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(LOUISVILLE, March 20th, 2003, 10:30 a.m.) -- Kentuckians are paying more for a gallon of gasoline and one of the reasons is the uncertainty in the Middle East. Other factors include the oil industry strike in Venezuela and the high use of heating oil during the recent winter months.

Kentucky does not have a specific "price gouging" law. However, Kentucky's Consumer Protection law does prohibit unreasonably high prices that are not caused by an increase in the business' cost, if consumers are unable to buy the product at a lower price in the same area.

By definition, price gouging can occur when "only one supplier of a product is available to consumers and the supplier unreasonably raises the price of the product".

Here are two examples of "Price Gouging":

Following a disaster, the "only" supplier of electrical generators, increases the price of generators, simply to increase his profits.

The "only" supplier of batteries increases the price of batteries during an electrical power outage, simply to increase his profits. If a business increases prices because the business is being charged more by his supplier or if another business has the same product at a lower price, the higher priced item is not illegal.

It is not "Price Gouging" when: Gas prices rise because a station owner is being charged more by his supplier. Gas prices rise to any level, at one station, when lower prices are available at other stations.

The Attorney General's Office and Federal Trade Commission continue to monitor the price of all fuels in Kentucky.

www.times-standard.com Article Last Updated: Thursday, March 20, 2003 - 6:14:05 AM PST By James Faulk The Times-Standard

EUREKA -- With the startling and dramatic spike recently in the price paid at the pump, you might expect that people would change their driving habits to save cash.

Evidence thus far has not borne that out -- people continue to drive as they always have, and buy the same big-ticket gas-guzzling sports utility vehicles.

According to Sean Comey, media spokesman for AAA of Northern California in San Francisco, dramatic spikes in prices often translate into less people driving, but the verdict on the current situation is still out, he said.

"It's too early to say for sure," he said. "But in the past when we've seen gas prices go up this quickly, there has been a changing of habits."

The recent rise in prices started in earnest in December, and the sticker shock set in about six weeks ago, Comey said. It won't be long until the trends, whatever they are, become clear.

Make no mistake -- this is a serious increase.

"It's a record high almost everywhere," he said. "It's virtually impossible to get gas for less than $2 a gallon anywhere in California."

San Francisco, which has consistently had the highest gas prices in the state recently, was selling its gas Wednesday for $2.28 per gallon of regular, while Humboldt Bay retailers hovered around $2.20.

Even with record-high gas prices, which could theoretically impact tourism, the number of travelers locally do not seem to have taken a hit.

J Warren Hockaday of the Eureka Chamber of Commerce said the number of walk-in visitors at the chamber offices appears to be on track with what it was last year, if not a little better.

He said that for once, motorists in Eureka are not paying the highest prices in the state, which may be refreshing for travelers.

Besides, tourism has benefited generally from concerns about travel safety, as people are staying closer to home; tourists may be drawn to this area because of security concerns, Hockaday said.

While the spike in gas prices may have had an impact on people driving, it has not counteracted other benefits the area has seen, he said.

Another expectation of the gas price increase could be that people would turn to more efficient vehicles.

Not so, say two local car dealers.

Jeremy Duncan, sales associate with Opie's Fine Cars, said buying habits seem to much the same as they ever were.

"Our numbers don't show it," he said.

Bill Davis of Harper Ford Country agreed.

While people have complained to retailers on the lot, they still buy whatever they want.

"We get complaints on the price of gas but it doesn't seem to change anyone's buying habits," he said. "They buy what they want and worry about it later."

Two local motorists filling up at a local gas station said the price of gas has not changed their driving habits.

Tony Scharn of Eureka said he has no choice but to drive as much as he does, because he has to drive to and from work.

He did say that with his next car, fuel economy may be among the determining factors.

Another man, who gave his name only as Hal, said he owns a sports utility vehicle now and will likely buy another one when the time comes.

Ridership on area buses has not seen any jump, either.

Nelleen Fregoso of the Humboldt Transit Authority said the number of people riding the bus has not noticeable increased. The authority, however, is affected by having to pay the high prices, she said.

There's nine buses that travel between 300 and 350 miles a day. Each bus gets five miles to the gallon. Fuel is therefore the second-highest cost to the authority, under labor.

Fregoso did encourage people frustrated by fuel costs to hop on a bus, which could keep them from having to pay for gas and perhaps even help drive the costs down, she said.

The factors in the fuel price explosion are a strike in Venezuela, which was recently brought to an end, and the looming and seemingly inevitable war with Iraq.

"The fear has been that (the war) would disrupt the distribution network for petroleum in the Middle East," Comey said.

California receives 30 percent of its crude oil that gets turned into gas from overseas sources. Most of the state's oil comes from California and Alaska, while roughly 8 percent comes from Iraq.

That's a big deal with the industry being so tightly balanced between supply and demand. Since the sale of petroleum is a world market and western Europe gets a much higher percentage of its oil from Iraq, some worry that the flow could be interrupted.

On the other hand, the price of crude oil has dropped recently, and the feeling in the industry is that the war will likely be resolved quickly and the supply stabilized.

"However, it will take a while before motorists see a benefit," Comey said. "Typically prices rise like a rocket and come down like a feather."

AAA will soon start to track consumer travel trends on a weekly basis, and an analysis will be available each week on how the war and prices are affecting a variety of trends, such as driving and air travel.

www.zwire.com 03/20/2003

Cries for energy independence helps ethanol cause, unless another renewable source grabs market.

COLUMBUS - One impact Americans have felt with a looming war with Iraq has been an increase in gas prices.

Gas prices are currently averaging $1.68 a gallon - a 54-cent increase from this time last year.

"Probably the biggest economic impact we would see with a war with Iraq would be sustained high gas prices," said Matt Roberts, Ohio State University agricultural economist.

Ag impact. With natural gas prices following suit, it could mean higher-priced fuel and fertilizers for farmers, Roberts added.

Roberts said the United States imports more natural gas than it once did. Because natural gas is the primary feedstock from which anhydrous is made, that has some potential to impact farming profitability this year.

"I don't think this is shaping up to be a year like 2001 where there was a gross anhydrous shortage, but those gas prices will stay higher," Roberts said.

"We may see a slight shift from corn planting to soybean planting because corn production requires higher input costs."

Venezuelan card. The other piece to the crude oil price puzzle is the political unrest in Venezuela that has substantially reduced the flow of petroleum products.

Venezuela is the United States' third-largest oil exporter, behind Mexico and Saudi Arabia.

"Venezuela pretty much shot itself in the foot with this situation," said Roberts. "Many of our refineries were built to process Venezuelan oil, but they have had to alter their processes and it has made them less efficient."

Boost for ethanol? Carl Zulauf, an Ohio State agricultural economist, said that another impact a war with Iraq could have would be a renewed emphasis on U.S. energy independence.

This would result in the increased use of alternative fuels like ethanol and biodiesel, crop byproducts.

"In the short run, this is probably good for U.S. agriculture, in particular corn producers because of increased demand for ethanol," said Zulauf. "In the long run, the impact could be more problematic if some other source of alternative fuel emerges that displaces the demand for ethanol."

Roberts said in the past year, since harvest, ethanol has "been a savior to the corn market" because corn exports have been very weak.

Ethanol production has exploded over the last six months, to the point where ethanol is consuming around 8 percent of American corn production, said Roberts.

Biodiesel in the news. Biodiesel, another renewable fuel, is also making headlines in U.S. energy production.

Last March, the Minnesota legislature passed a law mandating a 2 percent inclusion of biodiesel into the state's petroleum diesel supply beginning in 2005.

Minnesota is the first state to require the addition of biodiesel in commercial diesel supplies.

Tax incentives. More recently, a bill was introduced to the U.S. Congress that would give biodiesel the same tax incentives that ethanol currently receives.

"Much of the tax incentive for ethanol is because it is exempt from the highway excise tax, but it has begun to impact the budget of the interstate highway system," said Roberts.

"If biodiesel is exempt from those same taxes, concerns are being raised that as the production of alternative fuels increases, it will seriously impact that budget and the money is going to have to come from somewhere."

More emphasis on alternative fuels, however, would provide support for farm prices.

"Over the course of the year, my feeling is that national prices have been a dime higher because of increase in our ethanol production," said Roberts

www.azcentral.com Max Jarman The Arizona Republic Mar. 20, 2003 12:00 AM

Arizona's gas prices are the third-highest in the nation as the price of unleaded regular gas topped $2 per gallon in many parts of the Valley.

The price increase come despite steady declines in wholesale prices for both crude oil and gasoline.

Valley retail prices could come down after April 1, when Phoenix-area gas stations switch over to a new fuel mix, the drop could be minimal. But Laura Rightenburg, a spokeswoman for AAA Arizona, explained Wednesday that prices tend to rise in the summer due to increased demand, and that many of the factors affecting current prices, such as low refinery output, relatively high crude oil prices and strikes in Venezuela, are expected to linger.

"I don't see it (gasoline) going below $1.75 for the foreseeable future," she said.

Rightenburg said the record high prices are prompting consumers to limit driving and take shorter trips.

"Gas prices strike an emotional cord," she said. "People are fearful."

But, Rightenburg said, she doesn't expect many people will cancel their summer vacation plans because of the high prices.

The prices also are cutting into business profits. Jerry Garner, a Gilbert farmer, said he is being hurt by the rising price of the diesel fuel his farm equipment burns and by fertilizer prices that have risen with the price of natural gas used in its production.

Statewide, AAA pegged the average price of unleaded regular at $1.92 per gallon, the third-highest in the nation. Only California at $2.18 and Nevada at $2.02 were higher. Arizona's statewide price was 20 cents per gallon higher than the national average of $1.72, according to AAA.

"My eyebrows even went up, and I do this every week," said Rightenburg, who prepares AAA's weekly gas price survey.

In metropolitan Phoenix, a shortage of the special fuel that must be burned until April 1 is pushing prices up even higher.

In Maricopa County, the average price of unleaded regular was $1.995 per gallon, up 1.4 cents from the day before and $41.3 cents from a month ago. But in Phoenix, the average price was $2 per gallon, and in Scottsdale, motorists were paying $2.03.

That compares with $1.88 in Flagstaff and $1.86 in Tucson.

Meanwhile, the price of crude oil, the primary ingredient in gasoline, dropped below $30 per barrel Wednesday for the first time in three months.

"The war premium that we built in is gone," said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York.

Crude oil for April delivery fell $1.79, or 5.7 percent, to $29.88 a barrel on the New York Mercantile Exchange. It was the lowest closing price since Dec. 13, when prices last settled below $30 a barrel.

New York prices peaked at a record $41.15 a barrel in October 1990 after Iraq invaded Kuwait, cutting exports from the two nations.

Oil then plunged by a third on Jan. 17, 1991, after U.S.- led forces began their air attack on Iraq, reducing Iraq's threat to neighboring oil producers. The high this year was $39.99 a barrel.

"The large speculators are continuing to exit the oil market," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

"They now believe the recent bull market is over."

Future prices for refined unleaded gasoline also have dropped. Gas for April delivery sold for 94 cents a gallon on the New York Mercantile Exchange on Wednesday, down from a March 7 high of $1.16.

But Rightenburg explained that many of those supplies are not in the United States, which is why retail pump prices continue to rise, while wholesale prices fall.

"There's plenty of crude oil. It's just not here," she said.

By Peter Behr Washington Post Staff Writer Thursday, March 20, 2003; Page E01

The national average for a gallon of gasoline is over $1.70. In some areas, such as Malibu, Calif., prices are even higher. U.S. demand for gasoline has risen 2 percent a year in the past decade.

At the start of the first Persian Gulf oil crisis 30 years ago, America's hulking, chrome-laden cars covered about 15 miles on a gallon of gasoline. But few motorists gave that a second thought -- not with gasoline priced at 38 cents a gallon.

At the same time, American factories soaked up 43 percent of the nation's energy supplies and members of Congress debated how to address the power of the "seven sister" international oil companies that dominated worldwide production.

A generation later, as the fourth Gulf confrontation gets underway, the nation's oil needs and uses have changed, mirroring broad transitions in society and commerce.

Cars have slimmed down in a campaign to boost gasoline efficiency that succeeded in the 1980s but stalled in the 1990s. Persian Gulf kingdoms have supplanted the multinational oil companies as dominant producers. Today, oil companies cautiously manage exploration and inventories, a strategy that played a part in a surge in prices that has continued to the eve of U.S. military action in Iraq. From its peak of $40 a barrel last month, crude oil fell below $30 a barrel yesterday, closing under that level for the first time in three months, on expectations of a swift U.S. victory. Today, gasoline prices nationwide average more than $1.70 a gallon, a record for this time of year.

The transformation in oil dates to the 1970s, when prices quadrupled, forcing U.S. industries to change their manufacturing processes to reduce energy costs. Homes and appliances became more efficient, too, and the amount of energy needed to produce a dollar of gross domestic product dropped by 33 percent from 1973 to 1991.

Soaring pump prices and long gasoline lines in the late 1970s triggered a revolution in the auto industry as well, as consumers demanded cars that went farther on a tank of gasoline. Congress required that new vehicles get at least 27.5 miles per gallon, beginning in 1985. New cars' performance, led by imports, jumped from 20 miles per gallon at the end of the 1970s to 28 in the mid-1980s. Once that target had been reached, thought, it was not raised and the mileage performance of new cars stagnated.

An expanding and more affluent population, driving bigger cars, boosted gasoline demand 2 percent a year over the past decade.

But the restructuring of the oil industry has left the United States increasingly dependent on gasoline imports to satisfy motorists' needs, said Douglas MacIntyre, a senior oil analyst at the Energy Information Administration. U.S. refineries that manufacture gasoline are operating at or near capacity, he said, "and we aren't building new ones."

Until the 1970s, seven major oil companies held the coveted prime oil-production concessions in the Persian Gulf: Exxon, Mobil, Chevron, Texaco, Gulf, Royal Dutch Shell and British Petroleum. Now the seven sisters are four: Exxon Mobil, ChevronTexaco, Royal Dutch/Shell Group and BP.

In the view of Daniel Yergin, the author of "The Prize," the largest multinational companies have become bureaucratic corporations, balancing risks to maximize profits and compelled -- despite their size -- to compete for shareholder support and financiers' capital.

One consequence is the oil companies' unwillingness to get stuck with large inventories of high-priced crude oil or gasoline when pump prices start falling, MacIntyre said.

Paul B. Ting, a managing director of Salomon Smith Barney Inc., estimates that as a result of the wave of mergers in the industry in the past half-dozen years, the seven biggest U.S. oil producers and refiners have cut their crude oil inventories by 115 million barrels.

The U.S. economy stumbled after the Sept. 11, 2001, terrorist attacks, and early last year OPEC cut production and the Bush administration began buying oil for the nation's Strategic Petroleum Reserve. Oil prices began to rise, and U.S. producers let inventories drop.

The inventory numbers are a crucial benchmark of supply and demand for a legion of investors, speculators, and industrial and commercial buyers, who trade oil and oil products on commodity exchanges.

As stocks of crude oil and gasoline in the United States began to shrink last year, traders bid up the prices of oil and gasoline.

Growing concerns about a U.S. confrontation with Iraq began to inflate oil prices in September. A hurricane in the Gulf of Mexico hurt oil production in October, further reducing inventories, and a December strike at oil fields in Venezuela, a critical U.S. supplier, pushed oil prices over $40 a barrel this winter.

Changes in gasoline prices on commodity markets begin to show up at the pumps in as little as a week. The volatility of the system means that energy prices could rise, or fall, rapidly once the uncertainty of the Iraq conflict is resolved, said Adam E. Sieminski, a Deutsche Bank oil-industry analyst.

Three main fields are the key to Iraq's oil production, which contributed 5 percent of U.S. oil imports last year, Sieminski said. "If U.S. and British forces can secure them before anyone blows them up, that would be very good news."

That is the current bet among a majority of traders on commodity markets, analysts say -- one reason why oil prices have dropped recently.

Oil prices could sink to $25 barrel or lower if the U.S. campaign succeeds, said analyst Peter Beutel, president of Cameron Hanover Inc., in New Canaan, Conn.

Mark M. Zandi, the chief economist at Economy.com, said, "The markets are priced for a perfect war." If all goes well, the U.S. economy will turn upward. "Not roaring back, but back," he added. "If we get anything less than that, we have a problem. If prices don't fall quickly, I'd say we're in a recession in a month or two."