War threat makes gas prices unstable - Cost of a gallon won’t be going down anytime soon

www.wisinfo.com Posted Feb. 22, 2003 By Steve Wideman Post-Crescent staff writer

APPLETON — Glenn Adams filled up his Jeep Cherokee with gasoline Friday, and he wasn’t happy about it.

“Right now somebody is pocketing a lot of money,” said Adams, of Appleton, while at the BP Amoco station, 911 W. College Ave.

“It seems like everything was OK for a while until talk started of war with Iraq. I’d like to know the reasoning behind raising gas prices.”

Most area gasoline stations are selling a gallon of regular, unleaded gasoline for $1.749 after a week in which prices rose a dime or more. But while area gas prices stabilized this week, motorists shouldn’t expect a significant downward trend anytime soon, a travel industry analyst said.

“There is no way of predicting what is going to happen,” said Michael Bie of AAA Wisconsin. “Thursday was the first day in two weeks prices didn’t creep up. I couldn’t begin to guess why prices have stabilized at this point.”

The threat of war with Iraq, a general strike in Venezuela and short supplies of finished petroleum products are all being blamed for the most recent price increases, according the U.S. Department of Energy.

U.S. Sen. Herb Kohl asked the Federal Trade Commission on Friday to monitor gas prices in the Midwest, saying consumers “are entitled to know whether they are being subjected to anticompetitive and anti-consumer practices.”

Kamaljit Singh, a manager at BP Amoco, said retailers are not responsible for the price increases, but only increase prices to keep up with jumps in wholesale costs.

“Everyone is saying gasoline is too expensive. The last couple of weeks it increased 10 to 15 cents a gallon,” Singh said. “We don’t make much money on a gallon of gas.”

The price of diesel fuel is affecting the trucking industry, said John Wilkinson, president of Wisconsin Paper Group, a Neenah-based shipping association.

“Diesel fuel is at an all-time high. The DOE said the nationwide average for diesel is a little over $1.70,” Wilkinson said. “It’s becoming more expensive to do business.”

Wilkinson said many carriers have imposed fuel surcharges on shipments.

“Sometimes the surcharge is buried in the rate charged per mile. Sometimes it is a totally separate charge,” he said.

He said the higher fuel costs are making an economically difficult situation “harder yet, because the economy is still pretty flat.”

Bie said gasoline prices began to increase in mid-January when cold weather hit the northeast United States and the most severe spikes came in the two weeks following president Bush’s State of the Union message.

“That’s when consumers began having problems with exorbitant price increases that went up simply on the fear something might happen with Iraq,” he said.

Bie noted that the 1991 Persian Gulf War produced slow, but steady price increases leading up to Operation Desert Storm.

Because the 1991 conflict was short-lived, wholesale and retail prices dropped dramatically.

The day after the U.S. launched its 1991 attack on Iraq, the price of crude oil had its largest one-day plunge in the history of the New York Mercantile Exchange from $32 to $21.45 a barrel.

“Hopefully that scenario would play out again if there is a quick resolution to this conflict, but there is no guarantee,” Bie said.

Steve Wideman can be reached at 920-993-1000, ext. 302 or by e-mail at swideman@ posstcrescent.com.