www.belleville.com Posted on Wed, Mar. 19, 2003
BY DAVID VAN DEN BERG AP

Metro-east drivers have no reason to panic about the impact of war with Iraq on gasoline prices, industry experts say.

"I don't think it's going to be a big deal," said Mike Right, a spokesman for the American Automobile Association in St. Louis. "I think there's other things going on in the oil markets that are going to be as big, if not bigger, a factor in determining what you and I pay at the pump than the Middle East action."

Those other factors, Right said, include the changeover from winter gasoline to summer gasoline -- a change Right said comes with a price penalty that hasn't shown up yet. In addition, Right mentioned low supplies, and an oil industry strike in Venezuela.

Along Illinois 159 between Belleville and Collinsville on Tuesday, prices ranged from $1.54 to $1.64 per gallon.

Muhammad Islam, an economics professor at St. Louis University, said the oil market is betting that the war will be short and that there will not be disruptions in the supply of oil, as evidenced by a drop in the price of crude oil. The price of crude, which reached a 12-year high of $37.83 last Wednesday, has fallen 16 percent over the past four trading sessions.

The price of oil plunged 9 percent Tuesday, falling to its lowest level in more than two months. The April futures contract fell $3.26 to $31.67 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 8.

Jim Forsyth, the CEO of Belleville-based MotoMart, which has 67 gas stations in six states, said once the war starts, the price of oil will likely rise.

"If things look like they're going well, it'll come back down," he said.

Islam said if there is an increase in prices, it will probably be short-lived, because other sources of oil are available.

"The reasonable assumption would be that even if there is a short spike in oil prices, those prices will come down because somebody else will bring more oil to the market," Islam said.

European nations have their own stockpiles that could help make up for any supply shortages resulting from war. In addition, Islam said Saudi Arabia has said they have extra capacity and will pump oil to supply the U.S. market, and there is a possibility the United States could tap into its strategic petroleum reserves.

David Sykuta, the executive director of the Illinois Petroleum Council, said "there's going to be a holding of breath here when things step off." But, Sykuta thinks the United States is in better shape to weather any impact on gas prices than it was during the 1991 Gulf War, in part because the country depends less on oil from the Middle East now.

"We don't depend on them as much as Europe does," he said.

Some information for this story was provided by The Associated Press.

www.floridatoday.com Mar 18, 9:41 PM By Wayne T. Price FLORIDA TODAY

U.S. oil companies should roll back prices to Jan. 1 levels because of the economic strain rising fuel prices are causing consumers, Florida Attorney General Charlie Crist said Tuesday.

Crist, in Washington for the annual meeting of the National Association of Attorneys General, made his request in a letter to six oil companies.

In Florida, that would mean gas at about $1.50 a gallon for regular unleaded vs. the current average price of $1.722.

"Consumers are losing the ability to break even, and those consumers include many of your employees or retired employees," Crist said in his letter to the oil companies.

A copy of Crist's letter to Lee Raymond, chairman and chief executive of Exxon Mobil Corp. was posted Crist's Web site, www.myfloridalegal.com. A representative for the Irving, Texas-based Exxon Mobil was unavailable for comment Tuesday.

Crist and several other chief law-enforcement officers of the nation's states have been questioning the quick rise of gasoline prices during the past few weeks. Most analysts have blamed uncertainty about military action in Iraq as the cause of the price increase.

But other factors also are at work, including a strike in oil-producing Venezuela, a harsh winter in the Northeastern United States and problems at oil refineries.

Crist said those conditions have changed. Venezuela has worked to end the strike and is producing 3 million barrels of oil a day. Also, temperatures in the Northeastern states have moderated.

And while there still may be uncertainty about what will happen with oil production in Iraq, the price of oil plunged 9 percent Tuesday, falling to its lowest level in more than two months. The April futures contract fell $3.26 to $31.67 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 8.

"If these factors are genuine factors, as it relates to the rationale for raising prices, then it would be my hope they are genuine factors in the rationale to lower the price of fuel," Crist said from Washington.

Crist said he didn't expect a response from the oil companies for several days. He also added he didn't believe price-gouging was taking place in Florida, "but I can tell I received hundreds of calls from across Florida from people who are concerned about that issue."

"There is no allegation, and no finding, of price-gouging at this point," Crist said.

Even with gasoline prices at unprecedented levels, U.S. consumers still have it good, said Beck Taylor, the W.H. Smith professor of economics at Baylor University.

"Americans have a long tradition of complaining about gasoline prices, and sometimes rightly so," Taylor said. "But, compared with other countries in the world -- particularly in Europe -- the relative price of gasoline in the United States is low."

www.floridatoday.com Mar 18, 9:44 PM Associated Press

NEW YORK -- The price of oil plunged 9 percent Tuesday, falling to its lowest level in more than two months. Traders bet that the impending United States invasion of Iraq will go smoothly and that global stockpiles of crude are sufficient to offset any supply disruptions.

The April futures contract fell $3.26 to $31.67 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 8.

However, with U.S. supplies low and uncertainty in the Middle East high, traders said petroleum prices likely will remain volatile in the short term.

"This thing could go right back up," said Tom Bentz, an analyst at BNP Paribas in New York. "We're still vulnerable because inventories are tight."

The most-recent Energy Department data showed commercial stockpiles of crude at269.8 million barrels, 18 percent below year ago levels.

Supplies have dwindled as a result of high demand for heating oil in the Northeast and fewer imports from Venezuela, whose oil industry was crippled for months by a nationwide strike.

Yet Bentz and other traders mostly expressed confidence Tuesday that the loss of Iraqi crude could be made up elsewhere and that the U.S. government will tap its own 600 million barrel stockpile, the Strategic Petroleum Reserve, in the event of a supply emergency. European nations have their own stockpiles that could help make up for any supply shortages resulting from war, which could begin as early as tonight.

Furthermore, industry-watchers said Organization of Petroleum Exporting Countries producers -- except Iraq and Venezuela -- all are pumping over their quotas, eager to take advantage of the high prices.

USA Energy

United States of America

The United States of America is the world's largest energy producer, consumer, and net importer. It also ranks eleventh worldwide in reserves of oil, sixth in natural gas, and first in coal.

Information contained in this report is the best available as of April 2001 and is subject to change. For the latest monthly U.S. outlook by the Energy Information Administration, please see the "Short-Term Energy Outlook".

www.heraldtribune.com By H. JOSEF HEBERT Associated Press Writer

As the United States and Iraq move closer to war, oil markets seemed to be taking it all in stride. Global crude oil stocks are growing, prices declining and some analysts are talking cautiously of a possible oil glut on the horizon. Lower energy prices probably would follow.

That is, energy experts warned, if a war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or, in the worst case, finds a way to disrupt other Persian Gulf supplies.

For now, the markets are betting those things won't happen and that the war will be a swift one.

Oil prices dropped by more than $3 a barrel, or about 9 percent, on Tuesday, falling to their lowest in more than two months as traders believed there is enough crude in the system to make up for Iraq's lost production if war erupts.

Oil traders "are beginning .. to realize there's a bit of a glut of oil around," said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

But that oil has yet to reach the U.S. markets.

The Energy Department said Wednesday U.S. crude oil stocks remained uncomfortably low at 270 million barrels, roughly where inventories have been most of this year and at the minimum industry says is needed for smooth refinery operation. The U.S. stocks increased only slightly over a week ago.

Crude inventories have consistently been 300,000 to 400,000 barrels below a year ago, said Doug MacIntyre, an oil analyst for the Energy Information Administration. Imports also have been down from previous levels, although OPEC producers other than Iraq and strife-torn Venezuela have been pumping more oil for weeks.

The low U.S. inventories reflect transportation delays, but also reluctance by refiners to buy oil when the price has been $35 to $37 a barrel, analysts said.

Much of that oil is now in storage in the Persian Gulf or in tankers on the high seas, say oil analysts. Saudi Arabia is believed to have as much as 50 million barrels in storage in the country and more en route to other storage facilities. That's enough to replace Iraq's 1.5 million to 2 million barrels a day for about a month.

Larry Goldstein, president of the private Petroleum Industry Research Foundation, said the markets also have been calmed because the Bush administration has made clear that it's ready to use some of the 600 million barrels in the Strategic Petroleum Reserve to counter shortages.

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, said this week he is convinced the reserve is capable of providing oil quickly on orders from President Bush. It has shifted "from the fill mode to the flow mode," Tauzin said.

Still, there remains some trepidation among oil traders and analysts should war in Iraq last a while. Crude oil prices are likely to remain volatile in the months to come, they cautioned.

"This thing could go right back up," said Tom Bentz, an analyst at BNP Paribas in New York, suggesting prices could rebound once fighting erupts. "We're still vulnerable because inventories are tight."

When prices jumped in the weeks before the Gulf War, oil inventories already were high. That helped cushion the impact on prices, which jumped briefly to more than $40 a barrel and then declined rapidly when it became clear that the war would be settled quickly.

The biggest fear in the market is that oil facilities in other Middle Eastern countries, such as Kuwait or Saudi Arabia, could be attacked - a scenario that would cause oil prices to shoot higher very quickly, said Fadel Gheit, senior oil analyst at Fahnestock & Co. in New York.

Short of that happening, there is plenty of oil, Gheit said, and the recent price declines make clear that for the time being the "war premium" has disappeared. He said prices could drop an additional $5 a barrel in the coming days.

Energy experts say a glut could result if war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or disrupt other Persian Gulf suppliers.

For now, the markets are betting those things won't happen and that the war will be a short one.

Associated Press Writer Brad Foss in New York contributed to this report.

Last modified: March 19. 2003 11:39AM