"Gas Prices To Go Higher"
"Drivers Could Pay as Much as $1.80 a Gallon This Summer, Feds Say"
March 06, 2000: 7:10 p.m. ET
WASHINGTON (AP) - Already at nearly $1.50 a gallon or more, gasoline prices are likely to jump another 20 cents by the end of May and soar even higher as the summer driving season takes hold, the government said Monday.
The oil exporting countries may boost production soon to ease the acute shortage that has seen crude prices climb to nearly $32 a barrel, but the additional oil, even if pumped immediately, "would undoubtedly be too late" to keep gasoline prices from rising, according to a report released by the Energy Department.
No matter what production decisions are made, "retail gasoline prices are poised to surge to unprecedented levels before the spring is out," said the report. It said U.S. gasoline stocks were "alarmingly low" and that the country was "moving into uncharted territory" as far as gasoline markets are concerned.
North Dakota officials said the higher prices are helping the state's revenue picture.
Rod Backman, director of the state Office of Management and Budget, said oil tax collections are running about $5 million ahead of forecasts, and the higher oil prices are rekindling interest in drilling in North Dakota.
"If the prices stay where they are now or even come down a little, we'll probably see about $20 million over forecast by the end of the biennium," Backman said.
"It's good for state revenue, but I don't know how good it is when you're pulling up to the gas pump."
Mike Armstrong, an oil and gas producer in Dickinson, said he is pleased with the high oil prices.
"I don't complain too much about gasoline prices," he said. "I'm absolutely convinced that in an oil-producing state like North Dakota, the high price of oil helps us more than the high price of gas hurts us."
Despite the high prices, motorists are giving little sign that they are changing travel plans or rethinking their zeal for gas-guzzling cars and sport utility vehicles.
"We don't think it's going to cause people to stop taking long-distance driving vacations," said Geoff Sundstrom, spokesman for the American Automobile Association. "The economy is strong and people have the money to go on vacation."
But that may change if gasoline hits the psychological $2 barrier or if supplies become tight, leading to lines at filling stations, he said.
In Albany, N.Y., Steven Hank, a computer specialist who commutes 70 miles a day, said he's worried gasoline night hit $2. Already he's spending $250 a month on gasoline, he said, and "I don't want to pay that much."
But Devin Dangles, who drove from New Jersey to Washington, D.C., on Monday, said "people should just quit complaining" about the higher cost of travel. "You don't have a choice, anyway," he said.
In its analysis, the Energy Department said that average gasoline prices, currently at about $1.46 a gallon, would increase as much as 20 cents by the beginning of summer and go to $1.80 a gallon during the peak summer driving periods.
The analysis cautioned that those are national averages and that prices could spike much higher in some parts of the country, including California, which historically has had higher prices, making $2-a-gallon regular gasoline a probability in some areas.
Members of the Organization of Petroleum Exporting Countries will meet March 27 to decide whether to pump more oil. They cut production by 4.3 million barrels a day early last year in response to a world oil glut that saw prices drop to below $11 a barrel. A barrel is 42 gallons.
Saudi Arabia, Venezuela and Mexico have already said they will recommend some production increases and another major producer, Kuwait, has signaled a willingness to go along. But they have given no indication how much of an increase.
The government analysis examined several scenarios of increased production and what impact they would have on oil prices.
A 1.7 million barrel-a-day increase in petroleum production, if put into place immediately, could drive down prices from nearly $32 a barrel to $25.50 a barrel by August and to $23 by the end of the year.
If production is increased by 2.5 million barrels a day, prices could dip to $23 a barrel by July and to $17 a barrel by year's end. But if production increases were delayed until fall, the analysis predicts crude prices would increase to $35 a barrel by summer.
None of those scenarios would have an impact on gasoline prices through the summer, when demand historically is high, partly because of the low inventories in both crude oil and gasoline, the analysis said.
There is no certainty all the countries will even agree to boost production. Iran and Iraq, which together account for 8 percent of the world's oil production, have argued against increases.
The Energy Department analysis assumes Iraq will continue to supply about 2.3 million barrels a day, and more later in the year. But Iraq has threatened to slow its production as a way to get the United Nations to ease its economic sanctions.
Copyright 2000 Associated Press All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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