Prices at pump fall despite war

www.kansas.com Posted on Fri, Mar. 21, 2003 Eagle staff and news services

Wichitans expecting to wake up Thursday to higher gasoline prices because of the war with Iraq got a pleasant surprise.

Prices at the pump actually came down some as the price of crude oil dropped.

The average price for a gallon of regular unleaded in Wichita on Wednesday was $1.667, according to AAA Kansas.

On Thursday, many stations were offering gasoline for less than $1.60.

Amanda Millard, spokeswoman for AAA Kansas, said she drove to work on Thursday in Topeka and noticed prices were down from $1.63 to $1.59.

"I think that's a considerable drop for the changes that went on overnight," she said.

Dennis O'Brien, director of the Institute for Energy Economics and Policy at the University of Oklahoma, started to say that the industry will be "nervous" as the war progresses.

But then he stopped himself.

Nervous, he said, doesn't begin to describe what likely will happen with gasoline prices.

"It's going to go berserk," O'Brien said.

Oil well fires in Iraq will "cause the market to jump around," he said.

Indeed, reports of oil fields burning in Iraq sent oil prices jumping and then falling on the first full day of the war, with traders eventually heaving a sigh of relief that only a few wells had been set ablaze.

By the end of the day, oil prices dropped more than 4 percent -- topping off a decline of more than $9 a barrel in six trading sessions.

"Every bit of news is going to get the market moving one way or another," said Allen Mesch, president of PetroStrategies Inc., a consulting firm in Plano, Texas.

"Until reservoirs are destroyed and irreparably damaged, we're dealing with speculation, we're dealing with uncertainty, and we're dealing with people reacting on the basis of very little information," Mesch said.

Crude oil for April delivery hopped between $28 and $30.60 a barrel during regular trading, before closing down $1.27 to $28.61 on the New York Mercantile Exchange's last day for the contract. Oil for May delivery settled at $28.12 a barrel, down $1.24.

The market's largest concerns have been oil-well fires in Iraq and damage to neighboring Middle East countries that could disrupt oil supplies.

Amid those fears, government and industry officials spent the first day of war trying to reassure markets and consumers that global oil supplies would be adequate.

The Organization of the Petroleum Exporting Countries has pledged to cover any shortfalls from a war, even as Iraq's 1.7 million barrels of daily exports dropped to a trickle this week. Iraq pumped about 3 percent of the world's oil last month.

Saudi Arabia, the world's largest producer, started pumping more oil in January to cover a drop in supplies from the Venezuela strike and meet global demand. "All preparations have been undertaken to ensure the flow of supplies," Oil Minister Ali Naimi said in a statement.