UPDATE:INTERVIEW: No OPEC Action Needed -Algeria Oil Min
sg.biz.yahoo.com
Tuesday March 11, 2:26 AM
(This updates an article from 1519 GMT with additional comments on stockpiles, prices and economic outlook.)
By David Bird
Select from the most reliable agencies Of DOW JONES NEWSWIRES
VIENNA (Dow Jones)--OPEC doesn't need to act now to cover potential lost supplies caused by an Iraq war, because strong output and expected lower demand will balance the market, Algeria's oil minister said Monday.
In an interview with Dow Jones Newswires, Chakib Khelil said he believes the Organization of Petroleum Exporting Countries can easily cover a supply loss of 3 million barrels a day, exceeding current Iraqi output of 2.4 million b/d.
For this reason, he said OPEC doesn't have to take action at Tuesday's output policy meeting but rather should plan to meet if and when more oil is needed after conflict in Iraq has begun.
Khelil said oil prices will rise on the start of war, though he believes there is a possibility of a collapse to below $22/bbl thereafter.
Concerns "might last a week or two weeks, but the prices will go down even without ... the use of (strategic) stockpiles." Khelil believes the U.S. would want to restore Iraq's oil output as quickly as possible and that Iraqi supplies could be cut off for as little as two weeks.
"We're going to know very fast whether we're going to have a long disruption or not," Khelil said.
"We've seen in the past that once it starts going below $22/bbl, it's very difficult to keep it (from dropping further)," he said, adding that when prices fell to $16-$17 in 2001, output discipline improved.
"If you're looking at the next three to six months, I think the concern is there," that OPEC could be putting too much oil on the market and prices could crash, he said.
A war would severely disrupt the world economy and therefore pull down potential growth in oil demand, exacerbating the competition between OPEC and non-OPEC exporters for market share, he said.
Khelil said current oil prices, trading just below their peaks from the 1990-1991 Gulf War, are inflated solely by fears related to war.
"Stocks are reasonably OK, supply is there," he said. "From that point ... there's no reason why prices are at this level. Once that uncertainty is eliminated, I think we should see a normal situation return and maybe prices at more reasonable levels."
Khelil said in the interview: "OPEC is here to make sure we're meeting the demand." After two increases in output quotas totaling 2.8 million b/d since January, there isn't any need for another increase now, even if war breaks out.
If further supply was needed from the group, it could meet after a war and decide to raise output, he said.
Has Hunch IEA Won't Unplug Its Oil Reserves
Khelil said because he believes OPEC can easily meet demand now, he doesn't think the International Energy Agency, the energy watchdog for members of the Organization of Economic Cooperation and Development, will at the start of a war unleash some of its strategic oil stockpiles.
"I don't think there is a need for them to use the supply" he said, adding it could be brought to market later if OPEC couldn't manage the market or if high prices were crippling economies. Emergency stockpiles are a "last resort" to guard against shortages, he said.
"After they've seen that OPEC has used all it can, maybe they'll come in. My hunch is they are not going to use it," he said.
"Stocks are OK. Venezuela is coming back up ... and we have already seen other countries taking the place of Venezuela," during the export cuts caused by an oil workers' strike there.
Khelil said he sees a second-quarter decline in demand of 2 million b/d.
"In terms of the fundamentals, I cannot explain why OPEC should do anything at this stage," Khelil said. "All the indicators show that we don't really need to give more oil."
"As you know, OPEC members are fast in increasing production, maybe slower in pulling out (cutting back) production," meaning a price collapse is possible, he said. "My feeling is ... that whatever happens, uncertainty isn't going to be relieved (quickly). My hunch is there's going to be a lot of tension."
Zanganeh: No "economic justification" for OPEC to boost output
www.irna.com
(ADDs further quotes, corrects dateline)
Tehran, March 10, IRNA -- Iran's Oil Minister Bijan Namdar Zanganeh here Monday cautioned world oil exporters against being taken away by political developments in the Persian Gulf, saying there was no need for OPEC to increase output under the present situation.
"Under the present conditions, there are no economic
justifications for increasing the OPEC production," he told IRNA
ahead of a scheduled meeting of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna Tuesday.
Zanganeh said "OPEC must refrain from taking any politically
motivated measures" as it was reported that participants at the
Tuesday meeting sought to find a Western-friendly compromise to
guarantee world oil supplies.
"The Islamic Republic of Iran will not endorse decisions of
political connotations, and we are confident that OPEC will not take
decisions regarded by the world Muslim and Arab public opinion as supportive of the United States' military invasion against an OPEC fellow member," he said in reference to Iraq.
Facts and figures indicate that the market is not facing a
shortage at the moment, Zanganeh said, adding "if the current
production level and the increment supply from Venezuela continue, there will be a daily 3.1 million barrel over-supply in the second quarter".
The Iranian oil minister brushed aside fears of a possible upset
to global oil supply among oil markets and consumers on the back of a looming military showdown in the oil-rich Persian Gulf region, which have caused crude prices to spiral up to new highs.
"Prices, at any rate, are not reflecting market fundamentals.
There is the war premium. There is the uncertainty about future
political developments in both the Middle East and the Persian Gulf region.
"Impacts of speculation, logistical problem, products-related
issues, as well as the US gas market problems are also there, those have nothing to do with the OPEC production ceiling," Zanganeh added.
"If the political tensions of the war with Iraq had been absent,
OPEC should have acted to cut its production ceiling. Thus, under the present conditions, there are no economic justifications for
increasing the OPEC production," he went on to say.
BH/AR
End
Fuel prices spur call for probe - Hike blamed on strikes, Iraq tension
www.greenbaypressgazette.com
Posted Mar. 08, 2003
By John Dipko
Press-Gazette Madison bureau, jdipko@greenbaypressgazette.com
MADISON — Concern about rising gasoline prices has sparked a three-state request to look at whether fuel wholesalers and retailers are cashing in on tensions in the Middle East.
Wisconsin Attorney General Peg Lautenschlager and her counterparts in Iowa and Illinois asked the Federal Trade Commission in writing Friday to study whether gasoline wholesalers or retailers in the region are raising fuel prices to record highs to take advantage of the situation in Iraq.
The letter to FTC Chairman Timothy Muris notes the American Automobile Association has accused some wholesalers or retailers of coming dangerously close to price gouging.
“I am urging the FTC to take action now to protect Wisconsin consumers,” Lautenschlager said. “While there are complicated factors driving the cost of gasoline, we must draw a clear line between free market fluctuations and out-and-out price-gouging at the pump, which we will not tolerate.”
Gasoline prices in the Green Bay area average about $1.75 per gallon of regular unleaded, up significantly from a year ago.
But Robert Bartlett, president of the Petroleum Marketers Association of Wisconsin, said it appears Lautenschlager’s advisers are unaware of fundamental market forces at work in the industry.
Bartlett said crude oil prices were $36.76 a barrel at the end of February, which is $14.39 more than the $22.37-per-barrel price a year earlier. Tensions in the Middle East and strikes in Venezuela have sent crude oil prices skyrocketing, he said.
“Retailers, just like consumers, are taking it on the chin right now,” Bartlett said. “Many retailers are reporting to me that they’re having a record unprofitable year, and many small retailers are financially very distressed at this point. So we resent any notion being promoted that implies Wisconsin retailers are taking advantage of consumers.”
Price-gouging at Wisconsin gasoline pumps occurred in the days following the terrorist attacks of Sept. 11, 2001, when state officials took some 2,000 calls about gas stations charging top dollar for fuel.
Saving gasoline
The state Division of Trade and Consumer Protection urges consumers to use these tips to save money on gasoline purchases:
• Easy does it. Fast acceleration and braking waste fuel and can lower your mileage by as much as 33 percent.
• You don’t get any miles to the gallon when your car is idling. Drive immediately instead of letting the car warm up. Combine errands and avoid making lots of short trips.
• If your owner’s manual recommends regular, don’t buy premium, which is 14 percent more expensive.
• Check your car’s air filter. If it’s clogged, your fuel consumption can spike by up to 10 percent.
• Check tire inflation. Just one tire under-inflated by 2 pounds results in a 1 percent increase in fuel consumption, according to the U.S. Environmental Protection Agency.
• Travel light. Remove roof storage boxes and bicycle racks when not in use. Even when empty, they produce a drag that reduces mileage.
• Call the Division of Consumer Protection at (800) 422-7128 if you think you’re not getting what you pay for at the gas pump.
Oil's 'perfect storm' buffets Del. motorists
www.delawareonline.com
By MAUREEN MILFORD
Staff reporter
03/08/2003
Delaware motorists, small business owners and independent gas-station operators are being battered by what petroleum experts are calling the "perfect storm" in the gasoline industry.
Several key forces that contribute to retail gas prices - from the flow of crude oil to the demand for heating oil - have converged in recent months, pushing prices nationwide to their highest levels since May 2001 when a gallon of regular unleaded peaked at $1.718 nationwide.
Prices Friday were inching close to the recent record, with regular grade selling nationally for an average of $1.684 a gallon, according to the AAA Daily Fuel Gauge Report.
In Delaware, the average price was $1.64 a gallon, though individual stations have been charging as much as $1.80.
The highest recorded price for regular unleaded in the state was $1.728 a gallon in June 2001, although prices adjusted for inflation were much higher in the early 1980s.
"To pay $10 and get 5.99 gallons of gas - it ticks me off," said Shannon Zuzek, 32, of Newport, as she pumped gas at the Newport Exxon Friday. Regular unleaded was selling for $1.669 a gallon there. "We use to budget $50 a month for gas, now it's $70 or $80."
Mary Beth Pala, 36, of Hockessin, said it now costs her about $45 to fill up her Chevrolet Suburban.
The Hockessin Texaco station where she was pumping gas Friday was selling regular unleaded for $1.719. "It annoys me," Pala said.
Experts are warning consumers to batten down because the recent price spike is weeks ahead of the annual rise in prices during spring and summer.
Changes from winter blends of gas to formulations for summer have driven up wholesale prices from March to May during the past 18 years, said Peter Beutel, president of Cameron Hanover, an energy risk-management company in New Canaan, Conn. Increased summer driving also boosts prices.
Still, experts said motorists shouldn't expect average prices to imitate those in California, where regular was selling for $2.057 a gallon Friday. Pump prices for regular gas are expected to average about $1.70 a gallon nationwide from April to September, with prices peaking in April at about $1.76, according to a forecast released Thursday by the Energy Information Administration, the statistical arm of the U.S. Department of Energy.
And gas prices are a bargain compared with other years. In today's dollars, gas in March, 1981 was selling for $2.90 a gallon. "Historically, it's cheap as a percentage of discretionary income," said David Costello, an economist with the Energy Information Administration.
But economists said they can't speculate what prices will do if war erupts with Iraq and crude oil supplies are further disrupted.
Even if a war ends quickly, it's not a forgone conclusion that prices will plummet. The oil market is still "fundamentally tight," he said. "The decline in prices is going to be pretty gradual."
Cost factors converge
Gas prices always vary widely because of seasonal changes and local market conditions.
But in recent months, several supply disruptions have pushed the price of crude oil up 65 percent, from $22.37 a barrel in March 2002 to $36.86 Thursday - a level not seen since October 1990, according to the Energy Information Administration.
• A general strike in Venezuela dramatically decreased crude-oil production. In 2002, Venezuela exported 1.19 million barrels of crude oil a day to the United States, or 13 percent of the country's total daily crude-oil imports, Costello said. While the general strike has ended, the recovery has been slow, he said.
• OPEC cut production in 2001, resulting in excess oil being used up through 2002.
• A cold winter in the Northeast has resulted in greater demand for heating oil, meaning refineries produce more heating oil at the expense of gasoline. Gasoline inventories at the end of February were about 5.6 percent below last year's levels, Costello said.
• Prices in the natural-gas market have risen because of the cold weather and low storage levels, Costello said. Oil prices also have a tendency to rise with the natural-gas market.
• Worries of a war with Iraq have driven up prices, although industry experts say it's difficult to quantify.
All this comes before the switch to summer blends. Because of the Clean Air Act Amendments of 1990, reformulated gasoline is required in metropolitan areas with ozone problems - or about one-third of the total U.S. gasoline market. Delaware is required to use reformulated gasoline statewide.
In winter, gas is allowed to contain more volatile components. But in summer those components must be removed to meet environmental requirements. To comply, refineries have to shut down equipment and clean it, a process that takes about 15 days and affects supplies temporarily. Prices also tend to rise by about 6 percent during summer, according to the Energy Information Administration.
"Get used to it, regardless of what happens in Iraq," said David Hinton, petroleum-industry analyst with the administration.
Prices vary widely
How gasoline is marketed also results in wide price disparities from state to state. Even in the same community, the difference in the price of regular unleaded can be as much as 12 cents.
Some prices have to do with proximity to supplies. In the oil state of Oklahoma, for example, the average price for a gallon of regular unleaded was $1.559 Friday. In New Jersey, with its refineries, the average price for the same gas was $1.566.
"Delaware is closer to a lot of sources of supply, but it's not Houston," Hinton said.
Federal and state-excise taxes also can drive up prices at the pump.
And gas can be higher in wealthier areas because of the cost of real estate, experts said. Greenville Amoco, though, has been able to keep its prices down because it's been in business there for about 40 years. "We don't have a big mortgage," said owner Joseph Di Donato.
Some convenience-store chains offer the lowest prices because they sell unbranded gasoline, industry experts said. Wawa Inc., for example, sells Wawa brand. "We build cost efficiencies into our model, and as long as we can obtain favorable costs we try to pass that along," said Lori Bruce, spokeswoman for Wawa.
Still, the effects of price increases are being felt across the board.
"Gas prices are the most visible commodity you buy because the price is right up there in big numbers that you see every day,'' said Michael Shanahan, spokesman for the American Petroleum Institute, which represents 400 oil and natural gas companies. "It has a very real impact on consumers because the economy runs on oil."
Independent station owners said they are finding it hard to compete.
Shawn Rodgers, owner of Dewey Beach Exxon, said he's selling regular unleaded for $1.599 a gallon, but paying $1.579 for it. With the average 2 percent fee he pays the banks for credit-card purchases, he said he's losing money.
"If this place wasn't in my family there's no way I could make it," he said.
Ken Hudson, owner of Kens Exxon in Lewes, is charging $1.719 for regular unleaded and finding it tough. Business at his 42-year-old establishment is down about 60 percent, he said.
"I don't know how much longer I can stand it," he said. "I hope something gives. If not, I'll have to go out of the gas business."
Small businesses that use a lot of gasoline - such as limousine, delivery and other companies that use automobiles and trucks - also are grousing.
"Everybody gets hurt," said John Killeen, owner of Touch of Elegance Limousine Service in New Castle. "I just have to bite the bullet for a while, and hopefully gas will go down. But if it doesn't and we go into summer when prices normally go up 10 to 15 cents a gallon, I guess I'll have to do something."
Reach Maureen Milford at 324-2881 or mmilford@delawareonline.com.