www.philly.com Posted on Mon, Mar. 17, 2003 By Tom Avril Inquirer Staff Writer

Your car's gas tank is thirsty. Your wallet hurts.

Two things to consider:

1. Prices aren't really as high as they seem.
2. A little pocketbook pain, according to some, is not entirely a bad thing.

Not that anyone wants economic hardship, much less a war, but some clean-air advocates hope the recent rapid increase in gasoline prices will cause motorists to think about alternatives to the almighty automobile.

"It definitely forces people out of their cars," said Ronda R. Urkowitz, program director of Cross County Connection, a South Jersey nonprofit that promotes transportation alternatives. "We hope that people who do try alternatives like carpooling like it, so that once gas prices do come down, they'll keep doing it."

Joseph O. Minott, executive director of the Philadelphia-based Clean Air Council, holds a common view among environmentalists when he says gasoline prices are not high enough.

The price does not reflect the true societal cost of byproducts such as air pollution, Minott said. Yet he wishes the current high prices were happening for a different reason.

"Ideally, they shouldn't be high because oil companies and Middle Eastern countries are making a lot of money off it," Minott said. "I'd rather see them high because they're taxed so highly, and then the government can invest in... alternatives to the car."

The run-up in fuel prices is already being cited by interest groups in Washington in promoting initiatives for energy efficiency.

On Thursday, the nonprofit coalition Alliance to Save Energy applauded the introduction of a bipartisan Senate bill that calls for a wide range of energy-efficiency tax credits.

"With energy costs reaching record levels in recent days, lawmakers are right to get behind energy efficiency that will help consumers and the environment with longer-term benefits for the economy and national security," David M. Nemtzow, alliance president, said.

Energy experts agree that current gasoline prices - said to be higher because of a possible war with Iraq and labor unrest in Venezuela - are not high enough to significantly reduce consumption. Indeed, after accounting for inflation, gas prices are as low as they were in the 1960s.

And even if the current hikes continue, gasoline prices are what economists call "inelastic," meaning that higher prices have little effect on demand, at least in the short term.

That's because people still have to get to work or school, and in many parts of the country there aren't many options besides the car.

Still, Honda dealers credit high gas prices with recent record sales of the company's fuel-efficient "hybrid" cars. And in big cities such as Philadelphia, commuters will readily forsake their cars when pushed. Witness the packed SEPTA trains when the weather is bad.

Urkowitz said her organization had seen an increase recently in inquiries about ride-sharing and mass transit, but could not say whether it had been prompted by higher gas prices or by bad weather.

How high would gas prices have to go before people start taking the train, buying fuel-efficient cars, or living closer to where they work and play?

"What's the pain threshhold?" said Bill Veno, a director of Cambridge Energy Research Associates and coauthor of a 2000 study titled Gasoline and the American People. "Gasoline doesn't cost enough to really have a significant impact on the average person's income."

Veno said a good model is Europe, where gasoline prices are triple what they are here - a difference due mostly to higher taxes.

Greater use of mass-transit and smaller cars have long been the norm on the other side of the Atlantic, though part of the reason for small cars could be the narrow roads in older cities, Veno said.

Here in the United States, said Kert Davies, the U.S. research director for Greenpeace, the goal should be to "change behavior without nuking the economy."

Whatever their impact, current high gasoline prices may be short-lived, according to one expert.

George Gaspar, an energy analyst with the Robert W. Baird & Co. financial firm in Milwaukee, predicted that crude oil prices, now at about $37 a barrel, won't go higher than $45. That means average prices at the pump, now about $1.70 nationwide, won't go up more than 20 cents a gallon, he said.

The reasons are that a war is expected to be quick, and that the Bush administration would open the nation's strategic petroleum reserves to keep prices in check, he said. In the meantime, oil companies are building up non-OPEC supplies, Gaspar said.

All of which makes Minott, of the Clean Air Council, lament that prices won't have much of an impact.

"It takes an awfully large price hike for Americans to change their gas-consuming ways," Minott said. "Culturally, we love our cars."

Contact staff writer Tom Avril at 215-854-2430 or tavril@phillynews.com.

seattletimes.nwsource.com Monday, March 17, 2003 - 11:01 a.m. Pacific By Luke Timmerman Seattle Times business reporter MIKE SIEGEL / THE SEATTLE TIMES

Truckers, like these heading east along Interstate 90, are commonly paying $200 a day to fill their tanks with diesel. Many are trying to raise delivery charges to help cover the costs, and that eventually could mean higher prices for consumer goods.

Imagine paying $200 a day to fill your tank instead of $150.

That's what truckers are facing as the price of diesel, the fuel that transports most goods onto American store shelves and heats many homes, has reached record highs. Diesel climbed to $2.05 a gallon yesterday in Washington, according to the American Automobile Association.

Those who operate trucks — from large semis to small delivery trucks — are feeling the pressure. If it lasts long, economists say consumers will start taking a hit, too.

James Wallace, president of Gee Cee's Truck Stop along Interstate 5 in Southwest Washington, one of the state's largest diesel retailers, said truckers commonly pay $200 for daily fill-ups that cost $150 a month ago. Many are trying to raise their delivery charges to cover the costs, but some customers refuse to pay more, so truckers are forced to absorb the costs, he said.

Some truckers are postponing maintenance, such as oil changes and tire rotations, to stay in business, he said. If fuel prices stay high for months, he said some will go bankrupt.

"I don't empathize with the gas-guzzling public as much as the truckers," Wallace said. "With gas, most people waste a lot just by going to the market to get a gallon of milk. But truckers don't have a choice. Fuel costs are a fact of life for them."

It's also part of life for Metro, King County's bus service that operates a fleet of 1,300 vehicles. The buses consume ultra-low-sulfur diesel, which last week cost $1.41 per gallon, up from $1.08 in early February. It matters to Metro's budget: The annual impact of each penny increase works out to $100,000 a year, said Metro spokeswoman Linda Thielke. If prices stay high, it could cost the county millions.

Diesel prices are propelled by the same forces moving the price of gas. Crude-oil prices have reached the highest levels since the 1991 Persian Gulf War, based on uncertainty about a new war in Iraq and lingering supply shortages from the general strike in Venezuela. On top of that, the cold winter in the East and Midwest has drained supplies of home heating oil, which closely resembles motor diesel.

Refiners are postponing crude-oil purchases in hopes that prices will fall, which in turn depletes inventories of refined fuels like gas and diesel, said Severin Borenstein, director of the University of California Energy Institute.

The American Trucking Association has asked the Bush administration to release oil from the nation's Strategic Petroleum Reserve to bring down prices, so far without success.

Bob Costello, the association's chief economist, said for every 10-cent-per-gallon increase in diesel, there are about 1,000 bankruptcies in fleets with five trucks or more. If enough go out of business that the survivors gain pricing power, they could impose surcharges on, say, grocery chains, who could then pass it along to consumers by raising the price of milk.

"If this price increase lasts for months, we'll see this show up in our prices at the store," Costello said.

Phil Verleger, an energy economist affiliated with the Council on Foreign Relations, said high fuel prices could shave off 3 percent or more from the gross domestic product, leading the country into a recession by the fourth quarter of 2004.

But he doubts that it will get to that point. The federal government tapped the nation's reserves when the ground war began in the first Gulf War, and oil prices fell dramatically within an hour.

Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com

jacksonville.bizjournals.com From the March 14, 2003 print edition Devan Stuart  

Kuhn Flowers has 14 drivers delivering bouquets all over the city. But that service for its customers is causing the florist some gas pains. Rising fuel prices have driven Kuhn's monthly gas bill to $7,800 from $6,000, a 30 percent increase, said Bill Cutting, who owns Kuhn. For now, Cutting is absorbing the extra cost and refuses to change delivery routes or ask customers to pick up their flowers rather than have them delivered.

"It's something you live with for awhile," he said. But he added that "if it goes up too much, we'll have to pass it on to customers."

Throughout Northeast Florida businesses large and small are struggling to cope with some of the highest fuel prices they've seen in years.

War jitters alone typically raise the price of crude oil by about $5 a barrel, experts say. By some estimates, the war premium currently is $10 to $12 a barrel. For each dollar-a-barrel increase in crude oil, gasoline prices jump 2.5 cents a gallon.

The nation's worsening conflict with Iraq adds to what insiders call a "perfect storm" of recent events pushing up gas prices and straining supply, said Buzz Hoover, vice president of petroleum supply for Jacksonville-based Gate Petroleum Co.

In December, oil workers in Venezuela, which accounts for 14 percent of U.S. petroleum imports and supplies the East Coast, kicked off a two-month strike.

Japan is also sucking up more of the world's oil supplies, the result of a scandal at Tokyo Electric Power Co., which has admitted it failed to accurately report cracks at its nuclear reactors in the late 1980s and 1990s. Japan began shutting down reactors, increasing the nation's crude oil imports by nearly 300,000 barrels a day.

Those factors, combined with an unusually cold winter, have reduced the United States' crude oil inventory to a 27-year low. And even as the push to decrease U.S. dependence on Middle Eastern oil intensifies, America's aging oil fields are producing less.

"The Saudis are about the only ones that have the capacity," Hoover said. "But that's not enough to cover all the shortage if we had any sustained loss of Iraqi crude."

Today, world demand is 77 million barrels a day. The 10-nation Vienna, Austria-based Organization of Petroleum Exporting Countries, which includes Iraq, pumps 24.5 million barrels a day. OPEC officials say the organization would cover any potential shortfall.

But Gate's Hoover points out consumer panic could worsen an already bad situation. Industry statistics show the average driver typically is riding on a third of a tank of gas.

"If everyone decided to fill up at the same time, thinking [gasoline] isn't going to be there in a week, it would double the world's demand," Hoover said.

Sharing the burden

Rising costs are getting tougher to swallow for area businesses of all sizes that use large amounts of fuel, be it gasoline, diesel or jet fuel.

"I'm going to be eating less steaks and more hot dogs if this keeps up," said Dale Snodgrass, a retired U.S. Navy captain and owner of DS Airshows Inc. in St. Augustine.

He'll have to save a lot of lunch money to help pay for the 500 gallons of fuel his F-8 Sabre, a Korean-era fighter jet, burns in an hour. Snodgrass flies the jet, his Beach Baron or Piper Super Cub in 18 air shows a year, including the annual Jacksonville Sea and Sky Spectacular. He racked up a $100,000 fuel bill last year and projects he'll spend $120,000 this year. Fueling up in Tampa earlier this week, Snodgrass paid $3.45 a gallon, compared with last year's top price of $2.85 a gallon.

"For me, a 10-cents, 20-cents or 30-cents jump makes a huge difference," he said. "Just like in any business, I have to pass the cost of business on to my customers. I'm having to charge more per show."

Small businesses aren't the only ones laboring under higher fuel prices. In January, Jacksonville-based CSX Transportation implemented a 2 percent surcharge to customers on fuel when prices for West Texas Intermediate Crude Oil exceeded the $28-a-barrel benchmark for 30 consecutive days.

"No one likes to see price increases," CSXT spokesman Gary Sease said. "At the same time, we hope [clients] understand that to provide the reliable, safe rail transportation they expect, we have to cover our costs."

Fuel represents nearly 8 percent of CSXT's costs. The diesel fuel it uses to power trains recently hit $1.03 a gallon, compared with 90 cents this time last year. The extra cost adds up, considering CSXT used more than 572 million gallons of diesel fuel last year to power its fleet of more than 3,500 locomotives operating in 23 states.

"That 13-cent increase becomes a major factor in our operating expenses," Sease said. "We're feeling the effects."

To help keep costs at bay, CSXT officials plan fueling stops in areas of the nation offering the lowest prices. Conservation practices already in place also help. Engineers use a formula that takes into account such factors as number of train cars, tonnage carried and type of territory the train will travel to calculate how much horsepower to use.

"Just like any smart, sensible motorist would do, we try to stretch the mileage on our locomotives," Sease said.

Waiting it out

Many business owners, particularly smaller ones, such as Kuhn's Cutting, are trying to absorb the price increases while holding the line on the prices they charge their customers. But that will become increasingly difficult if fuel prices remain high.

Individuals who use their cars for business are feeling the pain, too. Duane Guerra, a driver for Papa John's pizza restaurant on San Pablo Road, said he's paying $70 a week for gasoline, up from $60. Although he gets reimbursed for mileage, the amount Papa John's pays hasn't risen at all. That means Guerra has taken an effective $10-a-week pay cut, which may prompt him to look for another job if fuel prices remain high. "It all comes down to how much I'm making and if it's worth it."

Officials with Comfort Keepers, an in-home, non-medical care provider for the elderly, say their care givers have yet to complain about gas prices despite the fact the Internal Revenue Service hasn't raised the allowable reimbursement amount for higher gasoline prices.

"I'm sure the [price increases] are affecting them," said Ruth Patterson, care manager for Comfort Keepers. "Everyone is hoping this will be a temporary thing."

Lighting up

Public entities also are feeling the impact. Jacksonville may have to increase its $5.5 million fuel budget by $1.9 million if prices remain at current levels through September.

JEA service trucks drink 637,000 gallons of unleaded gasoline and 457,000 gallons of diesel fuel annually, an average of 91,000 gallons a month.

Since early December, JEA's fuel cost doubled, spokesman Bruce Dugan said.

JEA also burns oil to create electricity at its Northside and Talleyrand plants. Miami-based Florida Power & Light, which covers much of the state and several service areas JEA doesn't, last month proposed a rate hike to Florida's Public Service Commission. JEA officials aim to avoid rate hikes.

"It's pinching us, but it's not having any impact right now on the general public," Dugan said, noting Jacksonville consumers pay 6.8 cents a kilowatt compared to Tampa's 9.4 cents. "We're watching the interest rates and fuel prices … the two variables that affect prices of electricity."

Don't kill the messenger

Gasoline price increases in times of war or other international tensions often prompt accusations of price gouging. But Hoover contends that's a misperception. He notes Gate's costs are up 40 cents a gallon, 33 percent, but it has raised prices to its consumers 19 cents a gallon, or 13.2 percent.

"We're barely selling the gasoline for what we're paying for it, and that doesn't even begin to cover operating the stores or covering the overhead," he said.

Area gas station owners determine prices by adding 46 cents in state, local and federal taxes to the wholesale per-gallon price, then adding a 3 percent credit card fee. Owners then add enough to cover costs while remaining competitive.

Gate's sales volume remains constant, but its premium gas sales have dropped by 10 percent as customers increasingly choose midgrade or regular gasoline to stretch dollars. The same scenario happened at the time of the Gulf War.

"Premium sales dropped and really have never recovered to the level they were before the Gulf War," Hoover said.

Gate officials are banking on speculation a war likely would be short, allowing the U.S. economy to get back to normal earlier than if the conflict drags on. "If it's a two-day war, clearly prices are going to come down quicker," Hoover said. Other factors are the degree of collateral damage to Persian Gulf oil production and the stockpiles of strategic oil reserves held by a number of governments around the world, including the United States. Government officials would decide the speed and amount of reserves to release in the event of a major shortage. Gas prices would change accordingly.

Jane Bennett, Beth Davis, Jessica Gellady, Bruce Hamilton and John Snow contributed to this report.

www.quicken.com Monday, March 17, 2003 00:28 AM ET  Printer-friendly version   Oil prices are sliding as more crude moves toward a thirsty U.S. market, but gasoline prices aren't expected to follow them down anytime soon, Monday's Wall Street Journal reported.

The reason: tight crude-oil supplies and production problems, particularly on the West Coast.

In California, where prices now average $2.08 a gallon, gasoline supply continues to be dogged by refinery- maintenance issues and complications surrounding the production of a new ethanol-gasoline blend. Those problems appear to be affecting supplies to other western states.

Nationally, gasoline prices are expected to reach highs, before adjusting for inflation, when the latest survey comes out today. They most recently averaged $ 1.71 a gallon of regular, just below the previous record. A prolonged oil workers' strike in Venezuela this year and fears about the impact of a possible U.S. invasion of Iraq have contributed to the bulk of the price run-up.

Inventories have dropped dangerously low in some parts of the country and will be hard to replenish quickly. The crude on the way from the Middle East won't help inventories for a month or more, and weeks more will pass before the oil is refined into gasoline and transported to service stations. The Energy Information Administration, an arm of the Department of Energy, predicts that pump prices will peak at $1.76 this year.

On Friday, crude oil fell on the New York Mercantile Exchange, in part reflecting reports that Saudi Arabia had chartered at least a dozen oil tankers for shipment to the U.S. Gulf Coast. But that oil won't reach U.S. shores until the first half of May. In the meantime, the first wave of extra Saudi oil -- shipped more than a month ago -- is expected to reach the U.S. Gulf Coast soon, said Larry Goldstein, president of Petroleum Research Foundation in New York.

Wall Street Journal Staff Reporter Alexei Barrionuevo contributed to this report.

www.petroleumnewsalaska.com Petroleum News Alaska Staff

North Slope crude hit $37.48 per barrel on March 12, reaching a 12-year high according to Alaska Department of Revenue records.

The spike occurred after the U.S. Department of Energy announced oil inventories had dropped to 269.8 million barrels the week before, the lowest number in almost 28 years.

The shortfall came as Venezuela, the world’s fifth-largest oil producer, continues to struggle to rebuild oil production after a general strike. The South American country’s pre-strike production had been 3 million barrels a day. Lacking that output, U.S. imports fell 12 percent for the week ending March 7 to 7.62 million barrels.

The news came as oil traders worry that supplies will be further disrupted if there’s a war in Iraq. Conflict in the Persian Gulf could not only end Iraq’s exports of 1.7 million barrels a day but could also threaten exports from other major producers such as Saudi Arabia.

Lawrence Eagles, an analyst with GNI-Man Financial in Belfast, was quoted in news reports as saying, “It shows that the U.S. market is still undersupplied by about one million barrels per day.”

Prices fell slightly on March 13 On March 13, news reports said oil prices fell by approximately 4 percent following news that the United States’ efforts to garner support for a new U.N. resolution on Iraq could extend into the week ending March 21, potentially further delaying a Middle East war.

News that Japan plans to sell 300,000 barrels per day from its state reserves should U.S.-led forces begin attacking Iraq, according to a Nihon Keizai Shimbun report, added to the March 13 slide, news reports said.

DOE said there were also sharp drops in U.S. gasoline inventories, which would normally be growing as stockbuilding starts for the summer driving season.

News reports said analysts expected the March 13 drop to be short-lived.