Shifting up-- Drop in gas prices expected to turn around soon
By Thomas Grillo, Globe Correspondent, 6/7/2003
SOMERVILLE -- Despite the war in Iraq and the start of the summer driving season, gasoline prices have fallen by 18 cents in the past three months. ''We figured wholesale prices would rise for the Memorial Day weekend as they usually do, but they just keep falling,'' said Tito Vincente, owner of Vincente Brothers, a full-service independent station on Medford Street in Somerville where regular gas was selling for $1.45 per gallon this week.
The average price for a gallon of regular gasoline in Massachusetts dropped for the 11th consecutive week to $1.52 yesterday, down from a high of $1.70 for the period ending March 18, according to AAA's Daily Fuel Gauge Report. One year ago, gas was $1.42 per gallon. And some stations are selling it for as low as $1.37 per gallon.
But the slide in prices could end soon. The Energy Information Administration, an arm of the US Energy Department, said fuel inventories are low, and summer demand for gasoline is expected to be 1.6 percent above 2002 levels, a recipe for higher prices at the pumps. By the end of June, gasoline prices are expected to reach $1.56 per gallon, up from the summer 2002 average of $1.39 per gallon, the agency said.
While imports of crude oil are averaging 10.5 million barrels per day, the second-highest amount ever, US gasoline inventories are at 200 million barrels, down 13.2 million barrels from a year ago, according to an EIA report. And inventories are expected to rise to 201 million barrels by summer's end. But the small increase is not expected to make a major contribution to this summer's gasoline supply.
Despite a sluggish economy, gasoline demand is projected to average 9.18 million barrels per day this summer, a record, up 150,000 barrels per day, or 1.6 percent, from last summer, the report said.
Jacob Bournazian, a US energy economist, said no matter the price, demand for fuel is unstoppable. In the 1980s, Americans purchased 6 million gallons per day, and in the mid-1990s demand reached 8.2 million gallons, he said. Today, motorists gobble up more than 9 million gallons each day. ''People still have to get to work, kids have to get to school, and products have to be shipped,'' Bournazian said. ''Who can really change their transportation routes enough to have an impact?''
In March, fears of war with Iraq and production problems at a refinery in Venezuela drove prices higher. But the world's refiners picked up production to meet the demand for fuel worldwide, causing the recent decline in prices.
''Ironically, Iraq has not been a factor,'' said Bournazian. ''Our normal suppliers, Venezuela, Nigeria, and Saudi Arabia, stepped up production to offset losses from Iraq.''
The Organization of the Petroleum Exporting Countries will meet June 11 to decide whether to cut production and lower its cap of 25.4 million barrels a day. One OPEC minister did not rule out the possibility of trimming production at next week's meeting, but analysts said a shift in production is unlikely.
This story ran on page C1 of the Boston Globe on 6/7/2003. © Copyright 2003 Globe Newspaper Company.