Relief at pump might be delayed - Weather, other factors leave gas supply short
www.freep.com March 11, 2003 JOCELYN PARKER DETROIT FREE PRESS BUSINESS WRITER
Although crude-oil prices are expected to fall once the Iraqi crisis is over, low supplies of gasoline could keep prices high at the pump for at least the next few months, says the head of oil producer ConocoPhillips.
During a news briefing Monday in Detroit, chairman Archie Dunham said a cold winter across the nation has caused refiners to increase production of heating oil, and that has led to a significant decrease in gasoline production.
For consumers that translates into higher prices for gasoline as the nation enters the summer driving season. Compounding the problem: Refiners switch to a less-polluting grade of gasoline for the summer, which adds about 4 more cents per gallon, experts say.
"I expect the price of gas will stay at the current level or go higher for the next 60 to 90 days," Dunham said before delivering a speech before the Detroit Economic Club.
He declined to give a specific target for gas prices.
Meanwhile, crude oil prices could sink to $25 to $30 a barrel once the war situation is resolved, Dunham said. The possible conflict with Iraq and a strike that has crippled Venezuela's oil industry have pushed crude-oil prices near $40 a 42-gallon barrel, the highest they have been in more than two years.
Dunham says that price is unjustified because world supplies are plentiful. "There's no reason for oil prices to remain at $40 a barrel, given the excess capacity." He estimates the excess supply could range from 3.5 million to 5 million barrels a day.
Because crude oil can make up more than 50 percent of the price of a gallon of gasoline, drivers across the nation feel the pinch.
"It almost makes you want to park your vehicle and carpool," said Detroit resident Richard Perdue, as he filled his Ford Explorer sport-utility vehicle at a Marathon station on East Jefferson in Detroit. "I hear gas will hit $2. And $2 and an SUV don't mix."
In Michigan, gas prices remain at their highest levels of the year. The average price of a gallon of self-serve regular stands at $1.76 a gallon, unchanged from last week and up 50.2 cents from a year ago, according to AAA Michigan's weekly survey of 300 service stations.
The average price in the Detroit area is $1.72 a gallon, up 1 cent from last week and up 47.4 cents from a year ago, AAA said.
Higher crude prices could also result in a potential windfall for large oil companies such as Exxon Mobil Corp., Royal Dutch Shell and ConocoPhillips. And some observers question whether that's fair to consumers paying hefty prices at the pump.
"When there's a substantial change in prices, there's more of an opportunity for gouging," says Joan Claybrook, president of consumer advocacy group Public Citizen. "Prices are going to go up even more."
Claybrook says the gas price problem could be resolved if the nation tapped into its Strategic Petroleum Reserve, which is generally used during emergencies. The organization has also asked President George W. Bush to cap gas prices at $2 a gallon.
Other experts say the Organization of Petroleum Exporting Countries will increase oil production, and that could ultimately lower gasoline prices.
Contact JOCELYN PARKER at 313-222-5391 or at parker@freepress.com. The Associated Press contributed to this report.