The Christian Science Monitor from the May 12, 2003 edition

Consumers may pay an average of $1.46 at the pump over the summer, freeing up money to be spent elsewhere.

By Ron Scherer | Staff writer of The Christian Science Monitor

NEW YORK – After rising all winter, gasoline prices are ratcheting lower. Since the start of the Iraq war, prices at the pump have fallen about 21 cents a gallon. For Americans who drive, this is the equivalent of getting a tax cut of about $200, assuming that gasoline prices don't go back up again. The lower prices have arrived just before the official start of the driving season - Memorial Day weekend.

Lower energy prices are one of the bright spots in the economy. Economists believe the combination of lower mortgage rates and cheaper gasoline could increase consumer spending by as much as 1 percent over the next six months.

The good news will help the balance sheets of the beleaguered airline and trucking industries, both of which are large consumers of fuel. And, it will help the Federal Reserve keep a handle on interest rates since it reduces the US spending on imported oil by about $40 billion - part of the trade deficit that won't need to be financed.

"This is good news for gasoline consumers, they can spend the money on something else," says John Felmy, chief economist for the American Petroleum Institute in Washington. "It's good news overall for the economy."

Although gasoline prices vary around the nation, as of Tuesday, the Energy Information Administration found the average price for unleaded gasoline was $1.51. However, prices are in the region of $1.20 in Georgia; in California they are as high as $1.93 a gallon.

Even so, these prices are well off the highs set in March, when the national average for gasoline was $1.73 and was well over $2.00 a gallon in California.

Prices have retreated despite the fact inventories - both crude and refined - are lower than normal. This is the result of the cold winter and the supply cut offs from Venezuela, Nigeria, and Iraq.

Now, Venezuelan production is heading back toward capacity and there are efforts to resolve disputes in Nigeria between the oil companies and its workers. Last week, a government report showed US crude inventories lower than expected - something that helped prices rise.

Because there have been so many disruptions, energy price forecasters are leery about how much further prices can fall.

"There could still be some problems with refineries or some kind of pipeline disruptions that could cause prices to go back up again," says Dave Costello, a forecaster at the US Energy Information Administration (EIA).

In fact, last month the EIA said consumers could expect "limited" price relief this summer. Since then, however, gasoline prices have declined for seven consecutive weeks. On Thursday, this prolonged drop prompted the government agency to revise its forecast. It now expects gasoline prices to average $1.46 during the summer season. This would be less than 10 cents a gallon higher than last year but well below the summer of 2000 and 2001.

Behind some of the uncertainties over price are questions about crude-oil supplies. Before the Iraq war, Saudi Arabia increased production to stabilize soaring prices.

Now, the Saudis as well as the rest of OPEC, are talking about cutting back. OPEC will meet in Doha on June 11 to discuss production quotas. On Friday, oil prices rose slightly after an OPEC official told the French daily Le Monde that there might be a need to cut output further in June.

Oil analysts are also uncertain about the timing of production from Iraq. Before the war, Iraq was producing about 2.5 million barrels per day. Now, the US is pressing the United Nations to allow Iraq to start up production again.

"This would have a negative impact on prices because it would be seen as additional supply," says Mike Fitzpatrick of Fimat USA, an energy trading group.

Most Americans are just glad to see prices fall. So far, demand for gasoline has been very brisk, despite the fact that the economy is sluggish and the vacation season has not started yet.

This is partially because of the increased use of SUVs and light trucks, which get a lower gasoline mileage.

But it's also because gasoline has become an indispensable commodity for many Americans. Last month, the American Automobile Association conducted a survey asking if consumers adjusted their driving based on price.

"About 75 percent said they had not changed a thing," says Geoff Sundstrom, a spokesman for the Heathrow, Fla.-based organization. "For many Americans you either drive the car or you don't go."

That's the case in Boise, Idaho, where people drive long distances every day. "Gas prices hit working families really hard because there aren't any alternatives," says Mary Smith a homemaker in Boise, Idaho. "It is a big deal to poor or working-class families. They have to commute to work."

One of those families is Heather and Matthew Longhurst, an electrician, and their eight-month-old daughter. They had budgeted $100 a month for gasoline for their two cars. In January, they actually spent $138.

Last month, they noticed the price had come down. "It will help - we're saving up for a million things," says Ms. Longhurst, a property manager.

• Stacey Vanek Smith contributed to this article.

JAMES STEVENSON <a href=www.canada.com>Canadian Press Friday, May 09, 2003

CALGARY (CP) - America wants more Canadian energy and regulatory rules need to be streamlined to allow that to happen, U.S. Ambassador Paul Cellucci said Friday.

Capping off a visit to Canada's oilpatch nerve centre, Cellucci told the Calgary Chamber of Commerce that the United States needs easier access to the oil, gas and electricity reserves of its northern neighbour.

"We want to be less dependent on Venezuela, where they turned the spigot off a few months ago; We want to be less dependent on the Middle East," said Cellucci.

"We know that we have the resources here in North America to fuel the economies of Canada, the U.S. and Mexico," he said.

"And we need a regulatory climate that encourages investment not only of the source, but of the transmission of this energy as well."

After the speech, Cellucci said the U.S. expects to import nearly 1 million barrels of oil per day from the northern Alberta oilsands, and that number will likely double within the next decade.

The U.S. recently changed its global energy reserve estimates to recognize the oilsands as proven reserves. This bumped Canadian oil reserves from five to 180 billion barrels, placing Canada number two in the world behind Saudi Arabia.

Washington also believes that access to large natural gas reserves in Alaska and the Mackenzie Delta region of the Northwest Territories is vital to its future energy needs.

Yet the energy companies behind both the $4-billion Mackenzie valley pipeline proposal and the estimated $20-billion US Alaska highway project have not even filed for regulatory approval yet - a complex step needed before construction can begin.

"It's pretty clear to us that we're going to need gas from both areas," said Cellucci, adding that the U.S. was in favour of a quick permitting process.

Demand for natural gas continues to grow in North America as more new power plants are using cleaner-burning natural gas instead of coal. But conventional supplies are quickly drying up.

When the top energy regulators for Canada, the U.S. and Mexico met earlier this week in Banff, Alta., they agreed that strong demand coupled with scarcity of new supplies would keep the price and consumers' gas bills highly volatile for at least the next three years.

During his visit to Calgary, Cellucci also met with Ralph Klein to "personally thank him" for the Alberta premier's support of the U.S.-led war in Iraq contrary to Ottawa's position.

But Cellucci's appearance was not without protest, as a small group of people huddled together against a May snowstorm and waved anti-U.S. placards.

"Canada's been a trading nation for 150 years and we've never been opposed to trade as workers or as an organization," said Gord Christie of the Calgary and District Labour Council.

"But we want fair trade, not these free trade agreements and this giving away our resources under the guise of free-trade."

<a href=www.sun-sentinel.com>sun-sentinel.com By Michael Turnbell Transportation Writer Posted May 9 2003

Retail gasoline prices continued their skid downward this week, but for most drivers, the ride is almost over. Prices have dipped 17 cents per gallon on average over the past seven weeks as crude oil prices continue to tumble in the wake of the Iraq war.

But the price at the pump is still a few cents higher than a year ago and is expected to stay that way throughout the summer.

"With all we've been through in the last few months, that's still not that bad," said Yoli Buss, AAA's traffic safety director. "It's better than we might have expected."

In March, gas prices reached their highest levels ever in Florida and many places around the country.

According to AAA's daily fuel gauge report, the per-gallon average in Fort Lauderdale on Thursday was $1.54. A month ago, that average was substantially higher, $1.71. But a year ago, motorists paid $1.50.

Miami's price is $1.55, vs. $1.70 a month ago and $1.52 a year ago.

In West Palm Beach-Boca Raton, the regular unleaded average posted Thursday was $1.61, better than the average a month ago of $1.74. A year ago, motorists paid $1.55.

For Brenda Wilson, the drop in prices made it possible for her to drive from her Georgia home to visit family in Delray Beach. "Two months ago, I don't think I would've made the same trip," said Wilson, 42, as she filled up her Nissan Pathfinder at a Hess station on Federal Highway at Glades Road in Boca Raton.

Expect gas prices to be on the rise again as the summer driving season swings into high gear on Memorial Day. But the price increases won't be as high as predicted a month ago, thanks to lower crude oil costs, the U.S. Energy Department's Energy Information Administration said Thursday.

"A lot of people are going to be traveling by car," AAA's Buss said. "There are a lot of great air and cruise deals out there to get people traveling again. But there are a lot less flights. So even though there are these great deals, if you don't book your trip way in advance, you're going to miss out."

The war's conclusion certainly helped lower gas prices. The price of crude has dropped dramatically, from almost $40 a barrel prior to the war to less than $30 today.

"Crude oil prices had several dollars extra per barrel built in prior to the war in Iraq because Iraq had threatened to destroy its own oil resources, and that was prevented," said California-based analyst Trilby Lundberg, editor of a national survey of gas stations. "The response of the oil market was a price crash."

Another factor contributing to the price declines is Venezuela's continuing recovery from its oil industry strike, Lundberg said. She said Venezuela is back up to, or close to, its pre-strike production level of 3.2 million barrels per day.

The downward gas price trend isn't expected to continue.

Analysts say consumers didn't buy less fuel when prices soared in March and probably won't slow down when prices inch back up this summer. U.S. gasoline demand is expected to reach a record 386 million gallons a day during the summer, up 1.6 percent from last summer, according to the Energy Information Administration.

In February, Florida Attorney General Charlie Crist asked the Federal Trade Commission to investigate whether Florida's gas stations were improperly increasing prices to take advantage of fears of a war with Iraq. He also asked representatives of major oil companies whether they were withholding oil from the market. That inquiry is still unsettled.

The last time Florida investigated high gas prices, in the 1970s, the inquiry took 17 years and there were no substantial findings.

"Our staff has been in regular discussions with people from the gas companies. But no new issues have arisen from that," said Joann Carrin, a spokeswoman for Crist. "We're continuing to gather information."

Information from The Associated Press was used to supplement this report.

Michael Turnbell can be reached at mturnbell@sun-sentinel.com or 954-356-4155.

Reuters, 05.06.03, 1:55 AM ET

SINGAPORE, May 6 (Reuters) - Oil prices held steady on Tuesday awaiting U.S. fuel data for signs of stocking in key gasoline supplies ahead of the peak-demand summer-holiday period, which kicks off at the end of the month.

U.S. light crude traded down three cents to $26.46 a barrel, little changed after Monday's 82-cent rise in New York.

London's benchmark Brent crude jumped 77 cents to $24.29 a barrel in catch up with the U.S. market. The International Petroleum Exchange was closed on Monday for a public holiday.

U.S. oil prices pushed higher on Monday partly on concerns of a possible gasoline supply crunch in coming months when consumption traditionally peaks.

Gasoline demand in the United States burns up about 12 percent of global oil supply and is used by traders as a barometer of overall oil demand between the end-May Memorial Day holiday weekend and September's Labor Day.

Data for the week ended May 2 from the government's Energy Information Administration are expected to show a three-million-barrel rise in crude inventories, with gasoline increasing by 1.75 million barrels, said six analysts, polled by Reuters.

U.S. oil stocks have been running at sharp deficits to levels of a year ago. The EIA's report last Wednesday showed U.S. gasoline stocks up by 4.4 million barrels but still 10.5 million barrels below levels at the same point last year.

Crude stocks rose in the week to April 25 by 1.8 million barrels to 288 million, but remained a little over 38 million barrels below a year ago, the EIA said.

"Last year we saw how susceptible the market was to a major supply disruption with the strike in Venezuela. In previous years we have seen the market rise due to stress on the refinery network in the United States," said Sydney-based oil analyst Simon Games-Thomas.

"These factors will support the oil price at, or above, current levels," he said in a daily note.

IRAQI OIL IN U.N. TANGLE

Oil prices have also found support from a lack of progress in restoring crude supplies from Iraq, where production ground to a halt shortly before the U.S.-led invasion that toppled Saddam Hussein.

Before the war, Iraq was pumping up to 2.5 million barrels per day (bpd) and exporting 1.7-2.0 million bpd, or roughly four percent of internationally traded oil.

Diplomats at the United Nations said on Monday that Iraq's exports remained stalled despite the weekend appointment of Thamir Abbad Ghadhban to run the country's oil ministry.

The U.N. Security Council, which oversaw the sale of Iraqi crude under the seven-year-old oil-for-food programme permitted under U.N. sanctions, is deadlocked over setting up a legal framework to resume sales.

Iraq has crude in storage that could be exported now, but without a competent authority to sign and certify sales oil firms are reluctant to trade the oil for fear of breaking the law.

The United States is expected to produce this week a draft resolution to lift U.N. sanctions on Iraq, in place since Baghdad invaded neighbouring Kuwait in 1990.

Diplomats said the U.S. proposal would transfer Iraq's oil wealth to a new Iraqi administration with World Bank oversight. Russia and other Security Council members want the oil sales to remain under U.N. control.

A U.N. diplomat representing one of the five permanent U.N. Security Council members -- Britain, China, France, Russia and the United States -- said it was "still too early" to say whether Washington's proposal would face resistance similar to earlier this year when it sought authorisation to invade Iraq.

By Angela Macdonald-Smith

Sydney, May 6 (<a href=quote.bloomberg.com>Bloomberg) -- Crude oil fell on expectations that a decline in production from the Organization of Petroleum Exporting Countries won't prevent further increases in U.S. inventories in the weeks ahead.

OPEC's April oil production fell 3.6 percent to 26.54 million barrels a day, according to a Bloomberg survey of oil companies, producers and analysts. Still, excluding Iraq, output rose one percent to 26.4 million barrels, 1.9 million barrels a day above quota. U.S. crude inventories rose 10.8 million barrels in the two weeks up to April 25.

I wouldn't be surprised to see a five or six million barrel build this next week,'' said Mike Armbruster, energy analyst and broker with Altavest Worldwide Trading Inc. in Laguna Hills, California. It's going to be another month down the road before OPEC's reduced production really starts to be reflected in our data.''

Crude oil for June delivery fell as much as 19 cents, or 0.7 percent, to $26.30 a barrel in after-hours electronic trading on the New York Mercantile Exchange. Oil traded at $26.45 a barrel at 10:01 a.m. Sydney time.

Yesterday, oil rose 82 cents, or 3.2 percent, to $26.49 a barrel in regular floor trading, the biggest one-day increase since April 17, on speculation that grades of gasoline used in the biggest U.S. cities may be in short supply when demand peaks this summer.

Oil production by OPEC reached a 1 1/2-year high in March as members replaced Iraqi oil that was cut off by war. Iraq's oil output last month fell to 140,000 barrels a day from an average of 1.4 million barrels daily in March as a U.S.-led invasion disrupted the nation's oil industry, the Bloomberg survey showed.

The biggest increase was in Venezuela, where production is recovering from a strike. Venezuelan output rose 340,000 barrels, or 15 percent, to 2.59 million barrels a day.

OPEC members agreed last month to cut oil output starting June 1 to keep prices from falling. The producer group is scheduled to meet again on June 11, when it may decide to cut supply again, ministers said.

OPEC aims to keep an index of crude-oil grades it monitors between $22 and $28 a barrel. The so-called basket price was quoted at $23.84 a barrel on May 2, down 28 percent from $33.11 on March 10. Last Updated: May 5, 2003 20:20 EDT