Fuel forecast unpredictable. Analyst says price at the pump determined in part by crude price

www.cjonline.com By Amy Bauer The Capital-Journal

The effect of a looming war with Iraq on local gasoline prices is uncertain, but analysts said Tuesday one thing is clear -- consumers shouldn't panic. "I don't think anyone has enough information to predict how things will turn out, but historically the price of gas that people pay at the pump has an awful lot to do with the price of crude oil," said Ron Planting, an analyst for the American Petroleum Institute in Washington, D.C.

Fuel prices have climbed steadily during the past five months because of uncertainty about a potential war; higher demand for heating fuel because of a cold winter; and political unrest and strikes that significantly decreased oil production in Venezuela, the fourth-largest oil-producing nation. The United States relies on Venezuela for 15 percent of its crude oil. The strikes have ended, and its oil production has increased, though not to previous levels.

According to AAA on Tuesday, the average price of a gallon of regular gasoline in Topeka was $1.66, about 40 cents higher than the same time last year and slightly lower than the national average. The national average for a gallon of regular gasoline was $1.72, which set a record high earlier this week.

Topekans said they were feeling the effects of higher gasoline prices in their driving habits and their wallets.

"It's just outrageous, the prices of gas," said Robert Owens, of Topeka, who was fueling up at the Amoco station at S.E. 6th and Quincy on Tuesday afternoon. "I just go to work and the necessary places like stores and school."

"We think about it every time we get ready to go out," said Topekan Kent Foga, who also was fueling his vehicle at the station. "Anything out of your pocket affects you. After the Iraqi situation is resolved, maybe prices will go back down."

If the events of 1991's Gulf War are a guide, then prices may fluctuate.

"When Iraq invaded Kuwait, there was a sharp increase (in crude oil prices) because the world lost a tremendous amount of oil production -- about 4 million barrels per day," analyst Planting said.

As it became clear the United States and its allies had the advantage, and some government reserves were released, crude oil prices dropped quickly. Planting said that was reflected in a matter of weeks by prices at the gasoline pump.

Tom Palace, executive director of the Petroleum Marketers & Convenience Store Association of Kansas, said, "I see the price of crude actually inching down today (Tuesday). What that means is when the price of crude goes down, your gasoline prices should follow suit at some point in time. Obviously that doesn't all happen overnight or within the hours.

"My guess right now is that the gas prices will remain flat or constant for a little while," Palace said. "I won't say they'll be going down a whole lot. I won't be saying they're going to go up a whole lot. Flat being 5 or 6 cents either side."

He said factors such as the length of any conflict and its effects on oil-producing countries will partially determine crude oil supplies and pricing.

"If it lasts a long time -- any kind of prolonged conflict -- we're going to have to rely on other sources of crude oil," Palace said.

Saudi Arabia and other members of OPEC have agreed to increase their output to boost supply, and Planting said the United States, Europe and countries in Asia have strategic reserves -- oil that could be brought into the market in the case of a major supply disruption.

Palace said, "If people just sit back and be smart about what they're doing on a daily basis -- we're all watching how much gas we put in our vehicles because of the cost -- then we should not panic at any time."

"It should be business as usual, which is what we anticipate right now."

Amy Bauer can be reached at (785) 295-1231 or amy.bauer@cjonline.com.

Tips from AAA

• Practice fuel conservation • Keep car maintenance up-to-date • Don't let price changes cause panic • Refuel at 1/4-tank or lower or before long trips

Average fuel prices

Average regular grade unleaded fuel prices Location Current Month ago Year ago Topeka $1.662 $1.614 $1.267 Kansas $1.671 $1.610 $1.262 Nation $1.722 $1.655 $1.266 Source: AAA Daily Fuel Gauge Report

Last Modified: 12:02 a.m. - 3/19/2003