Are gas prices at peak? State and local gas prices reach record levels

www.tribnet.com Roy Gallop | THE News Tribune BARBARA CLEMENTS; The News Tribune

Andy Green looked up at the reader board and sighed.

The price for premium gasoline at this Fife Chevron station had just inched over the $2-a-gallon mark.

"I can't believe this," Green grumbled as he filled his tank with $1.95 medium grade fuel.

"I used to shop around, but now I don't," Green said. "Every sign is beginning to look like the ones around here."

Down the street at a Texaco station, gas cost $2.12 for premium, stair-stepping down to a "low" of $1.92 for regular unleaded - ranking the outlet among the highest-priced gas stations in the South Sound.

Local and national experts in the gasoline and crude oil industry disagree over whether the relentless price climb at the pump has leveled off - or is just catching its breath before spiking upward once again.

Some believe prices will fall once war starts with Iraq and commodities traders are assured the oil supply will continue to flow. Others fear that a war will mean $3 a gallon gas at the pump.

They also disagree on the cause of this winter's price spikes. Is it just war jitters? Some say so. Others point to oil exporter Venezuela's political instability or the East Coast's heating-oil demands.

But since Washington state refineries get more than 90 percent of their crude oil from Alaska and Canada, why should a labor strike in Venezuela affect us? Or a war in Iraq or the deep freeze in New York, for that matter.

Conversations at pumps around the South Sound last week eventually turn to the question: Who is profiting from this?

Spokesmen from the oil companies, refineries and gas stations each say it's not them.

Refinery and oil representatives say they aren't making a big profit on the recent price increase, which hit all-time highs in the Seattle area last week at $1.82 a gallon for regular unleaded. That broke a record set in October 2000.

On Friday, Tacoma's gas prices set a new record at $1.73 per gallon for unleaded regular, according to AAA, formerly known as the American Automobile Association, which tracks pump prices nationally.

"In many parts of the country, prices are beginning to level out," said Janet Ray of AAA. "But we're going up (in this region), while others are coming down."

What pushes prices Oil company representatives say that they are feeling the pinch at the pump like everyone else, and no, their companies are not gouging the U.S. consumer under the guise of pending war.

"The price of crude is simply higher," said Bill Hickman of the American Petroleum Institute in Washington, D.C.

Institute reports show that crude oil prices on the worldwide market are 70 percent higher than a year ago. This last week, crude oil prices tickled the $40 a barrel mark, the highest level in 12 years.

"The price of crude has just been skyrocketing," concurred Marcia Nielsen, spokeswoman for U.S. Oil and Refining Co. in Tacoma, the only refinery in the state south of Anacortes.

A small refinery which produces about 30,000 barrels of product a day, U.S. Oil does not set the price of gasoline in this state, Nielsen said.

That's established by crude oil prices and by the four larger refineries located in Skagit and Whatcom counties, near the Canadian border.

"We're not a price leader, but a price follower," Nielsen said.

Gasoline and crude supplies in the United States also are at record lows, according to the Energy Department and the petroleum institute.

While about 98 percent of this state's oil comes from either Alaska or Canada, for the nation as a whole there's a different scenario in play, the petroleum institute's Hickman said.

About 60 percent of U.S. crude comes from overseas - from countries such as Canada, Saudi Arabia and Venezuela.

The oil flow from Venezuela, which provides the United States with 8 percent of its crude, stopped in early December due to a labor strike, which was finally settled late last month. But it may take months for the crude oil shipments to return to their normal levels, said Energy Secretary Spencer Abraham.

Even with the crude delivery from Venezuela on line again, there is fear of war interrupting supplies from the Gulf states, Hickman said.

Although the United States receives only 2 percent of its oil from Iraq, about 33 percent of the U.S. oil supply comes from OPEC and countries in the Persian Gulf, according to the Department of Energy.

"The oil market is really a worldwide market now," said Frank Holmes of the Western States Petroleum Association. "Things happen anywhere in the world, the market reacts instantly."

International worries aside, a cold snap along the eastern U.S. seaboard also has refineries producing more heating oil than gasoline, thus reducing the overall supply of gasoline in the nation, Hickman said.

Still, he acknowledges that his friends and family give him the hairy eyeball over gas prices at the pump. "I even get it from my kids," he said.

Hickman adds there have been dozens of congressional probes into price gouging by oil companies, but not one investigation has resulted in an actual criminal charge.

But two years ago, an investigation by The Oregonian newspaper in Portland found that BP Amoco bumped up West Coast oil prices by exporting its Alaskan crude to Asia for less than it could have sold it in U.S. refineries.

Gas dealer skepticism Tim Hamilton said there's no doubt in his mind that oil companies are making huge profits from the recent price bumps.

Hamilton is an energy consultant and executive director of the Automotive United Trades Organization, an association representing 500 independent gas dealers in Washington.

Oil companies both pump the crude and refine the viscous liquid into gasoline at refineries they own, he said.

"It really doesn't cost any more to bring it out of the ground," Hamilton said.

The recent price hikes have nothing to do with the cold snaps back East, strikes in Venezuela or a pending fight with Iraq, he contended.

The oil companies are simply ramping down the production of gasoline to drive the price up, he said.

This comes at time when the oil industry is adopting "just-in-time" production schedules. While this practice, adopted about three years ago, saves the industry money, it creates an instant shortage if crude does not arrive as planned, industry experts said.

Given this, prices topping the $2 a gallon mark now - well before the summer driving season - worry Hamilton.

"If there is a single burp in the refinery system between now and then, we could see $2.50 to $3 a gallon at the pump in a matter of a week," he said.

Even if Saddam Hussein blows up his country's oil fields, as he did in the 1990 Persian Gulf War, it's doubtful that would have a direct effect on oil prices, he said.

"The Saudis replaced that production in a matter of hours," Hamilton said.

Once the gulf war started, prices at the pump dropped, Hamilton and other experts noted.

AAA figures back this up. In April 1990, the average price for unleaded gas in the United States was $1.06. When the gulf war began in late summer, the price jumped to $1.42. But it dropped back to $1.06 in March 2001, after the war ended.

Hamilton stressed that the station owners aren't getting rich off the almost hourly price increases drivers have seen over the last 12 weeks.

Most owners have been losing $4,000 a month because price increases have gobbled up any profit margin they receive on the gasoline.

"Typically, station owners don't make any money on gasoline," Hamilton said. "They hope you'll fill up, and then go and buy that higher-priced Twinkie.

"The station owners are the people taking the heat for these increases by the customers, not the oil executives."

If there is any solace for beleaguered station owners or consumers such as Green, it may be that other states are feeling the bite worse than Washington.

Last week, California posted the highest average price for unleaded regular gasoline in the nation, at $1.99 a gallon. The average price for premium: $2.15.

The Associated Press contributed to this report Barbara Clements: 253-597-8652 barbara.clements@mail.tribnet.com

State and local gas prices reach record levels Over the last 12 weeks, gas prices rose to record levels in the United States as well as in Washington state and the Seattle-Tacoma area. Seattle's gas prices hit record levels in mid-week.

On Friday, the price for regular unleaded gasoline set records in the state and in Tacoma.

The state's prices came in at $1.77 on Friday. In Tacoma, the price at the pump for regular unleaded was $1.73, which also broke the record set in 2000, according to AAA, which tracks gas pump prices nationally. (Published 12:30AM, March 2nd, 2003)