OPEC Boost May Not Help Gas Prices
Monday, 6 March 2000
W A S H I N G T O N (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.
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.
Oil prices, meanwhile, moved Monday to another nine-year high.
Benchmark West Texas Intermediate crude for April delivery settled at
$32.18. That was the highest closing price on the New York Mercantile
Exchange since Nov. 29, 1990, when thousands of U.S. troops were in
the Middle East, preparing for the Gulf War.
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.
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On the Net, the panel's full report: eia.doe.gov |
