www.zwire.com By: AMY REININK, Staff Writer February 23, 2003

Burton Wilson of Stoney Ridge looks for the lowest gas prices available when he has to fill up the two 15-gallon tanks that hold fuel for his 1992 Ford F150 pickup truck.

EASTON - Gas prices have spiked nearly 10 cents per gallon in the Washington, D.C., region in the past week, frustrating Eastern Shore drivers and forcing trucking companies to seriously watch their wallets to compensate. Maryland prices were up to an average of $1.62 per gallon for self-serve regular this week, up from $1.49 a month ago and $1.12 a year ago, according to the latest American Automobile Association survey. Local gas stations did not seem busier than normal, but those waiting to fuel up were annoyed nonetheless.

"It's outrageous," said Chris Lanning, 29, of Easton, after paying his tab. "I'm just dealing with it day by day."

Some, like Barry Curry, 43, of Salisbury, shopped for the lowest prices before pulling in. Curry decided on Elliott's Exxon on U.S. Route 50, where regular fuel cost $1.69 per gallon.

But most said they felt helpless to do anything but watch the numbers on the roadside stands multiply.

"It looks like it's going to go up, much to my dismay," said Bill Parker, 66, of Easton. "There's nothing you can really do - if you're going to travel, you're going to need gas."

Many local motorists also said they expected a more severe increase if the country goes to war with Iraq.

Personal drivers weren't the only ones stupefied by the spike. Local trucking companies said the high prices could seriously hurt business and cause them to raise their own prices to compensate.

"Diesel fuel has gone out of whack," said Gary Fox, president of Fox Trucking in Easton. "We've really got to pinch pennies now, because it's hard to get our freight rates up to match our fuel costs. It's pretty tough right now."

The industry has blamed tensions in the Middle East and a strike in Venezuela that has crippled that nation's petroleum industry. Venezuela is one of the largest exporters of crude oil to the United States.

AAA spokespeople this week said the increase is unwarranted and oil companies may be looking ahead to what could happen to crude oil prices if the United States invades Iraq.

"It's terrible, I resent it and it's a personal affront," said Bart Pelstring, a self-described "adult citizen" of Easton who was fueling at the Super Soda Center on Dover Street, where regular gas cost $1.59 per gallon. "Really? This is just goofy."

www.meridianstar.com By William F. West / community editor Feb. 23, 2003

VIEW FROM THE TANK — Patrick Kelly, an employee at BP Express Lane on 22nd Avenue in Meridian, has watched gas prices soar to an all time high for the month of February.

Gasoline prices are all pumped up in Meridian, leaving motorists dismayed or outraged after refilling their tanks.

Locally, the complaints have been frequent long before prices for self-service unleaded regular passed the $1.60 per-gallon mark.

A check of prices in Meridian showed Super Wal-Mart offering the lowest price for self-service unleaded regular at $1.599, but most stations in the city have postings of $1.649.

On Saturday in Hattiesburg, unleaded regular gas was selling at $1.519, about 13 cents lower than Meridian.

Some motorists said they don’t understand why prices in Meridian are higher than cities or towns elsewhere — particularly with the presence of pipelines and massive fuel depots off Interstate 20/59 on the west side of the city.

Local distributors, contacted for a response, preferred to remain silent.

“I believe we’ll pass,” Billy Blaine, manager of Dixie Oil Co., 2918 Fifth St., said when asked for comment last week.

Representatives of two other major local distributors, Maples Gas Co. Inc., and Burns and Burns Inc., also declined to comment.

Expert opinions

Experts monitoring gasoline prices say they can’t speak for Meridian specifically.

But they said high fuel prices nationally result from U.S. dependence on foreign oil, mainly from strife-torn Venezuela, a harsh winter in the north that depleted fuel supplies and worries about a U.S. war against Iraq.

Stacey Wall , an economist, is president of Pinnacle Trust, a Jackson-based wealth management firm. He said he’s concerned about high gas prices being a drag on a national economy that has been struggling since before 9/11.

Wall said the U.S. either needs to defeat Iraq in a quick war or reach a peaceful resolution.

“As long as there’s uncertainty in the air, I think prices are going to continue to stay high,” he said.

Wall said he hopes prices will decline, but he’s also skeptical about the gasoline giants’ marketing philosophy.

“Historically, gasoline companies tend to be real quick to raise gas prices,” Wall said. “And then when oil prices eventually recede, they’re a little bit slower about bringing them back down if they can get away with it.”

“As long as nobody can prove any kind of collusion or anything, they can pretty much do it,” he said.

Wilkerson’s comments

Jerry Wilkerson, executive director of the Mississippi Petroleum Marketers Association, quickly noted that collusion to artificially inflate gasoline prices is a federal offense.

But Wilkerson said he has gotten an earful of complaints about prices from state legislators while lobbying at the Capitol. He quipped that even his minister asked him about the high prices after church last Sunday.

Wilkerson, a Madison resident and a Meridian native, frequently drives here to see his relatives. He said he’s eyed the gas prices here but doesn’t see differences between what’s posted in Meridian or elsewhere.

“Sometimes it’s cheaper over there and sometimes it’s cheaper in Jackson,” he added.

Wilkerson said he did receive complaints in the late 1990s about high prices in Indianola and Greenwood. In 1997, the former Jitney Jungle supermarket chain opened a Pump and Save in Greenwood and engaged in price war that culminated with self-service regular unleaded dropping to 78.9 cents a gallon.

Wilkerson represents about 300 wholesale distributors and convenience store chains in the state.

“Of course this is always a bad time for us when prices are going up like this,” he said. “Quite honestly, I hear this all the time, people saying, ‘Well, you all are making a killing off of this.’”

“And it’s the reverse,” he said. “Our folks lose money when the prices are going up.”

Wilkerson was referring to longstanding arguments that there are wholesalers and retailers who try to hold off increasing prices at the pumps as long as possible before passing costs on to the customers.

Other viewpoints

Kent Young, manager of public affairs for Citgo Petroleum Corp. said the corporation has received some feedback about high prices.

“But so far it’s been fairly light,” he said.

Citgo, based in Tulsa, Okla., supplies more than 13,500 stations and has long had a presence in the Deep South.

The corporation has a huge fuel depot at 180 65th Ave., but Young said it doesn’t set fuel prices at the retail level. He said that’s the responsibility of the marketer or the dealer.

Young, asked whether he believes prices will decline or stabilize, replied with a laugh: “If I had the answer to that, I wouldn’t be where I am right now.”

Joe Sims is president of the US Oil and Gas Association in Jackson, formerly known as Mid-Continent Oil and Gas. The association represents the production end of the fuel business.

Sims said a problem that could be on the horizon isn’t in oil but in natural gas.

Sims recalled the natural gas crisis in the severe winter of early 2001, when masses of poor people found themselves unable to pay astronomical heating bills resulting from price increases.

Sims said he believes the problem is that the U.S. hasn’t had a robust program for natural gas exploration.

“The country just sort of needs to take a deep breath and really get serious about an energy policy,” he said.

www.democratandchronicle.com THE ASSOCIATED PRESS

(February 23, 2003) — ALBANY — From Albany to Buffalo, motorists are feeling the unwelcome pinch in their wallets as gasoline prices at the pumps continue their spike of recent weeks. Motorists’ losses could be New York’s gain. The state could receive a surge in revenue if the cost of gas and diesel fuel maintains this trend, because the state charges 4 percent sales tax on gas sales, or 8 cents a gallon if the average price of motor fuel reaches $2 a gallon. On a 10-gallon fill-up, that could be a tidy 80 cents for the state. Analysts blame the price boost on tensions in the Middle East and a strike in Venezuela that has crippled that nation’s petroleum industry. This turmoil is potentially good news for New York state, which is struggling to plug an $11.5 billion hole in its budget over the next 13 months. Even without the price surge for most of this fiscal year, the state expects to raise more than $500 million from its motor fuel tax. But while prices at the gas pump might inject much-needed revenue into state coffers, the harsh winter New York is suffering through is increasing the cost to the state of heating its buildings. So far this winter, the state has spent $3.82 million to heat the state Capitol and the sprawling Empire State Plaza complex in Albany where 16,000 state employees report to work. That’s an increase of more than 50 percent compared with the same period last year, when the state spent $2.13 million. “Because of the colder temperatures and the longer winter that we’re experiencing, our costs this winter are higher because of the increased demand for fuel,” said Jennifer Meicht of the Office of General Services. The state heats its buildings with a combination of oil and natural gas, depending on price and supply and demand. Last winter, the state used only gas, which is environmentally cleaner and cheaper, to heat buildings. This month, the state paid $1.12 a gallon for heating oil, up from 89 cents in October 2002. Last week, the U.S. Energy Department, citing low stocks -- as well as higher natural gas prices -- said heating bills could be 50 percent higher this year than last winter. If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said. Across New York, gas prices have reached new highs. In the Albany area, the average price for a gallon of regular unleaded gas Saturday was $1.70, up from $1.16 a year ago, according to the American Automobile Association. In Buffalo, it was $1.74 a gallon, up from $1.17. In New York City, it was $1.81, up from $1.29. In Rochester, regular gas was $1.73 a gallon Thursday vs. $1.19 a year ago. The Pataki administration disputes that the state benefits from higher gas prices at the expense of motorists. Officials contend that drivers tend to purchase less gas as prices skyrocket, essentially offsetting a revenue surge when gas prices spike. Robert Sinclair Jr., a spokesman for the American Automobile Association of New York, disagreed. He said that, contrary to popular belief, people don’t buy less gas when prices are expensive but rather shop around. “In the United States, we are tied to our vehicles, so folks don’t have a choice.”

www.troyrecord.com By: Alicia Chang, The Associated Press February 23, 2003

ALBANY - From Albany to Buffalo, motorists are feeling the unwelcome pinch in their wallets as gasoline prices at the pumps continue their spike in recent weeks.

Motorists' loss could be New York's gain. The state could receive a surge in revenues if the cost of gas and diesel fuel maintains this trend because the state charges 4 percent sales tax on gas sales, or 8 cents a gallon if the average price of motor fuel reaches $2 a gallon. On a 10-gallon fill-up, that could be a tidy 80 cents for the state. Analysts blame the price hike on tensions in the Middle East and a strike in Venezuela that has crippled that nation's petroleum industry. This turmoil is potentially good news for New York state, which is struggling to plug an $11.5 billion hole in its budget over the next 13 months. Even without the price surge for most of this fiscal year, the state expects to raise more than $500 million from its motor fuel tax. But while prices at the gas pump might inject much-needed revenues into state coffers, the harsh winter New York is suffering through is increasing the cost to the state to heat its buildings. So far this winter, the state has spent $3.82 million alone to heat the state Capitol and the sprawling Empire State Plaza complex in Albany where 16,000 state employees report to work. That's an increase of more than 50 percent compared to the same period last year, when the state spent $2.13 million. "Because of the colder temperatures and the longer winter that we're experiencing, our costs this winter are higher because of the increased demand for fuel," said Jennifer Meicht of the Office of General Services. The state heats its buildings with a combination of oil and natural gas, depending on price and supply and demand. Last winter, the state used only gas, which is environmentally cleaner and cheaper, to heat buildings. This month, the state paid $1.12 a gallon for heating oil, up from 89 cents in October 2002. Last week, the U.S. Energy Department, citing low stocks - as well as higher natural gas prices - said heating bills could be 50 percent higher this year than last winter. If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said. Across New York, gas prices have reached record highs. In the Albany area, the average price for a gallon of regular, unleaded gas Saturday was $1.70, up from $1.16 a year ago, according to the American Automobile Association. In Buffalo, it was $1.74 a gallon, up from $1.17 a year ago. In New York City, it was $1.81 a gallon, up from $1.29 a year ago. The Pataki administration disputes that the state benefits from higher gas prices at the expense of motorists. Officials contend that drivers tend to purchase less gas as prices skyrocket, essentially offsetting a revenue surge when gas prices spike. Robert Sinclair Jr., a spokesman for the American Automobile Association of New York, disagreed. He said that contrary to popular belief, people don't buy less gas when prices are expensive but rather shop around or cut back on nonessential driving. "In the United States, we are tied to our vehicles so folks don't have a choice," Sinclair said. Under a special contract, the state, which maintains a fleet of 12,823 vehicles, currently pays 98 cents a gallon for gas compared with 66 cents a gallon a year ago, Meicht said. Of that fleet, 20 percent use alternative fuel such as electric and ethanol and are not subject to gas price fluctuations. It was not immediately clear how the soaring prices have affected the state's fleet, she said. During the last gas price hike in summer 2000, Republican Senate Majority Leader Joseph Bruno proposed to permanently repeal the motor fuel tax in order to give motorists a financial break while Democratic Assembly Speaker Sheldon Silver favored a two-month suspension of the gas tax. Neither proposal passed. Given the climate of the state's fiscal problems, it's unlikely any state leader will suggest giving back any surge it gets in gas tax revenues in 2003. Earlier this month, New York U.S. Sen. Charles Schumer asked the Federal Trade Commission to launch an investigation into the rising gas prices in order to determine whether there was evidence of price gouging.

www.boston.com By Colum Lynch, Washington Post, 2/23/2003

UNITED NATIONS -- American oil refineries have dramatically increased their reliance on Iraqi crude, even as the Bush administration steps up preparations for a military attack against Baghdad, to offset a shortfall in oil imports caused by a recent political crisis in Venezuela.

The United States has more than doubled its consumption of Iraqi crude over the past two months, buying more than $1.6 billion in Iraqi oil through foreign middlemen between Dec. 5 and Feb. 1, according to unpublished UN figures. The US Department of Energy, whose Iraqi import figures typically lag behind, by about 40 days, those of the United Nations, also recorded a sudden surge of Iraqi oil imports into the United States recently to more than 1 million barrels a day, according to US officials.

''We did have a large increase in Iraqi imports, but we don't know if that is sustained,'' said Doug MacIntyre, an international energy analyst at the Department of Energy who produces an unpublished weekly report on oil imports. MacIntyre declined to provide specific figures, citing concerns that the underlying data were too preliminary, but he said it was ''a doubling over the averages we have seen over the last several weeks.''

Iraqi exports to the US market, which includes the Caribbean, averaged nearly 500,000 barrels a day during the first 11 months of 2002. US firms purchased only 39 percent of Iraqi oil exports during the second half of last year. Between Dec. 5 and Feb. 1, US buyers consumed about 1.1 million barrels per day, accounting for 62 percent of Iraq's exports during that period, according to UN figures. The trend marks a significant reversal by US oil companies, which drastically cut their dependence on Iraqi oil last summer because of rising illicit Iraqi surcharges and concerns that the Bush administration was preparing for a war.

What are the occasions when war becomes necessary--despite the fact that violence is never a good in itself? We asked Boston.com users if war with Iraq meets the test of just war theory.

After Secretary of State Colin Powell's presentation of declassified material to the UN Security Council on February 5, has the case been made for the US to go to war? We asked Boston.com users for their thoughts.

Under the terms of the United Nations-supervised Iraqi oil-for-food deal, Iraq is permitted to sell oil to purchase food, medicines, fund the repair of the country's infrastructure, and finance UN weapons inspections. Under the humanitarian program, established in December 1996, the UN sets the prices of Iraqi exports and monitors Baghdad's spending.

Although Iraq rarely sells oil directly to American oil companies, Exxon Mobil Corp., ChevronTexaco Corp., Valero Energy Corp., and other US firms have purchased more than half of Iraq's oil through foreign middlemen since the oil-for-food program came into existence. Spokesmen for Exxon Mobil and Valero could not be reached for comment.

Some American oil giants, hit with rising surcharges and facing criticism that they may have indirectly paid illegal kickbacks to President Saddam Hussein, began scaling back their imports of Iraqi crude last summer. UN officials claimed that Iraq was imposing surcharges of 20 to 50 cents on each barrel last year, amounting to hundreds of millions of dollars in illicit profits for the Iraqi regime.

But oil analysts say that Iraq's decision to stop demanding a surcharge in September, and a sudden stoppage of Venezuelan exports following a national strike, has renewed American interest in the Iraqi oil market.

''The loss of Venezuelan oil complicated everybody's life,'' said Lawrence Goldstein, president of the New York-based Petroleum Industry Research Foundation. ''Iraqi oil is close to the Venezuelan-type oil, and it turned out to be the only large-volume alternative available'' over the past two months.

He suggested that American dependence on Iraqi oil is likely to diminish in the coming months as Venezuelan exports ''creep back'' up to normal levels and as the recent commitment by Saudi Arabia to increase production bears fruit.

Other analysts believe that Venezuela's oil exports will continue to be plagued by political uncertainty. They note that while Venezuela's oil strike has ended, the country is exporting only about half of the 3 million barrels it normally exports daily.

''I think that as the surcharge has faded, the concern that kept some people away from Iraqi oil has also faded,'' said George Beranek, the manager of market analysis at Washington, D.C.-based PFC Energy. ''It's a good large-volume source of oil. The risk of a decline [in potential Iraqi exports] was nothing compared with the fact of a loss of Venezuelan barrels. A bird in the hand is worth two in the bush.''

This story ran on page A25 of the Boston Globe on 2/23/2003.