As Gasoline Prices Rise, Drivers Have Doubts About Why - It looks like an oil embargo

www.nytimes.com February 20, 2003 By NICK MADIGAN

OS ANGELES, Feb. 19 — Beyond antiwar demonstrations and troop deployments, gasoline prices that have jumped to more than $2 a gallon in some places seem to many drivers to be the most tangible evidence of the Bush administration's plans for a possible attack on Iraq.

People pumping gas from Los Angeles to Charlotte, N.C., in the past few days surmised that the oil companies were cashing in on the uncertain geopolitical climate, with the effect trickling down to the corner gas station.

"If there's a chance of the oil companies' driving up the prices, they'll do that," said Jeremy Levenson, a doctor who had just paid $30.63 — at $2.09 a gallon, the most he had ever spent — to fill the tank of his Infiniti I30 with high-octane gasoline at a Union 76 station in the Westchester district of Los Angeles.

"Who knows how much of this is artifice and how much is created by the oil companies for their own benefit?" he asked. "It's what the traffic will bear. It's capitalism."

Since late last year, the price of gasoline has risen an average of 29 cents a gallon, according to the American Petroleum Institute, a trade group representing more than 400 oil and natural gas companies.

According to AAA, the motorist club, which assembles a daily compilation of gas prices, today's national average for regular unleaded gas was $1.66 a gallon, a few cents shy of the record average, $1.71, reached on May 15, 2001. Here in California, gasoline costs more than anywhere else in the country, with drivers today paying about $1.89 a gallon for regular unleaded gas and $2.05 for premium, AAA reported. Prices in Hawaii, usually the highest, were just a cent or two less. In New York State, regular was selling today for an average for $1.76 a gallon, with premium at $1.92; in New Jersey, home to many refineries, regular was $1.55 a gallon, while premium was $1.73.

But several factors are in the mix behind rising gas prices, including the possibility of war, said John Felmy, the petroleum institute's chief economist.

"You either believe in conspiracies or you believe in market fundamentals," Mr. Felmy said. "Most consumers just see the price going up and down, but they don't look into why."

Among the main reasons for the rise in prices, he said, was a 78-day strike by oil workers in Venezuela that removed as much as 4 percent of the world's supply for oil from the market. The United States imports 9 percent of its daily oil consumption — primarily crude oil and petroleum products like diesel fuel and asphalt — from Venezuela.

A similar strike in Nigeria has also affected the marketplace, Mr. Felmy said, though on a lesser scale. And the sharply colder weather has increased demand for home heating oil.

Inventories of crude oil are low and refiners have scaled back production accordingly. Typically, they stockpile oil this time of year to produce more gas as the heavy driving summer months approach. But because they are not stockpiling now, prices will probably stay high through the spring.

"There is some nervousness about Iraq," Mr. Felmy said, "and that's created some instability in the markets. Importers, traders and refineries tend to stock up, and so some participants put their prices up. If you don't, you exhaust your supply."

Such explanations seem to be small consolation to consumers.

"My theory is that they're stacking up on profits right now for if we do go to war," said Kathy Reilly, a minivan driver in Seattle. "I think a lot of it is pure greed."

Tim Jones, a computer network administrator from Tucson, recalled that in August 1990, immediately after Iraq's invasion of Kuwait, the price of gasoline soared virtually overnight. "And that fuel was already here, already in the tanks, already paid for," Mr. Jones said. "It's all about money."

Earlier this month, in Ann Arbor, Mich., Kathi Kelley got behind the wheel of her Toyota Rav4 for the first time since breaking her wrist in December and said she was astonished that gas prices had gone up 25 cents a gallon since she was last on the road. Ms. Kelley said she thought there was a direct correlation between the price increases and the mounting talk of conflict.

"With the idea of war looming, prices are not going down," said Ms. Kelley, who commutes 45 minutes each way to work every day to Jackson, Mich.

While some people said they did not want to pay at the pump for war, other consumers were willing to.

"I think the war is probably inevitable and probably necessary, and if higher prices are what we need for more security and safety than I'm willing to pay that," said David Fransko, a stockbroker filling up his Ford Explorer at a Shell station in Ann Arbor.

For some, sacrifice means driving less. In Bothell, a suburb of Seattle, Guy Nguyen and his wife, Diana, both drive to work, he to Bellevue, Wash., and she to Redmond, Wash. They recently returned from a vacation to find much higher gas prices, and decided this week to start sharing one of their two cars; they own a Toyota 4-Runner S.U.V. and a Chevy Tahoe pickup truck, the latter a guzzler with a V-8 engine that gets about 12 miles a gallon on the highway. The more modest Toyota seemed the better choice.

"I've looked everywhere and it's almost two dollars," said Mr. Nguyen, a car salesman, referring to the price of premium gasoline.

AAA reported that the average price of a gallon of regular unleaded gas has increased in Washington State by 18 cents in the past month, to $1.55. In neighboring Idaho, prices for regular have increased nearly 15 cents in the same period, to $1.59 a gallon. "I don't blame the government, I blame the gas companies," Mr. Nguyen said. "They have to find some way to make more profits."

Gasoline station operators are not necessarily happy about the increases, since they tend to strain relationships with customers.

"We got hit with another 4-cent increase yesterday," said Tom Simon, manager of a Union 76 station in Marina del Rey, west of Los Angeles, where full-service, high-octane gas was selling today for $2.29 a gallon. "We're not here for the fast buck, but it just keeps going up."

Paradoxically, Mr. Simon said, sales have risen, as drivers top off their tanks in anticipation of further increases.

"People are still going to buy gas and they're still going to buy S.U.V.'s — at least in this area," he said, pointing to a Ford Expedition and a Cadillac Escalade being filled at the pumps.

"We're all dependent on gasoline — it's like caffeine, or sugar," said Peggy Fisher, a dance teacher who had just spent $16.89 to put almost 10 gallons of the cheapest gas in her Honda Odyssey van. "These are our addictions."

Another customer, a taxi driver, Fred Sam, said he used to be able to fill up his tank for $20. Now, Mr. Sam said, it costs $50.

"At these prices, if you only make $5 or $10 an hour, you keep having to come back and put $5 or $10 worth of gas in the cab," said Mr. Sam, who pays $500 a week to lease his taxi. "I barely break even."

Even people who say that the prospect of a war with Iraq is a pretense to raise prices seem to have adopted an attitude of resignation. Few seemed indignant.

David Elder, a carpenter who was filling up his 1996 Chevy S10 truck on Monday in Charlotte, said he thought the troubles in Venezuela were the main culprit. But if war starts with Iraq, Mr. Elder said, prices "will really go up."

"They are going to get all the money they can out of us," he said.

Thomas Crosby, a spokesman for AAA Carolinas, said the gas price increases were distressing "because the prices are rising at a faster pace than increases in crude oil prices." Oil companies are raising prices on the street well before the prices in crude actually take effect in world markets, he said.

"It's a very typical practice," Mr. Crosby said. "It's a burden on all of us. Iraq gives them a reasonable explanation to offer consumers."

James Dozier, 36, a manager at a janitorial supply warehouse in Charlotte, decided to put just $7 of gasoline in his 1996 Dodge Caravan the other day because of the prices. Mr. Dozier said he also decided not to go out that night to save on fuel costs.

"I'll just stay home and watch television," he said. "It used to be you could put $10 in and go all weekend."