State's gas prices 3rd-highest - Record level comes despite crude oil drop

www.azcentral.com Max Jarman The Arizona Republic Mar. 20, 2003 12:00 AM

Arizona's gas prices are the third-highest in the nation as the price of unleaded regular gas topped $2 per gallon in many parts of the Valley.

The price increase come despite steady declines in wholesale prices for both crude oil and gasoline.

Valley retail prices could come down after April 1, when Phoenix-area gas stations switch over to a new fuel mix, the drop could be minimal. But Laura Rightenburg, a spokeswoman for AAA Arizona, explained Wednesday that prices tend to rise in the summer due to increased demand, and that many of the factors affecting current prices, such as low refinery output, relatively high crude oil prices and strikes in Venezuela, are expected to linger.

"I don't see it (gasoline) going below $1.75 for the foreseeable future," she said.

Rightenburg said the record high prices are prompting consumers to limit driving and take shorter trips.

"Gas prices strike an emotional cord," she said. "People are fearful."

But, Rightenburg said, she doesn't expect many people will cancel their summer vacation plans because of the high prices.

The prices also are cutting into business profits. Jerry Garner, a Gilbert farmer, said he is being hurt by the rising price of the diesel fuel his farm equipment burns and by fertilizer prices that have risen with the price of natural gas used in its production.

Statewide, AAA pegged the average price of unleaded regular at $1.92 per gallon, the third-highest in the nation. Only California at $2.18 and Nevada at $2.02 were higher. Arizona's statewide price was 20 cents per gallon higher than the national average of $1.72, according to AAA.

"My eyebrows even went up, and I do this every week," said Rightenburg, who prepares AAA's weekly gas price survey.

In metropolitan Phoenix, a shortage of the special fuel that must be burned until April 1 is pushing prices up even higher.

In Maricopa County, the average price of unleaded regular was $1.995 per gallon, up 1.4 cents from the day before and $41.3 cents from a month ago. But in Phoenix, the average price was $2 per gallon, and in Scottsdale, motorists were paying $2.03.

That compares with $1.88 in Flagstaff and $1.86 in Tucson.

Meanwhile, the price of crude oil, the primary ingredient in gasoline, dropped below $30 per barrel Wednesday for the first time in three months.

"The war premium that we built in is gone," said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York.

Crude oil for April delivery fell $1.79, or 5.7 percent, to $29.88 a barrel on the New York Mercantile Exchange. It was the lowest closing price since Dec. 13, when prices last settled below $30 a barrel.

New York prices peaked at a record $41.15 a barrel in October 1990 after Iraq invaded Kuwait, cutting exports from the two nations.

Oil then plunged by a third on Jan. 17, 1991, after U.S.- led forces began their air attack on Iraq, reducing Iraq's threat to neighboring oil producers. The high this year was $39.99 a barrel.

"The large speculators are continuing to exit the oil market," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

"They now believe the recent bull market is over."

Future prices for refined unleaded gasoline also have dropped. Gas for April delivery sold for 94 cents a gallon on the New York Mercantile Exchange on Wednesday, down from a March 7 high of $1.16.

But Rightenburg explained that many of those supplies are not in the United States, which is why retail pump prices continue to rise, while wholesale prices fall.

"There's plenty of crude oil. It's just not here," she said.