www.usatoday.com Posted 2/20/2003 12:23 PM     Updated 2/20/2003 9:15 PM By James R. Healey, USA TODAY

The USA had more crude oil on hand last week than the week before, the government reported Thursday, an unexpected development that clubbed oil prices down from what had begun to seem like unassailable heights.

West Texas Intermediate (WTI) crude for March delivery slid 37 cents from a 29-month high to $36.79 at the end of trading Thursday in New York. That was the first decline in seven sessions.

March oil contracts expired Thursday. April crude closed at $34.74, down 92 cents.

The record closing price for WTI futures is $40.42 on Oct. 10, 1990, equivalent to $55.64 today because of inflation.

In London, benchmark Brent crude fell 77 cents to $31.56.

Behind the hubbub:

The Energy Information Administration said 272.9 million barrels of crude were available in the USA, not counting the 599.3 million locked in the Strategic Petroleum Reserve. That was a slight improvement from 269.8 million the previous week, which was lowest since 1975.

The gain, from rising imports, was 3.1 million barrels, leaving inventories close to the 270 million barrels considered necessary to prevent refinery interruptions.

"It does indicate a tight market," said Rayola Dougher at the American Petroleum Institute, an oil industry trade organization.

API's weekly report, which coincides with EIA's, uses different methods and showed crude-oil inventories down to 268.3 million barrels from 271.6 million a week earlier. The differences with EIA are insignificant, she said.

Dougher said the 270 million was calculated in the 1980s and probably is less important now. "That 270 figure is not a magic number. Since then, the industry's much better at inventory control and computerization. We don't know how low it could go" without interruption nowadays.

Regardless, the inventories are about 50 million barrels lower than a year ago, EIA said, cautioning that the situation is acute in the Midwest, where oil inventories are "the lowest ever."

Average pump price for regular is $1.665, up from $1.661 overnight, motorists club AAA reported Thursday. Diesel is $1.751, off its record high of $1.755 Tuesday.

Concern that the EIA report was a blip instead of the start of a trend toward higher inventories prompted price rebounds overnight in foreign markets, the Oil Price Information Service reported.

www.sacbee.com Sacramento Bee/Bryan Patrick

The specter of war and other factors send gas prices soaring

By Dale Kasler and Cathleen Ferraro -- Bee Staff Writers Published 2:15 a.m. PST Thursday, February 20, 2003 Pamela Davis was filling her Mercedes with premium gasoline at a Shell station in Gold River on Wednesday when she glanced at the price -- $2.11 a gallon -- and stopped pumping.

"I looked at the sign and was taken aback," she said. "I stopped at halfway."

Gas prices are approaching extraordinary levels in Sacramento, fueled by the peculiarities of California's gasoline market and either pre-war profiteering or pre-war jitters, depending on whose assessment you buy.

The average price of regular in Sacramento hit $1.90 a gallon Wednesday, according to AAA of Northern California, a 19-cent jump in a month's time. And a spot check around town found prices as high as $1.99 for regular -- and well over $2 for the higher grades of fuel.

Californians are feeling more pain at the pump than are other Americans, who are paying $1.66 for a gallon of regular, up 19 cents in the last month.

Analysts said the buildup to a possible invasion of Iraq was the main culprit, but lingering effects of Venezuela's oil strike and conversion by California refiners to ethanol-additive fuels also have a role.

Another issue: Inventories of U.S. crude are at their lowest levels since 1975, the U.S. Department of Energy reported last week.

As a result, analysts believe prices will continue rising unless war is averted.

"It'll probably go higher before it'll go lower," said Chris Mennis, an independent oil and gas trader based in Santa Cruz.

Mennis and others said the largest factor in the run-up of pump prices is the rising worldwide price of crude. It topped $37 a barrel Wednesday, the highest in 29 months and near levels reached in fall 1990, on the eve of the Persian Gulf War.

Every $1 increase in oil barrel prices translates into 2.5 cents more per gallon at the pump. The price of oil has risen about $12 a barrel in the past few months, meaning 30 cents a gallon retail. A consumer advocate doesn't buy the analysts' explanations, saying oil companies are using the potential of war to generate a windfall for themselves.

The current price "is not based on the actual supply available today," said Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights in Santa Monica. "This is basically wartime profiteering by oil companies."

But oil industry sources and independent analysts said the jump in prices appears to be legitimate. The likelihood of war -- and the prospect of tightened supplies, especially if the conflict spreads to other Middle East nations -- has prompted traders to snap up supplies, and higher prices are the result.

War "is being priced into the current price of oil," said Severin Borenstein, director of the University of California Energy Institute.

"Expectations have always played a role in where prices are," added an industry source who asked not to be named.

California prices have risen even more, in part because of its strict clean-air regulations. The state is an island unto itself when it comes to gasoline because the gasoline it consumes must conform to pollution controls not found elsewhere.

Those requirements lead to higher prices than in other states and a more delicate supply-demand balance, making California prices more volatile.

This year things are a little worse. The rise in crude oil prices comes as several California refineries have temporarily shut down, either for regular late-winter maintenance or to convert their systems from the additive MTBE to ethanol, said analyst Gordon Schremp of the California Energy Commission.

Gasoline production at California's refineries is about 6 percent below a year ago, according to commission statistics.

Although the conversion to ethanol hasn't produced the huge price spikes some analysts predicted, it is keeping upward pressure on prices. So will the beginning of spring, when demand grows and prices normally go up, Schremp said.

The average price in California Wednesday was $1.89 for regular, up 21 cents from last month. California's prices are 23 cents higher than the U.S. average, according to AAA.

The highest prices in California were in San Francisco, where they averaged $2.04 a gallon. The average price in Los Angeles, meanwhile, was $1.86.

California produces nearly half of its own oil -- there's more in the Bakersfield area alone than in all of Oklahoma -- but the state still is subject to the world price.

"It doesn't matter that it's California oil," Borenstein said. "There's a world market."

Borenstein and others said a quick and relatively painless military victory over Iraq could deflate prices, just as it did after the 1991 war. Also working to keep prices from shooting out of sight: Saudi Arabia and other oil producers have promised to increase production to compensate for any wartime shortages.

About the Writer

The Bee's Dale Kasler can be reached at (916) 321-1066 or dkasler@sacbee.com.

www.tennessean.com Thursday, 02/20/03    |    Middle Tennessee News & Information

It's the new game in Every Town, USA, and every automobile driver seems to be playing it these days. It's called find the cheapest gasoline station.

''There's one with $1.53 cents a gallon,'' my wife said over the weekend as we were driving down the highway in our SUV.

That beat the price at the station we had just passed selling regular unleaded gasoline for $1.57 cents a gallon.

''We're paying the highest gas prices ever recorded for the month of February,'' Mantill Williams, director of public affairs for the American Automobile Association, told me over the telephone recently from his Washington office.

And, Williams added, ''It doesn't look like we're going to have any relief any time soon. Over the past two weeks, we've seen a 10-cent jump in gasoline prices.''

Makes you want to shout, doesn't it?

Nationally, AAA reported yesterday that the current average cost for regular unleaded gasoline was $1.66. For mid-level grade it was $1.76, and for premium the cost was $1.82.

A month ago, the average cost nationwide for regular unleaded was $1.46. For mid-grade it was $1.55 and premium ran $1.61. A year ago, we were much better off, paying an average of $1.12 nationwide for regular unleaded, $1.19 for mid-level and $1.23 for premium.

''There are a number of things people can do to control how much they spend on gasoline,'' the AAA representative told me. ''One is that they can shop aggressively. Two, they should properly maintain their vehicle. If tires on an automobile are properly inflated, that can reduce fuel consumption by 25%.''

The third thing, Williams said, is to cut down on the driving: Look for ways to combine errands and trips, look for good mass-transit opportunities and car pool whenever possible. He said it's also OK to use regular unleaded gasoline in automobiles that will take that type because ''there's no difference in the performance level of regular and mid-grade gasoline.''

''If a person has two automobiles, they should use the car that gets better fuel efficiency,'' he said. ''I think people are noticing where they can get better deals, but many people are having to pay those high prices because they don't have any other alternative for transportation.''

Williams said it is AAA's hope that gasoline retailers and wholesalers will take some constraint when pricing their product.

''We haven't seen any evidence of gouging,'' he said. ''We think it's more market speculation and fear of possibly going to war with Iraq. We say that because the price of crude oil over the last four to six weeks doesn't accurately reflect the retail gas prices we're paying right now.

''We think the market is anticipating war. Sure, we've had some bad weather recently, and there's the strikes in Venezuela that have reduced oil imports a little, but those two things don't justify the high gas prices we're paying.''

These high prices are also getting the attention of some service station operators.

''I haven't seen them this high before,'' said Mike Brasher, the owner and operator of Mike Brasher's 100 Oaks AMOCO here in Nashville. ''But I haven't seen any evidence of people slowing down either, just complaining about the high prices. I guess that's the American way of life.''

As he stood in his station about an hour before closing a couple of nights ago, Brasher said the high number of young people who drive automobiles in America also contributes to the high price of gasoline.

''When you go overseas, you don't see as many youngsters driving as you do in America,'' he said.

''All the kids have cars over here, and they're better than the automobiles their parents are driving. Just go look in some high school parking lot. We're just a little bit indulged and spoiled.''

He added: ''When people gas up, they're the only one in the car. You don't see a lot of car pooling, at least not in the 100 Oaks area here.''

At Brasher's AMOCO station Tuesday night, the price for regular unleaded gas was $1.69 a gallon. For mid-level it was $1.79 and $1.89 for premium.

And, as we continued talking, Brasher pointed to a small cartoon pasted up on a wall in the station.

''Regular is an arm and premium is the leg,'' the cartoon read. There was also a Reader's Digest piece that talked about the tax dollars that come out of a gallon of gasoline.

''I think we all share some responsibility for the high cost of gasoline,'' Brasher said, adding that he was making more money when regular unleaded gasoline cost as low as 49 cents a gallon.

''We need to do more to develop our own supply of oil. We also need to develop better transportation systems, and we need to do more car pooling.

''But I think gas prices are going to have to get up to $2 a gallon before it causes a mental shock to people.''

Believe it or not, drivers in San Francisco are already paying $2 a gallon for regular unleaded gas.

I don't think putting $5 worth in my SUV there would make a dent in my fuel tank. That's why it's time that we seriously look at ways to cut back on gasoline consumption. If not, there is no telling what type of games we'll be playing next when it comes to the price of gasoline.

Dwight Lewis is a columnist, regional editor and member of the editorial board for The Tennessean. E-mail: dlewis@tennessean.com.

www.ctnow.com February 20, 2003 By MICHAEL DOBBS, Washington Post Enough oil is stored in the deep, cone-shaped salt caverns along the Gulf of Mexico - most of them large enough to accommodate the towers of the World Trade Center - to replace a year of imports from Saudi Arabia. Originally conceived as a response to the oil crises of the 1970s, the Strategic Petroleum Reserve has become as much a part of the United States' strategic arsenal as the aircraft carriers, airborne divisions and spy planes converging on the Persian Gulf region. According to the Department of Energy, the 599-million barrel reserve constitutes the nation's "first line of defense" against disruptions in energy supplies. As President Bush prepares for war with Iraq, he has been pressured to use the reserve to calm an increasingly jittery market. In addition to the uncertainty caused by the Iraqi crisis, a general strike in Venezuela has helped push oil prices to new highs and slashed inventories in many parts of the world to critically low levels. Members of Congress from the Northeast - including Sen. Christopher Dodd of Connecticut - have urged Bush to release some of the reserves to ease heating oil prices, which have soared to an average $1.77 a gallon in Connecticut. If the past is a guide, and Bush follows the precedent set by his father in the Persian Gulf War in 1991, he probably will resist the temptation to tap the underground storage sites in Texas and Louisiana until the onset of any hostilities. If the attack on Iraq begins, he will order the release of some of the oil in the reserve, a move designed to signal the United States' ability to ride out any temporary panic over the oil market. If the war goes badly, and Iraqi President Saddam Hussein succeeds in torching Iraqi oil fields or hitting oil facilities in Kuwait or Saudi Arabia, the reserves would assume huge strategic importance. The 50 or so caverns in Louisiana and Texas contain enough oil to replace 53 days of lost imports. In practice, officials say, supplies should last considerably longer, as the United States buys much of its oil from such countries as Canada and Mexico, which would probably not be interrupted by a crisis in the Middle East. The Strategic Petroleum Reserve is "a powerful instrument," said John Shages, one of the Energy Department officials responsible for managing the network of storage sites, pipelines and loading facilities strung out along the Gulf of Mexico coast. "It gives the president a tremendous tool to use in the event of a severe disruption to the market, from an act of God to a political-military event." Because of the tightness of the international oil market, said Edward Porter, an economist at the American Petroleum Institute, the Strategic Petroleum Reserve could play "a much more central role" in a new Gulf war than it did in 1991. A decade ago, there was plenty of excess capacity in the oil market. After the war began in January 1991, prices dropped from more than $30 a barrel to about $20. Today, by contrast, it would be much more difficult to offset a likely loss of Middle Eastern oil, if the region became embroiled in war. Iraq alone sells 2 ½ million barrels a day to foreign countries, including the United States, through smuggling and "oil for food" arrangements approved by the United Nations. Although Venezuelan oil is slowly coming back on stream, as a general strike against populist President Hugo Chavez winds down, exports are no more than half those of pre-strike levels. According to oil analysts, the only country in the world that can significantly increase production levels practically overnight is Saudi Arabia, which has about 1 million barrels a day of excess capacity. In recent weeks, the Saudi government has boosted production to offset losses from Venezuela. But the Bush administration does not want to be held hostage to a potentially unstable Arab country rife with anti-Americanism that has previously used oil as a weapon against the United States. "We shouldn't allow U.S. national security to be dependent on decisions in Riyadh, when the president has the ability to take those decisions," said Edward L. Morse, who was responsible for international energy policy at the State Department during the Reagan administration. "The Strategic Petroleum Reserve allows the U.S. government to put much more oil onto the market (in the short term) than we can get from the Saudis." How much oil should be released from the reserve, and under what circumstances, is the subject of great debate among energy specialists. President George H.W. Bush was criticized for not acting after the Iraqi invasion of Kuwait in August 1990, when oil prices rose as high as $40 a barrel. He finally ordered a limited drawdown of 33.75 million barrels on Jan. 16, 1991, the same day he announced that U.S. warplanes had begun attacking Baghdad. By the time the oil reached the market, prices had fallen sharply, and the crisis was largely over. Last week, as the price of light sweet crude on the New York Mercantile Exchange rose to more than $36 - a 26-month high - calls for the release of oil from the reserves came from airlines hit by soaring fuel costs, refineries suffering from a lack of Venezuelan oil and senators worried about the rising price of both heating oil and gasoline for their constituents. Oil industry executives oppose the release of oil from the reserve, except in a national emergency. The Bush administration is keeping its options open. Energy Secretary Spencer Abraham said last week that the reserve should be used only in the event of severe supply disruptions, and not to bring down prices.

www.wistv.com

(Columbia) Feb. 19, 2003 - When you own a Hummer, you can expect to spend a lot of time and money at the gas station. The Hummer belongs to his brother so Jack Freeman doesn't always have to pay to fill it up, "Fill it up two times and it'd be roughly about a hundred dollars."

Even drivers of efficient vehicles are forking over much more for fuel and many don't know why from, "I guess it's supply and demand with the situation in Iraq, I guess," to, "I think it's a possibility we're just being asked to pay more, because it's a cause and we don't really know what's going on."

Why are gas prices going up so fast? The marketing arm for most of the state's service stations says it's not so much about Iraq, but about the cost of crude oil. A higher price per barrel, a short domestic supply [the shortest in 30 years], a harsh winter weather which has caused a run on heating oil, and disruptions in supplies from countries like Venezuela.

Prices at your favorite station might be shooting up every few days because retailers are seeing dramatic increases in their costs. Sims Floyd with the Petroleum Marketers Association says every time the tanker trucks stop in to refill the station's gas supply, "Typically in metro location you've got 16 to 20 thousand gallons underground. And in an urban setting you can turn that entire product in two to three days."

The marketers say dealer profits are razor thin. Seventy-eight cents goes for the cost of crude out of the amount you now pay for a gallon of gas in South Carolina. Thirty-five cents to to federal and state taxes. Thirty-nine cents for refining, distribution and marketing, which leaves about three cents profit for the dealer.

The petroleum marketers say some gas station owners make more money selling a cup of coffee than they do on a tank of gas. That's one reason they want customers to come into the store.   South Carolina's average gas price is a $1.55, the fourth lowest average in the nation. One reason is because the Palmetto State has lots of gas stations, several pipelines and terminals close by.