Jump in gas prices linked to Iraq crisis, Venezuela

www.indystar.com Staff and News Services January 20, 2003

A combination of soaring crude oil prices and uncertainty associated with situations in Venezuela and Iraq are equating to higher than normal gas prices, according to AAA Hoosier Motor Club.

"Typically, because there is less of a demand for gasoline during the winter, we're accustomed to seeing relatively low, stable gas prices at this time of the year," said spokesman Greg Seiter. "But the ongoing strike in Venezuela and the increasing possibility of war with Iraq have helped drive prices up in recent weeks."

The nationwide average price of self-serve regular gasoline is now $1.47 per gallon. In mid-December gasoline prices had declined to $1.37. One year ago, the nationwide average price of self-serve regular was $1.13 per gallon.

Gas prices in Indiana were averaging $1.44 last week.

Recently, the Organization of Petroleum Exporting Countries (OPEC) agreed to increase crude oil production quotas by 6.5 percent. That decision, and an increase in production by Mexico, is intended to help offset the drop-off in production from Venezuela and help reduce the price of crude oil to levels below $30 per barrel. OPEC officials have openly said they prefer to maintain a crude oil price range between $22 and $28 per barrel.

"Something else to keep in mind is that Indiana began experiencing cold temperatures earlier this year than in previous years. Even though we haven't had many excessively cold days, the temperatures have remained consistently low, resulting in a prolonged demand for heating oil," Seiter said. "Increased heating oil demands mean that more oil out of every given barrel is needed to produce it. That means less oil per barrel for gasoline."