www.theledger.com Published Wednesday, March 12, 2003 By Michael Sasso The Ledger michael.sasso@theledger.com

Now hovering about $1.70 a gallon, gas prices have room to go up even further, a leading oil industry analyst said. On Tuesday, eight Polk County gas stations were selling regular unleaded for $1.69 to $1.76 per gallon. That's up about a nickel per gallon over prices at the same stations last month. Local prices appear in line with the Florida and national averages for regular unleaded, both of which are $1.70, according to AAA Auto Club South. Industry analysts have attributed the high prices to short supplies of oil, partly because of labor strikes in Venezuela, a leading source of American oil. And with war looming, the oil industry is afraid the oil supply will fall further. So it is raising its prices now in anticipation of higher costs in the future. Last week, a barrel of oil on the futures market rose to more than $39. Essentially, that's the price buyers were willing to pay last week for oil at some set point in the future. In the past few days, that price has dropped to about $36 a barrel, but it may rise again and even eclipse last week's peak, said Tom Kloza, chief oil analyst for the Oil Price Information Service, which studies the industry. Already, supplies of oil are low, while consumer demand has stayed high. Now the summer driving season -- when demand is the highest -- is approaching, Kloza said. "Despite all the ink and all the Sturm und Drang (German for storm and stress) among consumers complaining about prices, the one thing that is consistent and scary is that demand continues to be phenomenal," Kloza said. The high gas prices have felled at least one local gas station. George Weaver of Weaver and Son Service Center in Bartow is considering turning off his gas pumps next month. Instead of selling gas, he'll just operate his repair shop, he said. Right now Weaver is paying his gas distributor $1.73 per gallon for regular unleaded -- more than some stations are selling regular unleaded at retail. He's selling it to consumers for $1.81 per gallon, not much of a profit, he said.

Last modified: March 12. 2003 8:10AM

www.trivalleyherald.com106691238081,00.html By Alan Zibel, BUSINESS WRITER

Nine out of 10 large Bay Area cities are experiencing the high- and predicted that prices will rise even higher.

"Then we'll all go out of business," he said.

The 15 percent increase in average Bay Area gas prices over the past month compares unfavorably to the nation as a whole. The national average for regular unleaded increased 5.5 percent, or 9 cents, to $1.70 a gallon on Tuesday, according to AAA statistics.

Drivers filling up in San Francisco on Tuesday were paying the highest average gasoline prices in the country, with prices at $2.24 a gallon, said AAA spokeswoman Jenny Mack. San Mateo was not far behind, with prices at $2.21 a gallon.

The only place in the Bay Area that had not yet broken its all-time price record as of Tuesday was Pleasanton, where the average price of $2.03 was two cents shy of the previous record of $2.05. That record was set in June of 2001, Mack said.

Gas prices have been on the rise since early to mid-January. Analysts attribute the nationwide increase to high crude oil prices, which have risen on fears of a war with Iraq and because of low production in Venezuela due to a strike there.

Still, California's dramatic price increases have outpaced the nation. Analysts say one reason is that the state's shift away from the polluting additive MTBE (methyl tertiary butyl ether) to corn-based ethanol has caused logistical difficulties for oil refiners. Also, the state's specifications for its clean-burning gasoline are different than the rest of the nation, reducing the state's ability to import gasoline from elsewhere.

Because of its unique gasoline standards, California "doesn't have as many supply options," said Peter Zipf, editor-in-chief of Platts Oilgram News. "If supply is tight, there are far fewer places to reach out and go and get more."

Jay McKeeman, executive vice president of the California Independent Oil Marketers Association, said many oil refineries are down for maintenance right now, as they make the switch from the winter gas formula to summer blends.

A price spike normally occurs during this switchover, McKeeman said, but this year's switch has been worsened by the transition from MTBE to ethanol.

Some refiners are still using MTBE as an additive, though, and oil companies cannot legally mix the two kinds of gasoline. However, using both blends in a vehicle does not present a mechanical or performance problem. The switch, McKeeman said, has "eliminated the ability of companies to efficiently and quickly swap product to cover shortfalls that they may have."

"I think this spike isn't over yet," McKeeman said. "I could see three dollar gasoline real easy during the summer if we start having refinery problems."

The transition to ethanol has complicated the switch from winter-grade to summer-grade gasoline and caused logistical problems as refiners make "rather major changes in how they make their gasoline," said Rob Schlicting, spokesman for the California Energy Commission.

"You may see some outages, some shortages," Schlicting said.

Still, Schlicting said he was encouraged by one piece of data: California's refiners produced 8.2 percent more gasoline last week than the week before.

"That's good news," he said. "A lot of this right now is a tight market. The more supplies that we have, the better it's going to be."

Last week, Sen. Barbara Boxer, D-Calif., called for a federal investigation into California's gasoline prices, saying she was concerned about possible manipulation of gasoline supplies due to shutdown refineries.

According to energy commission data, refiners' cost and profit margin -- the difference between the cost of crude oil and the wholesale price of gas -- has increased to 55 cents for name-brand gasoline this week. That's up from a margin of 25 to 38 cents earlier this year.

Still, Ron Planting, an analyst at the American Petroleum Institute, denied allegations of price gouging, saying that there have been numerous investigations into gasoline prices.

"In all cases, they have not found evidence of anticompetitive behavior or price fixing or any of those things," he said.

Alan Zibel may be reached at (925) 416-4805 or azibel@angnewspapers.com .

seattlepi.nwsource.com Wednesday, March 12, 2003 By STEVEN FRIEDERICH SEATTLE POST-INTELLIGENCER REPORTER

OLYMPIA -- State lawmakers yesterday quizzed oil industry officials about the spike in gas prices and were told petrol could cost even more at the pumps this summer.

In the Seattle area, drivers paid an average of $18.52 to fill 10-gallon gas tanks with regular unleaded gas on Friday, compared with $12.14 a year ago, according to the most recent data from AAA.

The direct out-of-pocket pinch consumers are feeling is the reason legislators held a work session on current oil and gas prices. Another hearing -- with public comment -- is scheduled for Friday.

"People expect the price of everything to go up," Rep. Laura Ruderman, D-Kirkland, told a spokesman from a petroleum association. "It was $1.35 at the cheap station near my home; as of Friday it's $1.81. That looks like a spike. The thing that's changed is you are taking advantage of the increased war talk."

Ruderman put it simply, "Tell me how to tell my constituents that price is reasonable."

Industry officials blame some of the price run-up on tensions with Iraq and the labor dispute in Venezuela, which is settled but continues to hamper supply.

Anita Mangeles, of the Western States Petroleum Association, told legislators that demand is higher than supply right now.

"Iraq has not a thing to do with this," countered Tim Hamilton, spokesman with the Automotive United Trades Organization. "I believe we'd be here today if we shot Saddam and installed the pope."

Hamilton warns that gas prices could even go higher. Typically, the winter months see the lowest spike of gas in the year, but that wasn't the case this year. And summer months see as high as a 50-cent burp.

"Why have prices gone up? In a word: Crude," she said. "Crude oil costs have doubled to $37.77 now compared to $18.00 last year."

Competition also keeps gas prices down. For example, Rep. Richard DeBolt , R- Tacoma, said a gas station in his district charges $2.05 just because it's a mile off the freeway.

FOR MORE INFO To read AAA's latest information on gas prices, go to www.fuelgaugereport.com

Article Last Updated: Tuesday, March 11, 2003 - 11:29:01 PM PST

www.dailynews.com209541237105,00.html By Evan Pondel Staff Writer

The average price of a gallon of regular gasoline in Los Angeles hit a record $2.076 on Tuesday and industry experts said it will keep rising steadily toward a once-unimaginable $3 a gallon.

The price has easily cleared the old record of $2.034 reached May 25, 2001, according to the Automobile Club of Southern California. And several factors, including a supply shortage, are poised to send prices even higher.

"It's going up, up, up," said Bob van der Valk, a wholesaler with Cosby Oil in Santa Fe Springs. "If there is no relief, it wouldn't surprise me to see prices end up at $3 a gallon."

Los Angeles drivers are not alone in their woes at the wheel. The average price of regular gasoline in Southern California hit $2.085 Tuesday, up 36 cents from the Feb. 11 average of $1.725. San Francisco motorists are spending an average of $2.140 for a gallon of regular gasoline, a 24-cent increase from last month.

"OK, enough is enough already. I've never really cared about the price of gasoline, but how can you avoid those numbers? You can't," said D'Artagnan Figueroa, 32, squeezing off a few gallons for his jet black Chevy Tahoe. "Between my Tahoe, my Impala and my van ... yeah, I'd say I'm spending a lot of money right now."

Prices are being affected by fears of war, rising crude oil costs and a petroleum workers strike in Venezuela.

But California's boutique blend of gasoline is the No. 1 culprit, said Rob Schlichting, spokesman for the state's energy commission.

To produce what is known as Carbob, or California Air Resources Board Oxygenated Blend, refiners must mix a complex gasoline and ethanol concoction to cut down on emissions. Carbob coupled with a seasonal change from a winter to summer-grade gasoline blend have tightened supplies and therefore raised the price at the pump, Schlichting said.

The switch in fuel has been amplified by the prospect of war in Iraq, causing many refiners to keep a tight rein on supplies.

Van der Valk said profit margins are rising with hikes in gas prices.

As of March 10, refiners' cost and profit margin was about 55 cents for every gallon of gasoline valued at $2.08. Whereas on Jan. 6, refiners' cost and profit margin was 27 cents for every gallon of gasoline valued at $1.58.

But rising gasoline prices aren't only a boon for refiners, as state and local government treasuries also are taking in a share of the increased prices at the pump.

"It's the silver lining to the black clouds right now," said Dan Blake, a professor of economics at California State University, Northridge.

Both the state and city collect sales tax on gasoline, which registers at 8.25 percent in Los Angeles. A majority of the tax goes to the state coffers, while the city keeps a fraction for transportation.

In 2000, California generated about $2.6 billion in sales tax revenues from gasoline, on approximately 14.7 billion gallons.

"Rising gasoline prices is definitely a windfall for the state," said Ron Roach, spokesman for the California Taxpayers Association.

Factoring a 50-cent increase in gasoline prices since last year, the state has churned about $500 million more in sales tax revenues thus far, Blake said.

"I suppose, depending on the situation, that number could increase substantially," he said. "But it's not nearly enough to offset the state's ($34 billion) budget deficit."

www.cw.ua.edu By Heather Henderson Senior staff reporter March 12, 2003

In self-serve gas stations across Tuscaloosa, signs advertising prices of $1.59 and up for regular unleaded gasoline demonstrate a nationwide trend.

According to a Lundberg Survey, the past two weeks have seen gasoline prices throughout the country rise an average five cents per gallon, with some areas, such as Los Angeles and San Francisco Bay exceeding $2 per gallon.

At the Pit Stop gas station on University Boulevard, regular unleaded gasoline prices rose from $1.54 at the beginning of March to $1.59 last week.

Factors contributing to the price inflation include a continuing workers' strike in Venezuela combined with talks of war with Iraq, said Dr. Peter Clark, associate professor of chemical engineering.

The Office of Petroleum Exporting Countries March quota for Venezuela is at almost 3 million barrels per day, the third largest OPEC quota.

"If the oil market in Venezuela would go back to normal, we'd be in good shape anyway," Clark said. "Until Venezuela started having their problems, we only got a small percentage of our oil from the Middle East."

However, the United States and Europe now rely heavily on Middle Eastern oil fields.

According to OPEC statistics, Saudi Arabia exports almost 8 million barrels per day, Iran is second with about 3.5 million barrels per day and Kuwait exports nearly 2 million barrels per day. Iraq, due to sanctions, produces about 2.3 million barrels per day, according to a CNN report.

The current rise in gasoline and oil prices, in all markets and levels of trading, has been influenced not only by a change in supply and demand, but also by fears of war, Clark said.

"Prices will rise during periods of uncertainty," Clark said.

No single person or company sets the price of oil. Instead, prices are controlled by supply and demand and to some degree by the oil futures price set by auction in trading markets like the New York Mercantile Exchange, he said.

If the majority of suppliers and buyers feel there may soon be an oil shortage, suppliers will ask for more and buyers will pay more for the product. As a result, when the president started talking about war with the Middle East, prices rose even more, Clark said.

If war becomes a reality, Clark said gasoline prices will depend on how much collateral damage Saddam manages to cause.

"If nothing goes wrong, and we manage to pull off the war without damages. The price of gas should drift down a little bit," Clark said.

Clark stressed the importance of protecting not only the oil fields in Iraq, but also in Saudi Arabia and Kuwait.

"If there is damage to the oil fields in Iraq ... there will be a little damage to the market, but not huge," Clark said. "If Saudi Arabia and Kuwait oil fields are damaged, we'll have a serious problem."

Clark also acknowledged the possibility that countries opposed to war could use their oil supplies as an international bargaining chip, but said the move might prove to be a disadvantage to them.

"While cutting off the U.S. oil supply by might seem like a good way to oppose U.S. policy, the problem that the countries could have in using this as a weapon is that their economy is so tied to the oil revenue that they would hurt themselves as much or more than they hurt us," Clark said.

Next week, OPEC ministers will meet to discuss raising output quotas to meet potential supply problems if war erupts.

"The thing that worries me, there's only a couple of ways this [the war] can go right and many ways this can go wrong," Clark said. "All the wrong ways will end up costing us a lot of money."