Great Falls drivers paying for Venezuela strike

www.greatfallstribune.com Friday, February 7, 2003 By JO DEE BLACK Tribune Staff Writer

A strike in Venezuela is responsible for rising gasoline prices and not talk of war with Iraq, says a Washington D.C. economist.

Recent increases in the price drivers pay at the pump are actually a delayed reaction to a rise two months ago in crude oil prices, said Jacob Bouranzian, an economist with the U.S. Department of Energy's Energy Information Administration.

In Great Falls, the average price of regular gasoline was $1.38 per gallon at the pump in December, according to the

Thursday several stations in Great Falls posted a price of $1.47 per gallon for regular gasoline.

Gas prices are likely to continue going up as the market corrects, he added. "Expect probably another five- to six-cent increase in the Rocky Mountain region by the end of March," Bouranzian said.

Crude oil prices jumped $6 to $7 a barrel at the beginning of December, the same time opponents of Venezuela's President Hugo Chavez organized a nationwide strike, nearly shutting down the country's oil industry.

The strike resulted in a 15 percent reduction of crude oil exports to the United States. Typically, 1.3 million of the 9 million barrels of crude oil imported into the United States daily comes from Venezuela. U.S. importers turned to Saudi Arabia to fill about half that void and other countries made up the rest of the difference.

Profits were strong in the oil refining business during December, so companies drew down their existing inventories of crude oil, even though supplies were tighter. The situation continued through January.

Now those companies are rebuilding inventories, and higher pump prices are the result of the market rebalancing, Bouranzian said.

If the United States does go to war with Iraq, gas prices would likely be pushed higher, he added.

"It's a wild card," Bouranzian said. "When we look at the war in 1990 and 1991, crude oil spiked $15 during the five-week war, but then plummeted right back down when it was over."

With or without a war, drivers probably will feel more of a pinch when they fill up this summer than they did last year.

Refiners are working to replenish supplies now. Traditionally February and March are when supplies of gasoline are stockpiled for the busy summer driving season.

"They aren't able to do that this year, so this summer we expect more volatility in the market than we saw last summer," Bouranzian said.

That's not good news for Guy Eklund, owner of Eklund's Appliance and TV. He already spends $1,500 a month for gas to provide free delivery to customers.

"It's another cost of business that's going up," he said. "It's tough to compete, and it's getting tighter and tighter."