www.guelphmercury.com Thursday March 13, 2003 VIK KIRSCH MERCURY STAFF

GUELPH -- Guelphites woke up Wednesday to sky-high gasoline prices.

"Pumping it in I had a bit of a shock," Chris McCracken said as he gassed up his minivan at the Canadian Tire self-serve gas bar on Woodlawn Road.

At a pricey 83.4 cents a litre, he yanked the nozzle out at $15, kicking himself for not filling up several days earlier when gasoline was less than 80 cents.

He wasn't buying the argument that an impending war with oil-rich Iraq is driving gas prices up, saying they fluctuate too much for that to be the simple explanation.

But that's what Canadian Petroleum Products Institute Ontario vice-president Bob Clapp was suggesting.

"It's the threat of war," said Clapp, conceding this is cold comfort to Canadian families facing expensive refueling costs for their SUVs and vans.

"We can certainly understand people's frustrations."

Driving this irritation is the rise of regular gasoline prices Tuesday to record highs averaging 84.2 cents a litre across Canada, up almost three cents over the past week. That's amid decade-high crude oil prices, which surged more than $1 US a barrel Wednesday to almost $38. Diesel, propane and furnace oil also peaked: diesel chugged to 84.4 cents Cdn, propane rose to 66.4 cents and heating oil floated to 77.5 cents.

Susan Dankert recalls how diesel fuel was once cheaper than gasoline.

"Now, it's right on par," said the partner in Choice Transportation Services, a Guelph company whose large truck rigs haul commercial freight.

Her trucking firm is among the lucky ones that can pass some of the higher costs on to customers through a fuel surcharge. And while that doesn't completely cover rising costs, she is more concerned for independent truckers driving their own rigs who aren't in a position to pass on some of the added expense.

The worry, said Guelph Chamber of Commerce president Ian Smith, is what damage rising energy costs are doing to the economy. It's not just the trucking sector passing along energy surcharges, Smith said. He cited airlines and Canada Post as well.

It's ironic, he said, that the Bank of Canada recently raised interest rates to combat oil-related inflation that is out of the hands of Canadians. (His last home hydro bill, he said, "was obscene," estimating it's almost 50 per cent higher than a year ago.)

Dankert proposes the federal government re-evaluate high gasoline taxes when crude prices soar.

Among the demons said to haunt oil -- aside from Iraqi dictator Saddam Hussein -- are production shortfalls in strife-torn, oil rich Venezuela and an unusually long and harsh winter in North America, though an oil industry-tracking Internet site (www.oil-gasoline.com) isn't buying it.

The Web site concludes the refining industry is "devoid of competition." Refiners are not replenishing inventories because they expect prices to drop.

Crude prices, the site said, are high because of significant costs to the industry from speculating in the commodity, with refiners passing on these costs to consumers.

That doesn't surprise Consumers Association of Canada Ontario president Theresa Courneyea, who is convinced high prices are driven by the refining industry. She said regular gasoline prices in her home town of Toronto were in the 75- to 76-cents a litre range at one point Monday. Two hours later, prices at those gas stations had risen to 83.9. "Nobody can tell me that just happens accidentally."

"The trouble is there are so many things happening at once," said Peter Dyne, the consumers association's oil expert. "What we are seeing is the workings of an open market, reasonably competitive."

What's impossible to gauge are the reasons prices are peaking and when, or if, they'll come down. "I can't offer you any comfort," said Dyne.

If motorists feel they're gouged by high taxes, Dyne said it doesn't reflect the reality that they pay among the lowest in the industrialized world.

"Gasoline is taxed heavily everywhere," said Dyne.

vkirsch@guelphmercury.com

www.signonsandiego.com By Brian Hazle UNION-TRIBUNE STAFF WRITER March 13, 2003

EL CAJON – While gasoline prices have risen steadily throughout the county, one station's prices rocketed out of this world yesterday.

The Texaco gas station at Greenfield Drive and East Main Street inexplicably raised the price of a gallon of regular unleaded gas to $3.19 – $1.07 higher than another station across the street.

The station advertised its "Power Plus" fuel for $3.79 and charged $4.29 for "Power Premium."

Understandably, fewer cars stopped at the station than at nearby pumps, but some customers paid the price.

"I have no choice, I have to get gas," said Jeanne Cooney as she fueled her SUV. "I didn't want to run out of gas."

Employees at the station said the owner had ordered the price increases. They also said the owner, whom they refused to identify, would hold a news conference at 6 p.m. yesterday, but the person didn't show up.

The prospect of war with Iraq and interruptions in crude-oil shipments from Venezuela have pushed the average per-gallon cost of regular unleaded gasoline in the United States to $1.71, according to the Energy Information Administration, which keeps statistics for the Energy Department.

In San Diego County, a survey by the Utility Consumers' Action Network found that the average price in the county Tuesday was $2.14 a gallon.

A year ago, the average price for gas in the county was $1.34.

"Prices have risen by a penny per day on average since February 24," UCAN's Web site says.

Analysts predict prices will continue to increase as refineries retool to make cleaner-burning summer fuel blends and produce fuel with ethanol instead of MTBE.

Last week, Sen. Barbara Boxer, D-Calif., asked the General Accounting Office to look into allegations that oil companies are shutting down more refineries than usual this season with the possible intention of spiking prices.

Besides calling for a GAO probe, Boxer also sent letters to the chief executive officers of the seven largest refining companies in California.

The letters requested information on the number of hours that the companies' refineries were off-line from November through last month, compared with the same period a year earlier.

Brian Hazle: (619) 593-4955; brian.hazle@uniontrib.com

www.canada.com Scott Haggett Calgary Herald; with files from Herald News Services Thursday, March 13, 2003

Oil continued to rise Wednesday, reaching a 12-year high, but the shares of the companies that produce it haven't managed similar gains.

Crude oil on New York's Nymex Exchange rose $1.11 US to $37.83 US a barrel -- the highest since Oct. 16, 1990 -- as a key report said oil inventories fell unexpectedly last week.

The U.S. department of energy said American oil reserves have fallen to 269.8 million barrels, down four million barrels in a week and the lowest in almost 28 years.

The shortfall came as Venezuela continues to struggle to rebuild oil production after a general strike. The South American country had been the world's fifth-largest oil producer and is struggling to resume its pre-strike production of three million barrels a day. Lacking that output, U.S. imports fell 12 per cent for the week ended March 7 to 7.62 million barrels.

"It shows that the U.S. market is still undersupplied by about one million barrels per day," said Lawrence Eagles. an energy analyst with GNI-Man Financial in Belfast.

The report came as oil traders worry that supplies will be further disrupted if there's a war in Iraq. Conflict in the crucial Persian Gulf region would not only end Iraq's exports of 1.7 million barrels a day but could also threaten exports from other big producers such as Kuwait or Saudi Arabia.

War fears and the potential for war pushed up oil prices by nearly a third over the past six months. While the Organization of Petroleum Producers has pledged to boost production to make up for shortfalls during a war, the International Energy Agency said Wednesday the cartel could only increase production by 900,000 barrels a day, much less than Iraq now exports.

"The market is heading into a period of heightened uncertainty with low stocks and limited spare production and shipping capacity," the IEA, which represent 26 industrialized countries, said in its monthly oil report. "A further supply disruption would tax a system operating close to capacity."

While oil rose, natural gas continued to fall off two-year highs reached late last month as warmer weather was forecast to move into eastern North America and the U.S. Midwest. Gas on the Nymex fell 7.9 cents US to US$5.865 per million British thermal units. Canadian gas prices also fell, dropping 70 cents to $7.65 per gigajoule at the AECO hub in southeastern Alberta. Despite Wednesday's fall, natural gas prices are still up by more than 75 per cent over the past six months.

Despite high prices for oil and natural gas, Canadian energy stocks fell Wednesday as investors steered clear of the sector. Calgary's petroleum companies are now enjoying what analysts say will be the most profitable first quarter in the industry's history, but that hasn't been reflected in their share prices.

The S&P/TSX energy index, which accounts for the shares of most of Canada's major oil producers, fell 18.77 points Wednesday to 1217.74, up 1.8 per cent in the past six months.

The trouble, observers say, is that no one wants to buy energy stocks at a time when prices are high.

"People won't pay for peak earnings and peak pricing," said Kevin Nyysola, a portfolio manager with Investors Group in Winnipeg. "Why buy them now when you can buy them later for less."

Nyysola said the investors are pricing the shares of energy companies as if oil was trading at $23 US a barrel and gas was $4 US per thousand cubic feet.

shaggett@theherald.canwest.com

www.tcpalm.com By Nadia Gergis staff writer March 13, 2003

Anthony Dalle isn't taking his family out to dinner anymore.

Cutting corners and watching the family's budget is becoming more of an obsession for the owner of Coastal One Maintenance in Stuart — all because of higher gasoline prices.

"Gas used to cost me $500 a month," said Dalle, who specializes in home repairs. "Then it became $700, now it is $1,000. I have to watch my expenses so much now."

Dalle, whose territory stretches from Wellington to Fort Pierce, is considering charging customers an extra 5 to 10 percent surcharge just to keep his business afloat.

"It makes me depressed, I don't know what is going to happen next," said Dalle, as he filled up his Ford truck Wednesday at a 7-Eleven at High Meadow Avenue and Martin Highway in Palm City.

Dalle isn't alone is making adjustments to his budget and transportation costs. Soaring gas prices are causing more and more Treasure Coast residents to pinch their pennies and make fewer trips in their vehicles, especially driver with sport utility vehicles and large trucks.

"I try to get rides to and from work whenever I can," said Kathy Santilli, a manager at the 7-Eleven who owns a Nissan SUV.

Prices for regular unleaded, self-serve gasoline on Wednesday shot up to an average of $1.704 per gallon — the highest ever recorded by AAA Auto South Club. That's 10.5 cents higher than the same date last month. Compared with a year ago, consumers in Florida now are paying 50 cents more for a gallon of gas.

Other gasoline grades also jumped in Florida. Mid-grade climbed 11.4 cents to a statewide average of $1.846 per gallon. Premium rose 11.6 cents to an average of $1.88, while diesel rocketed 21.5 cents to an average of $1.892 per gallon.

Topping the state in prices at the pump was the West Palm Beach-Boca Raton market, where the average cost of regular unleaded was $1.78 per gallon.

"A combination of crude oil prices, low inventories, bad weather up north and the volatile situation with Iraq are making gas prices horrendous for consumers," said Gregg Laskoski, managing director of public and government relations for AAA Auto Club South.

The American Petroleum Institute says the lack of crude oil imports from Venezuela, one of the biggest exporters of oil to the United States, is the largest factor contributing to the gasoline price hikes.

"We had a supply disruption from Venezuela because of workers going on strike," said Bill Bush, a spokesman for the API. "Any severe disruption will affect crude oil prices."

Also contributing to the problem is the unusually cold weather gripping the Northeast and Midwest. Refineries, industry officials say, have been forced to stop making gasoline to produce more heating fuel.

And, to make matters worse, prices of crude oil might keep increasing, said Ron Planting, manager of information and analysis at the API.

"Retail prices usually lag behind crude oil prices, so who knows what we are in for in the future," he said.

That means motorists looking for relief may be in for a long wait.

"It is absurd," said Michael Colella, a Palm City resident. "Every day it (gas) gets higher. It's ridiculous."

Paul Parrott, a 49-year-old Vero Beach resident, echoes that sentiment.

"I never really cared about the price before because I only drive about 6,000 miles per year," said Parrott, who is disabled, lives on Social Security and budgets $35 a month for gas.

washingtontimes.com Gary M. Galles

     The recent surge in gasoline prices has triggered the typical American response — politicians portraying themselves as voters' protectors against the evils of the market. Of particular note has been public servants' scrambling for air time and column space by demanding an investigation — into whether higher gas prices reflect collusion. But it is all consumer advocate imagery devoid of substance.      Absent a smoking gun documenting conspiracy, which is already illegal, not to mention impossible if the government was really protecting us, collusion is unprovable from the available price data. The reason is that the evidence of collusion is higher prices, but multiple political and market forces, with hard or impossible to quantify effects, have been pushing up gas prices. There is no way to accurately subtract the magnitude of those effects from the actual increase in market prices, particularly because the relevant costs are forward-looking, rather than historical, to demonstrate collusion.      Events in Iraq, Venezuela and elsewhere have increased crude oil prices, and with it the price of gas. And the decision to add to the Strategic Petroleum Reserve has done the same. But any alleged collusion among refiners has nothing to do with that.      Of more importance to the retail gasoline market is the uncertainty about future oil supplies. A refiner who plans to stay in business will have to replace any oil used up in current gas production, so that the relevant cost of that oil is what it is expected to cost in the near future, not what the oil they are now processing cost yesterday. But no investigator can know what that cost "really" is in the face of the present uncertainty (where war jitters add to weather forecasting, the proper timing for seasonal gasoline blend switchovers, etc., as complicating factors) . As a result, no possible relationship between the present or past cost of oil and current retail gasoline prices can demonstrate gouging or collusion.      California's cleaner gas mandate has also raised refining costs, as well as isolating California from most short-term outside sources of gasoline, since they do not conform to California's "recipe." Again, there is no way to establish exactly how much prices per gallon should rise to cover the added billions of refining costs, because that would require knowing how many total gallons will be sold, the rate of return companies "should" earn on investment, how long before California forces them to reformulate again, throwing some refinery investment away, etc.      These changes and more would have to be both understood and accurately quantified before any analysis of gasoline prices capable of establishing collusion could be done. This has not and probably cannot be done, given the multiple interacting market forces at work. But that has not stopped the political scapegoating of "big oil" in search of the conspiracy theory vote, for a simple reason. The mere accusation puts the burden of proof on oil companies, who cannot disprove the ill-defined charges beyond a shadow of a doubt any more than their accusers can prove them. But the posturing buys politicians more exposure and more votes in the next election.      If there is collusion, it should also show up in unusually high profits for refiners. But oil-refining profits have long been marginal, at best, which is also demonstrated by the substantial fall in U.S. refining capacity over the past two decades ("greedy" firms don't rush for the exits of highly profitable lines of business). This is anything but proof of successful collusion. As Salomon Brothers oil industry analyst Paul Ting said during an earlier episode of gouging and collusion accusations that recur every time gas prices spike: "Are oil companies gouging, making unconscionable profits? The indications are that on the refining and marketing side, the earnings have actually been abysmal."      What should we make of a government collusion witch hunt that cannot possibly prove what it is looking for, and which ignores clear evidence of abnormally low profits? It seems, more than anything else, to demonstrate that rather than relying on the government to protect us against the evils of the market, we need to rely more on the market to protect us against the evils of grandstanding government policies.      And after the 1970s, we shouldn't need this reminder. After all, while the market price of gas rises when underlying conditions of supply and demand warrant, only the government can create blocklong gas lines.             Gary M. Galles is a professor of economics at Pepperdine University in Malibu, Calif.