a couple months, he and others believe a drop in how much the Chinese are buying may be affecting the price. When the Kosovo crisis escalated and the U.S. mistakenly bombed the Chinese embassy, that "shocked the Chinese that we were willing to go to war over such a flimsy notion. It made them wonder," he said.

As a result, they have been aggressive in purchasing oil, accounting for a major share of what Asian nations have bought in 1999’s first three quarters.

"It looks like they’ve achieved their inventory levels," leaving more for the rest of the market, O’Grady added.

Tim Hamilton of the Automotive United Trades Organization, which supports station owners, played a bit of the Grinch role in discussing the drop.

"It’s always good news when the price goes down," he said, "but keep watching for when it goes up."

Blaming higher West Coast prices on oil companies that take bigger profits here than elsewhere, he said, even with the decline, "the West Coast is still one of the worst places to buy gas."

Nationwide, prices on Monday reported by the Oil Price Information Service in cooperation with the AAA ranged from a low of about $1.28 a gallon in Missouri, to a high of $2.01 in Hawaii. Washington’s statewide average was $1.64.