War jitters ripple in economy

www.twincities.com Posted on Tue, Mar. 18, 2003
BY DAVID HANNERS Pioneer Press

Service stations in the Twin Cities had about a 35-cent spread between high and low prices Monday as the country readied for a U.S. invasion of Iraq.

Put another way, if you drove a Hummer, it would cost you $48 to fill that 32-gallon gas tank with $1.50-per-gallon gas at the Marathon station at 26th and Hennepin in Minneapolis. But you would've paid $59 to fill up at the Mobil at 45th and University Avenue N.E., in Minneapolis, where gas was $1.85 per gallon, according to prices listed at www.twincitiesgasprices.com.

Then again, "If you can afford a Hummer, you can afford gas," said Dawn Duffy, a spokeswoman for the AAA office in Minneapolis.

A AA and state officials said there should be no shortage of gasoline in the Twin Cities if the country goes to war, but that prices will remain high. AAA has been cautioning motorists from immediately filling up once war appears imminent.

Such "panic buying," as they call it, can drive up prices.

"It's ugly, isn't it?" said Duffy. "Last year, nobody talked about gas prices. From April to November, we were around $1.40, $1.45. Last fall, we started worrying about Iraq, and last December we started worrying about Venezuela. But gas prices didn't start going out of control until the first week of February, when President Bush made his speech to the nation and said that things were going to be happening in a matter of weeks, not a matter of months. I don't know if the conflict ball was rolling, but the gas price ball was rolling fast."

According to figures compiled by AAA, the price of a gallon of unleaded self-serve regular in Minnesota currently averaged about $1.68 Monday, lower than the national average of $1.72.

But just to show how those prices can fluctuate, they were roughly equal ($1.63 a gallon nationally, and a penny higher in Minnesota) a month ago. Go back a year and the average Minnesota price of $1.31 per gallon was 6 cents higher than the national average.

Gasoline prices can fluctuate for a variety of reasons: rumors of war, labor strife in major world oil supplier Venezuela, refinery fires or even the presence of heavy fog in the Houston Ship Channel. But stocks of crude oil and refined petroleum products in Minnesota are relatively stable at present, said Jeff Haase, an engineer who monitors petroleum supplies for the Minnesota Department of Commerce.

"With motor gasoline, we're standing at about 1.88 million barrels (of stocks) and that's pretty much average for this time of year," said Haase. "We're entering into the 'shoulder' season, where refineries are going to be switching over to making more motor gasoline for the driving months of summer. There's really no cause for concern with the stocks the way they are right now."

The nation is divided into five petroleum districts. The district that includes Minnesota and 13 other Midwestern states imports the bulk of its foreign oil from Canada. Last December, for example, the district imported 43.7 million barrels of oil, and two-thirds of that oil came from Canada.

Refineries in the Midwest get about 13 percent of their crude oil from the Persian Gulf. Most of that is from Saudi Arabia, but Iraqi oil accounts for over 18 percent of the oil imported to the United States from that region, according to statistics from the U.S. Department of Energy's Energy Information Administration.

All told, about 2.5 percent of the gas a Hummer owner pumps into his vehicle — which gets about 8 to 10 mpg — was refined from Iraqi oil.

David Hanners can be reached at dhanners@pioneerpress.com or (651) 228-5551.