www.cjonline.com By Amy Bauer The Capital-Journal

The effect of a looming war with Iraq on local gasoline prices is uncertain, but analysts said Tuesday one thing is clear -- consumers shouldn't panic. "I don't think anyone has enough information to predict how things will turn out, but historically the price of gas that people pay at the pump has an awful lot to do with the price of crude oil," said Ron Planting, an analyst for the American Petroleum Institute in Washington, D.C.

Fuel prices have climbed steadily during the past five months because of uncertainty about a potential war; higher demand for heating fuel because of a cold winter; and political unrest and strikes that significantly decreased oil production in Venezuela, the fourth-largest oil-producing nation. The United States relies on Venezuela for 15 percent of its crude oil. The strikes have ended, and its oil production has increased, though not to previous levels.

According to AAA on Tuesday, the average price of a gallon of regular gasoline in Topeka was $1.66, about 40 cents higher than the same time last year and slightly lower than the national average. The national average for a gallon of regular gasoline was $1.72, which set a record high earlier this week.

Topekans said they were feeling the effects of higher gasoline prices in their driving habits and their wallets.

"It's just outrageous, the prices of gas," said Robert Owens, of Topeka, who was fueling up at the Amoco station at S.E. 6th and Quincy on Tuesday afternoon. "I just go to work and the necessary places like stores and school."

"We think about it every time we get ready to go out," said Topekan Kent Foga, who also was fueling his vehicle at the station. "Anything out of your pocket affects you. After the Iraqi situation is resolved, maybe prices will go back down."

If the events of 1991's Gulf War are a guide, then prices may fluctuate.

"When Iraq invaded Kuwait, there was a sharp increase (in crude oil prices) because the world lost a tremendous amount of oil production -- about 4 million barrels per day," analyst Planting said.

As it became clear the United States and its allies had the advantage, and some government reserves were released, crude oil prices dropped quickly. Planting said that was reflected in a matter of weeks by prices at the gasoline pump.

Tom Palace, executive director of the Petroleum Marketers & Convenience Store Association of Kansas, said, "I see the price of crude actually inching down today (Tuesday). What that means is when the price of crude goes down, your gasoline prices should follow suit at some point in time. Obviously that doesn't all happen overnight or within the hours.

"My guess right now is that the gas prices will remain flat or constant for a little while," Palace said. "I won't say they'll be going down a whole lot. I won't be saying they're going to go up a whole lot. Flat being 5 or 6 cents either side."

He said factors such as the length of any conflict and its effects on oil-producing countries will partially determine crude oil supplies and pricing.

"If it lasts a long time -- any kind of prolonged conflict -- we're going to have to rely on other sources of crude oil," Palace said.

Saudi Arabia and other members of OPEC have agreed to increase their output to boost supply, and Planting said the United States, Europe and countries in Asia have strategic reserves -- oil that could be brought into the market in the case of a major supply disruption.

Palace said, "If people just sit back and be smart about what they're doing on a daily basis -- we're all watching how much gas we put in our vehicles because of the cost -- then we should not panic at any time."

"It should be business as usual, which is what we anticipate right now."

Amy Bauer can be reached at (785) 295-1231 or amy.bauer@cjonline.com.

Tips from AAA

• Practice fuel conservation • Keep car maintenance up-to-date • Don't let price changes cause panic • Refuel at 1/4-tank or lower or before long trips

Average fuel prices

Average regular grade unleaded fuel prices Location Current Month ago Year ago Topeka $1.662 $1.614 $1.267 Kansas $1.671 $1.610 $1.262 Nation $1.722 $1.655 $1.266 Source: AAA Daily Fuel Gauge Report

Last Modified: 12:02 a.m. - 3/19/2003

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

Under a full moon at dawn in Kuwait, a soldier with the U.S. Army's 7th Infantry Regiment walked past a line of Bradley tanks.

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.

washingtontimes.com By Patrice Hill THE WASHINGTON TIMES

     The Federal Reserve, against a backdrop of plunging oil prices, was guardedly optimistic yesterday that the clouds cast over the economy by near-record oil prices and the Iraq crisis will soon lift.      After a daylong meeting of its rate-setting committee, the central bank said it had "heightened surveillance" to gauge the economy's response to the sudden drop in oil prices and other developments precipitated by the Bush administration's move toward war.      "The hesitancy of the economic expansion appears to owe importantly to oil price premiums and other aspects of geopolitical uncertainties," the committee said in a statement. "As those uncertainties lift," the economic climate should improve, it added.      The sharp rise in stock prices and unexpectedly big drop in oil rates this week to under $32 a barrel in New York trading appeared to vindicate Federal Reserve Chairman Alan Greenspan's prediction of a quick economic rebound once a decision is made on Iraq.      But the Fed yesterday was careful to add that it cannot predict the course of the war and, thus, its lasting effect on the economy, and that the reserve is poised to respond whichever way the situation goes. The Fed did not act on interest rates.      A good part of the "war premium" on oil prices referred to by the Fed, which drove prices close to $40 late last month, evaporated in the past two days on hopes that the war will go according to Bush administration plans and end quickly. Yesterday, prices plummeted more than 9 percent to $31.67 in New York trading.      The drop did not occur in time to prevent gasoline prices at the pump from hitting a record high last week, however. The shock from high gas prices and home-heating bills is one of the biggest threats that economists say could trip the weak economy back into recession.      The run-up in energy prices this year "has been at least comparable — and perhaps larger than — the spike that preceded the 1990-1991 Gulf war" and recession, said Mickey D. Levy, chief economist with Banc of America Securities.      Mr. Levy noted that the jump in energy prices for consumers has been almost identical to the rise that helped push the economy into recession in 2001, and that the drop in oil prices this week did not come a moment too soon.      But he expects energy prices to remain elevated and pose difficulties for the economy, even if the war in Iraq goes smoothly.      "[Organization of the Petroleum Exporting Countries] quota reductions in early 2002 and the persistent disruption of Venezuela's oil production have been key influences that are not likely to quickly reverse even with the discharge of some of the Gulf tensions," he said.      Gasoline prices may be slow to respond to the plunge in oil prices this week, because stocks are near their lowest levels in three decades.      The available oil has been diverted more into production of home-heating fuel than has been customary owing to the severely cold winter, reducing the oil available to build gasoline stocks for the summer driving season, Mr. Levy said.      While high energy prices have been cutting into consumers' purchasing power, they also have had a marked effect on consumer psychology. Consumer confidence is at the lowest level in a decade.      A survey released yesterday by the NPD research group found that nearly half of consumers plan to cut their discretionary spending because of high gas prices.      That is more than twice the number that said they would trim spending and family outings because of fears about war or terrorism, the group said.      "Not only are people cutting back on big-ticket items, but they are also spending less on relatively inexpensive entertainment activities like dining out," said Jon Swallen, senior vice president at Universal McCann, a private research group that recently documented a drop in consumer buying plans.      Travel spending is taking a disproportionate hit, he said, with a third of consumers saying now is a bad time to fly or take a vacation trip.      Spending has been the engine of the economic recovery in the past year, and any big pullback by consumers in response to high energy prices or war in Iraq threatens economic growth, analysts say.      One war-related problem that developed during the Gulf war was the so-called "CNN effect," as consumers stayed home and watched the Iraq developments unfold on the 24-hour cable television network. That resulted in a big drop in consumer spending that drove the economy closer to recession.      That is why the Fed is following closely reactions to developments in the Middle East, and is prepared to cut interest rates immediately, if necessary, to provide another prop for consumers, said Joel Naroff of Naroff Economic Advisers.

www.nytimes.com By NEELA BANERJEE

Consumers may be complaining mightily about rocketing gasoline prices, but so far they are not buying less, industry experts say. That, in turn, is helping to keep gasoline prices high, given how tight gasoline supplies are now.

The Energy Information Administration, the analytical arm of the Energy Department, predicts that even if crude oil prices decline over the next few months, retail gasoline prices will probably stay high, averaging about $1.76 a gallon in April. The current average retail price of gasoline is $1.73 a gallon, according to the latest Energy Department data.

"At the margin, which is where prices are set, any measurable increase or decrease in demand will have an effect on price," said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. "We're seeing a very slow increase in demand. But if demand is still going to grow, prices will stay high relative to crude oil."

Because of changes in Americans' driving habits over the last decade or so, demand for gasoline changes little, even when prices climb. The vehicles that many people are driving, most notably sport utility vehicles and light trucks, get far lower gas mileage than cars did 20 years ago.

In roughly the same period, the number of drivers has increased over all, as has the number of miles people drive each year, according to David Costello, an analyst with the Energy Information Administration. And despite the widespread complaints about high fuel prices, when adjusted for inflation prices are actually lower than they were at their peak 20 years ago, Mr. Costello said.

"There's no doubt about it that people are grumbling," said Scott Hartman, president of the CHR Corporation, which owns 51 convenience stores with gas stations in the York, Pa., area. "But we don't see any changes in the gallons that they're buying. Actually, we're seeing some nice growth figures."

At its meeting last week in Vienna, the Organization of the Petroleum Exporting Countries argued that a seasonal drop in demand would help keep a lid on crude oil prices, which have stayed over $30 for weeks now. Yesterday, the price of crude oil for April delivery fell $3.26, or 9.3 percent, settling at $31.67 a barrel on the New York Mercantile Exchange.

Gasoline futures followed suit, with the wholesale price of fuel for April delivery falling 6.52 cents, to 96.19 cents a gallon, the lowest end-of-session price since Feb. 3.

Analysts and traders said that the decreases were impelled by a belief in the oil markets that the expected war with Iraq would be quick and would result in little damage to Iraqi oil fields and installations. But other analysts warned that no one can predict what might happen in Iraq. More important, they said, the underlying factors that have driven up crude oil and gasoline prices persist, and an American victory in Iraq would not change them overnight.

OPEC made a series of output reductions last year that buoyed prices and led oil companies and refiners to draw down their inventories of crude oil and petroleum products. In the winter, when companies normally build stocks of gasoline for the spring and summer, supplies of crude oil plummeted after a strike in Venezuela brought the country's oil exports to a halt.

Then, a cold winter in the Northeast and mid-Atlantic motivated refiners to squeeze more heating oil from a barrel of oil, at the expense of gasoline. Now, supplies of crude oil, gasoline and heating oil are at their lowest levels in years.

Demand for petroleum products usually does dip in the second quarter, as OPEC predicted. But demand for crude oil remains unaffected by seasonal changes. And this year, demand could prove even stronger, especially in the United States, as companies scramble to fill stocks in the short time that remains before the main driving season begins in late spring. As a result, oil prices would probably remain volatile, despite price drops in the last few days.

With crude oil prices so high and stockpiles so low, consumer demand has proved to be an important factor in buoying gasoline prices. The question is, How high do prices have to go before car owners change their driving patterns?

California, where prices commonly exceed $2 a gallon, now has the most expensive gasoline in the country — a situation related to its environmental regulations. California requires a certain additive to make cleaner-burning gasoline, called ethanol, that constrains how many gallons of gasoline can be wrung from a barrel of oil and complicates the refining process over all.

But Tom Robinson, chief executive of the Robinson Oil Corporation of San Jose, which owns 28 local gas stations, said that despite their complaints about high gas prices, his customers continued to buy as much gasoline as they did before prices shot up.

"In California, we've had numerous run-ups, and this is the highest so far," he said. "And people know when the price goes up, it will come down. This time, it's been publicized more — the reasons that we have high prices — the war, Venezuela, the problems compounded by our own situation in California."

Some industry analysts and consumer groups said people might drive less if prices approached $3 a gallon or stayed near $2 a gallon for an extended period. But others contend that consumers adjust to prices — mainly because they have to, with driving integral to their lives.

"It has been our contention since the 1970's that consumers really don't change their driving habits on the basis of price," said Geoff Sundstrom, a spokesman for the Automobile Association of America. "They only change due to supply problems. At this point, the tightness in the markets is pretty much invisible to consumers in that they're not going to gas stations that have run out of fuel."

Auto Sales Off Markedly; Other Retail Sales Rise

www.newsok.com 2003-03-18 The Oklahoman

WAR WITH Iraq figures to make an already tight world oil market even tighter.

Industry experts think it will take other oil producers weeks to offset the loss of 2 million barrels a day of Iraqi oil. U.S. motorists who already are paying higher prices at the gasoline pump should brace to pay even more if hostilities break out.

As the Wall Street Journal reported yesterday, U.S. crude-oil supplies are stretched, partly because of the recent oil workers' strike in Venezuela, a major exporter, and fears of a war with Iraq. Gasoline prices now average $2.08 a gallon in California.

Hate to say we told you so, but the prospect of gasoline selling for $2, $2.50 or even $3 a gallon -- and the potential for even greater national energy calamities -- makes us wish the Arctic National Wildlife Refuge was producing oil and natural gas.

Of course, that would've required some foresight a decade ago, some sense in Washington that at some critical juncture down the road it would be good to have domestic supplies available to temporarily offset the sudden, potentially catastrophic loss of oil from a major overseas supplier.

That's right: If policy-makers in 1993 had given the go-ahead, the refuge's oil and natural gas would be online now, and we wouldn't be sweating $3 gas or even greater risks now.

What do we have instead? A remote, untapped wilderness that produces what it has produced for centuries: lots of caribou and mosquitoes.

Truth is, even if energy production were going on in an airport-sized sliver of the refuge that's roughly the size of South Carolina, the bugs and the beasts still would be thriving -- and the United States would be much less susceptible to dangerous fluctuations in the oil markets.

If there's war and Iraq's oil disappears from the world market, experts believe strategic reserves in the U.S., Germany, Japan and other countries may have to be tapped until OPEC and other suppliers can catch up with demand. Soon, we suspect, Americans will get a vivid illustration of why our own available resources should be developed.