INDUSTRY NEWS: Gas Prices Still Sliding--Politics move to the forefront as the U.S. tries to restore Iraq’s oil economy.
<a href=www.thecarconnection.com>The Car Connection by Joseph Szczesny 4/20/2003. Gasoline prices continued to drift downward last week on the heels of the capture of Baghdad by U.S. forces, but could reach a plateau for the next few weeks as American forces try to get Iraq's oil back on the market.
The U.S. military has said that Iraqi oil fields around Kirkuk could start shipping oil in four weeks. But the shipments could get tied up in another round of diplomatic wrangling in the United Nations. The Bush administration made it plain last week that it was eager for the Iraq fields to swing back into production to produce revenue need to pay for both relief and rebuilding efforts inside Iraq.
The wrangling over the oil for food program, however, goes right to the heart of the question of who will hold political authority in a post-war, post Saddam Iraq. President Bush and his advisers have been reluctant to offer the U.N. a larger role and a voice in rebuilding the war-torn country but the administration could find it difficult to sell the oil without U.N. approval.
Saudi Arabia, Iraq's southern neighbor, has adopted the position that the U.S. cannot ship the oil without clear authorization from the U.N. because it doesn't have legal title to the petroleum. Without a clarification of the title to the oil, many larger oil companies will probably be reluctant to bid for it, some experts say. Meanwhile, ministers from OPEC are scheduled to meet this week amid complaints from some members, such as Iran and Indonesia, that there is too much oil on the market and production should be cut to prevent any big decline in the price of crude. Before trading halted in New York and London for the Easter holiday weekend, prices actually had started to creep upwards again on concerns about OPEC actions and on the fear that political turmoil will keep parts of Nigeria's production shut down for a while longer.
The International Energy Agency in Paris, the energy watchdog for 26 industrialized nations, has urged OPEC to be cautious in any supply cut. The prices charged for crude are still too high for firms to rebuild low stocks, the IEA. With prices for crude still hovering above $29 per barrel, refiners and wholesaler are reluctant to take delivery of more oil because they fear they would not be able to recover their costs if the price of oil suddenly fell.
Motorist relief
Motorists around the United States, however, are beginning to see some relief from the relatively high prices that prevailed for through March and into early April.
The average price for regular self-serve unleaded gasoline in Southern California is $2.128, down about four cents from record highs set in late March, according to AAA. San Francisco Bay Area motorists were paying an average of $2.14, equal to the March price. Since hitting a record high of $2.18 per gallon on March 21 a similar, slow decline has occurred in nearly all Southern Californian cities, AAA said.
"While average city prices have begun to drop moderately in the region, they are still all above the $2 per gallon mark," said Auto Club spokesperson Carol Thorp. Nationally, prices are down 12 cents since the March AAA survey and are now averaging $1.595 per gallon. Georgia continues the lowest state average at $1.411, down 11.8 cents from last month, AAA reported.
“Over the past couple of weeks imports from Venezuela, Canada and Europe have increased and that has take the edge off of any supply worries. Imports combined with lower wholesale gasoline prices have sent pump prices lower," Thorp noted.