www.heraldnet.com Published: Friday, February 28, 2003 By Eric Fetters Herald Writer

The region's average price for gasoline rose to nearly $1.81 a gallon on Thursday, the highest recorded by AAA since the organization began tracking local prices in the late 1970s.

That Seattle-Bellevue-Everett average for regular unleaded fuel is 37 cents higher than just a month ago, and nearly 3 cents higher than Wednesday's average.

The statewide average for regular unleaded hit a record high of $1.76 on Thursday, according to AAA.

Chuck Lacy of Marysville said he is amazed at how fast the prices have risen since he last bought gas for his pickup several weeks ago.

"I think it was around the $1.40s-per-gallon the last time I filled up," he said.

In Everett, nearly all service stations were charging more than $1.70 for a gallon of regular unleaded gasoline on Thursday, with many prices creeping closer to $1.80. In Marysville, the Arco station on Fourth Street at I-5 looked like a relative bargain at $1.68 a gallon.

Find cheaper gas

Help us keep track of the area's lowest gas prices with this new HeraldNet feature: www.heraldnet.com/gasprices/ The price for premium unleaded is crossing the $2-a-gallon mark at more Snohomish and Island county stations as well.

Mark Nelson of Everett's Nelson Petroleum said he's not always able to quote a price for customers of his independent distributing business. That's because it's changing so fast.

"Our wholesale prices are going up much like what you see on the street," Nelson said. "We're not only seeing price changes daily, but sometimes also twice a day."

At this point, however, volume at his business hasn't been affected much.

"In a sense, it's a product everybody has to have," he said. "We have a lot of commercial customers, and they need to keep their fleets rolling."

But it's only a matter of time before the rapid rise in prices begins to ripple across the local economy. For example, some trucking companies are adding fuel surcharges to deliveries to cover their higher costs. Many airlines already have added a similar charge to their tickets.

Like many consumers, Lacy said he's suspicious of the reasons behind the higher prices at the pump.

"I think someone's making a killing off the prices," he said.

There's reason to be suspicious, many analysts agree. Pure speculation on the oil commodity market seems to be the biggest reason for a surge in crude oil prices, which in turn affects the retail price.

Uncertainty about what will happen in Iraq has caused much of the volatility in trading. That continued Thursday, as early panic buying sent oil futures soaring to a 12-year high of $39.99 a barrel, only to be replaced by panic selling. Crude oil ended the day at $37.20, down 50 cents.

The U.S. supply of oil is now at its lowest level since 1975, another reason for worry among commodity traders. The government and oil companies have blamed a strike in Venezuela and recent cold weather on the East Coast that has increased demand for heating oil.

But Tim Hamilton, executive director of the Automotive United Trades Organization, said the nation's supply could improve almost immediately if the federal government agreed to dip into emergency reserves or OPEC agreed to ratchet up production.

"We do have less oil, but it's a conscious decision on the part of the oil companies and oil-producing countries not to increase production," said Hamilton, whose Olympia-based group represents independent gas retailers.

How long will the prices keep going up?

"At some point in time, it will reach a peak," Nelson said. "Whether we're there yet, I don't know."

Hamilton said he would like to see prices go back down before they add any more to the economy's problems.

"The dealer's getting beat up, and the consumer's getting hammered," he said, "and our biggest fear is it could get much, much worse."

The Associated Press contributed to this story. Reporter Eric Fetters: 425-339-3453 or fetters@heraldnet.com.

washingtontimes.com By Jeffrey Sparshott THE WASHINGTON TIMES

     Venezuelan energy officials this week sought to reassure the United States and oil markets that crude oil production is returning to normal after a crippling strike that began late last year.      But in meetings this week, the U.S. State Department warned Venezuela that its reliability as a strategic oil partner is in doubt. At the same time, oil prices reached 12-year highs as cold weather and the specter of war with Iraq drove prices near $40 per barrel.      Venezuela last year was the United States' fourth-biggest crude oil supplier, but in December a nationwide strike all but shut down production at Petroleos de Venezuela, the country's state-owned oil monopoly.      The nationwide strike ended Feb. 4, but sporadic demonstrations and violent outbursts have continued.      Political strife and a severe economic slowdown have plagued the country as President Hugo Chavez has held on to power while opponents seek a referendum on ending his rule. Demonstrations yesterday forced a suspension of talks between government and opposition delegates on ending the political turmoil, the Associated Press reported.      "As far as we're concerned, the political impasse is really undermining Venezuela as a reliable energy supplier," said Charles Barclay, spokesman for the State Department's Bureau of Western Hemisphere Affairs. Officials at the State Department conveyed that message during a meeting Tuesday.      Rafael Ramirez, Venezuela's energy and mines minister, and Ali Rodriguez, head of Petroleos de Venezuela, both of whom met with State and Energy department officials, were in town to tell government and business groups that their government has regained control of the energy situation.      "It is within our own hands to supply all of the market demand. We wish to transmit this good news directly to the United States, to clear up all the doubts and conjectures that have naturally risen as part of this situation," Mr. Ramirez said yesterday in a meeting with reporters.      At the beginning of January, Venezuela produced only 150,000 barrels of oil per day. As of yesterday, production reached 2.08 million barrels per day, Mr. Ramirez said.      By the end of March, Venezuela's production should reach 2.9 million barrels per day, he said.      For most of 2002, before the strike, Venezuela produced about 2.9 million barrels of oil per day, with 2.4 million of that exported, the U.S. Energy Information Agency said.      Prior to the strike, Venezuela supplied about 12 percent of the United States' oil imports, making it the fourth-biggest supplier after Canada, Saudi Arabia and Mexico.      The political situation in Venezuela has stoked U.S. oil prices this year, along with a particularly cold winter that has increased heating needs, and worries that Middle East oil supplies could be disrupted by a war with Iraq.      "The Venezuela strike ... has been a big part of the run-up in oil prices. The strike cost the world a tremendous amount of oil," said Phil Flynn, an energy analyst with Alaron Trading in Chicago.      Oil prices were $27.24 per barrel Dec. 2, the day the Venezuela strike started.      Yesterday the price spiked to near $40 before settling at $37.20 to end the day.      U.S. consumers have felt the effects of rising oil prices through rising heating oil and gasoline prices.      Even if Venezuela returns to normal production levels, the political situation makes the country an unstable source of oil, Mr. Flynn said.      The Organization of American States, a political forum for governments in the Western Hemisphere, is trying to broker a political settlement that ends the strife in Venezuela, but recent violence, attacks on foreign embassies and an apparent crackdown by Mr. Chavez have delayed meetings.

www.forbes.com Reuters, 02.27.03, 6:04 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures moved sharply lower in early overnight electronic trade on Thursday, extending a profit-taking spree on dayside trade after an attempt to crack the $40-a-barrel mark failed. At 5:45 p.m. (2245 GMT), NYMEX crude for April delivery delivery traded 56 cents lower at $36.64 a barrel. The ACCESS trading range stood at $36.52 to $37.22. On Thursday evening, a United Nations official in New York said that Iraq had agreed in principle to destroy its al-Samoud 2 missiles, but that U.N. arms inspectors must clarify the offer with officials in Baghdad. "They accept in principle the destruction of the missiles and the facilities but this has to be clarified," a U.N. official told Reuters. In regular dayside trade, the NYMEX April crude contract settled 50 cents lower. That followed volatile morning trading when April crude soared $2.29 to $39.99, the highest level since October 1990 when NYMEX crude hit an all-time high of $41.15, just prior to the U.S.-led Gulf War to liberate Kuwait after an Iraqi invasion. Speculative funds led the sell-off, traders said, with the day's highs spurred by rising Iraq war fears and thin U.S. petroleum inventories. A suspected squeeze on the April contract intensified volatility, traders said. Before the day's sharp decline, NYMEX prompt crude oil had advanced nearly 60 percent from mid-November levels, a premium built on growing fears of a war in Iraq. A strike in major U.S. supplier Venezuela and a very cold winter have also propped up prices. A U.S. move to lower its terror threat level helped pare oil's move higher, traders said. The market remained nervous amid tough talk on Iraq by President Bush, who on Thursday said any Iraqi plan to destroy banned missiles was part of "a campaign of deception." He called for Baghdad to disarm completely. U.N. arms inspectors said the al-Samoud 2 rockets violate the 93-mile (150-km) range limit imposed after the 1991 Gulf War and called for Iraq to start destroying them by March 1. Bush's comments to White House reporters followed a speech on Wednesday in which he reiterated his intention to disarm Iraq, which the U.S. accuses of having weapons of mass destruction, with or without approval of the U.N. Security Council. A delay until the weekend of the Turkish parliament's vote to allow the use of Turkish territory as a possible launchpad for military action against Baghdad was also bearish, they added. Earlier on Thursday, an Iraqi official said Iraq would respond to U.N. chief arms inspector Hans Blix's order that Baghdad destroy its al-Samoud missiles. News that Iraqi Republican Guard troops and equipment were moving from their base in northern Iraq toward Baghdad raised concerns that Iraq was preparing for a U.S.-led attack. A divided U.N. Security Council on Thursday discussed a U.S.-British-Spanish draft resolution that lays the groundwork for war. France, Germany and Russia are pushing for more time for U.N. inspectors to search for Iraq's alleged weapons of mass destruction. No vote is expected for about two weeks. Saudi Ambassador to Britain Turki al-Faisal told BBC radio his country would not back a U.S.-led war in Iraq if there is no new U.N. resolution explicitly permitting the use of force. Meanwhile, OPEC Secretary-General Alvaro Silva said the cartel could cover any stoppage of Iraqi oil if war erupts and consumer countries need not release emergency reserves. On Wednesday U.S. officials said Saudi Arabia had agreed to increase output by 1.5 million barrels per day if Iraqi oil flow is interrupted by war. Temperatures across much of the United States and Canada are forecast to stay below normal through early March, Salomon Smith Barney meteorologists Jon Davis and Mark Russo said on Thursday. In the early ACCESS trade and ahead of Friday's expiration for March refined products contracts, NYMEX March heating oil traded 0.78 cent lower at $1.1465 a gallon. In regular hours trading, it settled 0.06 cent lower at $1.1543. The April contract was down 0.82 cent at $1.0519, after ending dayside trade 0.58 cent off at $1.0601. NYMEX March gasoline traded 1.05 cents down at $1.0075 a gallon. It ended dayside trade 0.03 cent lower at $1.018. April gasoline was down 1.13 cents at $1.0825 a gallon, after finished up 0.27 cent at $1.0938 in regular hours trading.

www.gmtoday.com By JOHN NEVILLE- GM Today Staff February 27, 2003

These high gas prices don’t  seem close to dropping soon, according to many experts.

OZAUKEE COUNTY - After rush hour Monday evening, a middle-aged man glumly eyed the gas pump readout at the Speedway filling station on Washington Avenue in Cedarburg.

"Damn, I wish they’d figure out what they’re going to do and just do it," he said, topping off the tank of a salt-crusted SUV and zooming off.

With war on hold in the Mideast and the flow of crude oil from Venezuela interrupted by a strike, international instability and several other related factors have driven up prices.

With a gallon of regular gas going for between $1.75 and $1.80 a gallon in southern Ozaukee County, a nationwide trend in rising gas prices has touched off grumbling but none of the public backlash that followed price gouging incidents in the wake of 9-11.

Mike Khaled, owner of the Citgo Free Zone in Grafton, says kvetching about gas prices is nothing new to him.

"They complain the first two or three days after they go up," he says during a spare moment during Tuesday’s lunch hour rush. "They know it’s not our fault but they always complain."

Tom Moore, of the state Agriculture and Trade’s Bureau of Consumer Protection, said Monday that agency hasn’t received any complaints about gas bilking.

A consumer information employee, Moore notes the agency handles price gouging like any other consumer complaints, with an expert in the trade practices division investigating.

"But we haven’t hit the $2 mark yet, fortunately," says Moore, recalling a wave of protests in June 2000 when a gallon of regular throughout most of Wisconsin went slightly above the dreaded $2 ceiling.

Ozaukee County Highway Commissioner Robert Dreblow notes a gallon of discounted gas the county gets has jumped from 90 cents a gallon for regular and 86 cent a gallon for diesel last year to $1.45 a gallon for regular and $1.42 for diesel now.

(The county provides gas to all county agencies, the Shared Ride Taxi service, the city of Port Washington and several small villages and municipalities.)

"Yeah, fuel is expensive. It’s early in the budget year so it’s hard to say we’re getting killed by it but it certainly is something we need to keep an eye on," he adds.

So far Dreblow’s fleet of trucks has had a very mild winter — at least in terms of snowfall.

"It’s not like we’re consuming as much fuel as we would have other years," he notes.

Jim Mueller asserts that service station owners are not making windfall profits from the recent hike in gas prices. Division Sales Manager for Citgo, Mueller makes a convincing argument that station owners are not profiting from the surge in pump prices.

"The market dictates that I’m not able to move my price yet my wholesale goes up," he explains. "So my profits get squeezed. That seems to be the case most of the time but especially when prices are rising."

Mueller spoke from behind the counter at Mequon’s Port Road Citgo, where Tuesday morning a gallon of regular went for $1.74 a gallon with a gallon of diesel for $1.78 a gallon.

Erin Roth, executive director of the Wisconsin Petroleum Council, notes that Wisconsin has several things working against it, including high gasoline taxes and location at the caboose of the Midwest supply pipeline.

"No, we are not lining our pockets with profits," he says. "We are just passing along our additional costs of the raw product."

Roth attributes a more than 100 percent increase in the price of a barrel of crude in one year to several causes: the looming war, a harsh winter in the Northeast states requiring more heating oil and less domestic production of oil.

"But the biggest reason is the unrest in Venezuela. We import over 7 percent of our crude oil from there," he says, noting that the United States imports most of its crude from Canada and Mexico. (Venezuela is third, followed by Saudi Arabia.)

Will oil prices come down this spring?

Probably not, seems to be the short — and most credible — answer.

George Gaspar, managing director of petroleum research at Robert W. Baird & Co. Inc., notes that while prices have gone down slightly in the last week, it’s too early to make predictions.

"Tell me when there’s a war," he says. "Oil is heady in price. The longer we stay away from the war the more opportunity there is going to be for production to build up in the world and start to resupply the huge decline that came about from the 140 million barrels that was not produced by Venezuela during its strike."

Gaspar explains that OPEC is producing "at will" to make up the shortage. He notes that with crude at $37 a barrel on the open market, it’s unlikely that prices will steadily fall anytime soon.

Should war come and the United States and its allies wage a relatively brief, successful war, the outcome might eventually help bring prices down at corner filling stations.

Gaspar thinks seizing Iraqi facilities intact would mean a barrel of crude may come down as much as $5. He says that the Bush administration may release some national strategic oil reserves to take the shock off of the recent increases in gas and heating oil prices.

"If you can protect the refineries and get control of them without super serious damage being imposed on them, that all works into the price of oil," Gaspar notes.

What if the regime of Saddam Hussein puts a match to those refineries?

Gaspar concedes that’s possible, but quickly notes that that scenario was not discussed in that part of the Mideast until recently.

"I think that idea was planted in his mind by the news media," he adds. "Now we may have to live with the consequences of that."

www.heraldtribune.com By KATHY BARKS HOFFMAN Associated Press Writer

Gov. Jennifer Granholm on Thursday ordered state officials to begin regular surveys of gasoline prices around the state in an effort to stop gouging. Under the executive order, the state will give consumers pricing information, and any possibly unfair prices will be reported to the attorney general. Granholm, who became governor last month, said she wanted to prevent a recurrence of apparent gouging prompted by fears about national security after Sept. 11, 2001. "The anxiety felt by consumers in those difficult days has begun to reappear in recent weeks as gas prices have increased dramatically," she said in a statement. AAA Michigan said Monday that the state's average price for self-serve regular gasoline last week was $1.70 a gallon, 56 cents higher than a year ago. The governor acknowledged that prices have been volatile in part because of uncertainty over war in Iraq and a slowdown in oil imports from Venezuela but said they still bear watching. Granholm urged passage of bills by two Democrats that would expressly ban price gouging during states of emergency declared by the governor. The law now contains no specific ban on gasoline price gouging. While attorney general, Granholm took action against 48 service stations that had raised prices sharply in the days after the Sept. 11 terrorism. The stations were required to refund more than $100,000 in overcharges to consumers and to pay about $30,000 in civil penalties to the state, Granholm said.