Relief from gas prices not likely without stability - Ozaukee County’s cost rises 61 percent in 1 year

www.gmtoday.com By JOHN NEVILLE- GM Today Staff February 27, 2003

These high gas prices don’t  seem close to dropping soon, according to many experts.

OZAUKEE COUNTY - After rush hour Monday evening, a middle-aged man glumly eyed the gas pump readout at the Speedway filling station on Washington Avenue in Cedarburg.

"Damn, I wish they’d figure out what they’re going to do and just do it," he said, topping off the tank of a salt-crusted SUV and zooming off.

With war on hold in the Mideast and the flow of crude oil from Venezuela interrupted by a strike, international instability and several other related factors have driven up prices.

With a gallon of regular gas going for between $1.75 and $1.80 a gallon in southern Ozaukee County, a nationwide trend in rising gas prices has touched off grumbling but none of the public backlash that followed price gouging incidents in the wake of 9-11.

Mike Khaled, owner of the Citgo Free Zone in Grafton, says kvetching about gas prices is nothing new to him.

"They complain the first two or three days after they go up," he says during a spare moment during Tuesday’s lunch hour rush. "They know it’s not our fault but they always complain."

Tom Moore, of the state Agriculture and Trade’s Bureau of Consumer Protection, said Monday that agency hasn’t received any complaints about gas bilking.

A consumer information employee, Moore notes the agency handles price gouging like any other consumer complaints, with an expert in the trade practices division investigating.

"But we haven’t hit the $2 mark yet, fortunately," says Moore, recalling a wave of protests in June 2000 when a gallon of regular throughout most of Wisconsin went slightly above the dreaded $2 ceiling.

Ozaukee County Highway Commissioner Robert Dreblow notes a gallon of discounted gas the county gets has jumped from 90 cents a gallon for regular and 86 cent a gallon for diesel last year to $1.45 a gallon for regular and $1.42 for diesel now.

(The county provides gas to all county agencies, the Shared Ride Taxi service, the city of Port Washington and several small villages and municipalities.)

"Yeah, fuel is expensive. It’s early in the budget year so it’s hard to say we’re getting killed by it but it certainly is something we need to keep an eye on," he adds.

So far Dreblow’s fleet of trucks has had a very mild winter — at least in terms of snowfall.

"It’s not like we’re consuming as much fuel as we would have other years," he notes.

Jim Mueller asserts that service station owners are not making windfall profits from the recent hike in gas prices. Division Sales Manager for Citgo, Mueller makes a convincing argument that station owners are not profiting from the surge in pump prices.

"The market dictates that I’m not able to move my price yet my wholesale goes up," he explains. "So my profits get squeezed. That seems to be the case most of the time but especially when prices are rising."

Mueller spoke from behind the counter at Mequon’s Port Road Citgo, where Tuesday morning a gallon of regular went for $1.74 a gallon with a gallon of diesel for $1.78 a gallon.

Erin Roth, executive director of the Wisconsin Petroleum Council, notes that Wisconsin has several things working against it, including high gasoline taxes and location at the caboose of the Midwest supply pipeline.

"No, we are not lining our pockets with profits," he says. "We are just passing along our additional costs of the raw product."

Roth attributes a more than 100 percent increase in the price of a barrel of crude in one year to several causes: the looming war, a harsh winter in the Northeast states requiring more heating oil and less domestic production of oil.

"But the biggest reason is the unrest in Venezuela. We import over 7 percent of our crude oil from there," he says, noting that the United States imports most of its crude from Canada and Mexico. (Venezuela is third, followed by Saudi Arabia.)

Will oil prices come down this spring?

Probably not, seems to be the short — and most credible — answer.

George Gaspar, managing director of petroleum research at Robert W. Baird & Co. Inc., notes that while prices have gone down slightly in the last week, it’s too early to make predictions.

"Tell me when there’s a war," he says. "Oil is heady in price. The longer we stay away from the war the more opportunity there is going to be for production to build up in the world and start to resupply the huge decline that came about from the 140 million barrels that was not produced by Venezuela during its strike."

Gaspar explains that OPEC is producing "at will" to make up the shortage. He notes that with crude at $37 a barrel on the open market, it’s unlikely that prices will steadily fall anytime soon.

Should war come and the United States and its allies wage a relatively brief, successful war, the outcome might eventually help bring prices down at corner filling stations.

Gaspar thinks seizing Iraqi facilities intact would mean a barrel of crude may come down as much as $5. He says that the Bush administration may release some national strategic oil reserves to take the shock off of the recent increases in gas and heating oil prices.

"If you can protect the refineries and get control of them without super serious damage being imposed on them, that all works into the price of oil," Gaspar notes.

What if the regime of Saddam Hussein puts a match to those refineries?

Gaspar concedes that’s possible, but quickly notes that that scenario was not discussed in that part of the Mideast until recently.

"I think that idea was planted in his mind by the news media," he adds. "Now we may have to live with the consequences of that."