Gas Prices May Stay High Despite Lower Crude Costs
smartmoney.com March 17, 2003
Oil prices are sliding as more crude moves toward a thirsty U.S. market, but gasoline prices aren't expected to follow them down anytime soon, Monday's Wall Street Journal reported.
The reason: tight crude-oil supplies and production problems, particularly on the West Coast.
In California, where prices now average $2.08 a gallon, gasoline supply continues to be dogged by refinery- maintenance issues and complications surrounding the production of a new ethanol-gasoline blend. Those problems appear to be affecting supplies to other western states.
Nationally, gasoline prices are expected to reach highs, before adjusting for inflation, when the latest survey comes out today. They most recently averaged $1.71 a gallon of regular, just below the previous record. A prolonged oil workers' strike in Venezuela this year and fears about the impact of a possible U.S. invasion of Iraq have contributed to the bulk of the price run-up.
Inventories have dropped dangerously low in some parts of the country and will be hard to replenish quickly. The crude on the way from the Middle East won't help inventories for a month or more, and weeks more will pass before the oil is refined into gasoline and transported to service stations. The Energy Information Administration, an arm of the Department of Energy, predicts that pump prices will peak at $1.76 this year.
On Friday, crude oil fell on the New York Mercantile Exchange, in part reflecting reports that Saudi Arabia had chartered at least a dozen oil tankers for shipment to the U.S. Gulf Coast. But that oil won't reach U.S. shores until the first half of May. In the meantime, the first wave of extra Saudi oil -- shipped more than a month ago -- is expected to reach the U.S. Gulf Coast soon, said Larry Goldstein, president of Petroleum Research Foundation in New York.
Wall Street Journal Staff Reporter Alexei Barrionuevo contributed to this report.
(END) Dow Jones Newswires
03-17-03 0028ET