Iraqi War Affecting US Gas Prices

<a href=www.kron4.com>Read URL VIDEO: Gas Prices at Record Highs Posted: March 26, 2003 at 9:10 p.m.

SAN FRANCISCO (KRON)  --  Since the war in Iraq began, the price for a barrel of oil has fluctuated, but for the most part this last week it's gone down.

Even so, you won't see that reflected at the gas pump anytime soon.

Gas prices haven't budged: they're still high in the Bay Area, more than $2 a gallon, some places upwards of $2.50.

But if you look at what happened in the first Gulf War 12 years ago, they will be coming down.

Severin Borenstein, director of the U.C. Energy Institute, sees oil price similarities in both wars. Earlier this month, a barrel of oil cost a high of $39.90. After the president's war speech, the price dropped to $35. As strikes began, it was $32.50 a barrel.

"The drop reflected a change in beliefs in how quickly the war would be over and oil flowing again," Borenstein says.

The first full day of war it dropped to $29.88 and on Wednesday, a price for a barrel of oil closed at $28.63.

A $10 decrease in a barrel of oil usually means 25 cents less for a gallon of gas, but oil is bought now for the future so price change takes some time.

If it seems the price of gas rises quicker than it falls: it is true. Borenstein says it takes just two to four weeks to see price increase, but it takes six to eight weeks to see the price drop.

Borenstein says companies try to hold higher onto those prices.

A shorter, successful war should mean prices will keep dropping. Borensteiin doesn't believe fires in Iraqi oil fields will change that, but he is concerned about political unrest in another part of the world, Venezuela, a major oil exporter.