- The Washington Times - Thursday, March 2, 2000

Energy Secretary Bill Richardson said yesterday he believes OPEC will decide later this month to boost oil production, but consumers won't notice any change in gas prices until at least the summer.

Motorists, who just months ago could easily find a gallon of gas for less than $1, increasingly are shopping around for the best price. And many wonder why pump prices vary by as much as 30 cents a gallon between stations.

Some industries, meanwhile, are starting to pass on rising fuel costs to their customers. Major airlines last month added a $10-per-trip surcharge to cover rising fuel prices. And delivery service Federal Express announced yesterday it will again boost rates by 1 percent, following a 3 percent increase in February, to cover fuel costs.

The Clinton administration concerned about the impact of surging oil prices on the economy has been urging the 11 members of the Organization of Petroleum Exporting Countries to bring down gas prices by increasing the world oil supply.

"Their upcoming discussions on production levels will not be arbitrary they will take into account the implications of current production levels on the world economy," Mr. Richardson said yesterday at a congressional hearing on U.S. policy toward OPEC.

Mr. Richardson, who recently returned from 10 days of meetings with OPEC ministers, said he expects that OPEC ministers will agree when they meet March 27 that "there should be substantial and timely increases in production."

But one energy analyst warns that consumers and businesses probably will not notice the change caused by an increase until at least the summer.

"Any amount of an increase in production will lead to a price change," said John Felmy, economist for the American Petroleum Institute. "But once these countries make a decision on supply it takes quite a while for consumers to feel the physical impact."

Ministers from Venezuela and Saudi Arabia, the world's largest oil producer, said OPEC would boost production if oil prices stayed above $30 a barrel. The price for a barrel of crude, which more than doubled in the past year, rose another 44 cents yesterday to $30.87, the highest price since Jan. 16, 1991.

But Iran, another OPEC member, was reportedly opposed to increasing production.

The national average price for a gallon of self-serve, regular, unleaded gasoline stood at $1.47 Friday, up 6 cents in two weeks, according to industry analyst Trilby Lundberg, who conducts regular surveys of 10,000 stations.

Gas prices locally also have climbed to $1.39 for self-serve, regular unleaded in mid-February, up 41 cents in 12 months, according to AAA-Potomac, which surveys local gas stations.

Many drivers like Pepsie Michel of Laurel, Md. are starting to wonder why gas prices have climbed so high, and why the cost for a gallon of gas varies so much. Around Washington, prices for self-serve, regular unleaded range from as low as $1.35 per gallon to $1.65.

A few months ago, Miss Michel could fill the tank of her 1995 Ford Explorer for about $15. Now it costs her more than $24, and she doesn't understand why.

But she has her suspicions.

"I think it's really a situation where these companies know people have to buy gas no matter how high it goes," said Miss Michel, a graduate medical student at the University of Maryland in Baltimore.

Industry analysts said the rising gas prices are caused by OPEC's agreement last spring to curtail production in an effort to boost crude oil prices, which had bottomed out at around $11 per barrel.

Gas station owners have little control over most of the costs embedded in the price of gasoline, said John Felmy, economist for the American Petroleum Institute.

Most of the cost, he said, is based on a number of factors:

* The price OPEC countries charge for the crude oil used to make the gasoline.

* Federal gas taxes.

* State taxes (23.5 cents per gallon in Maryland, 20 cents in the District and 17.5 cents in Virginia).

* The price gas-marketing companies charge to refine crude oil and transport gas to the stations.

The rest, about 7 percent on average, is determined by the gas station. The prices' disparities are based on what a station owner decides to charge for the service and convenience it provides, said Mantill Williams, spokesman for AAA-Potomac.

Some stations charge more because of their location, in downtown or close to a major highway, while others in outlying regions may charge less. But in areas with many stations, managers often compete by holding prices in check.

Zahid Ashraf, the manager at the Mobil gas station at 6799 Laurel-Bowie Road in Bowie, Md., said he adjusts his prices to compete with the Shell gas station down the street, but not by more than a few pennies.

"I have to see how much profit we're getting."

Currently he is charging $1.44 for a gallon of self-serve regular, the same price of his competitor, Dawn Walsh, the Shell's manager. Neither can charge much lower than that and still make a profit, they say.

Other stations charge less for gas and seek profit from other services like convenience-store food or tune-ups and repairs.

"We make the money from the inside, not the outside," said Osama Ghon, manager of the Exxon at 5806 Landover Road in Cheverly, Md., near Route 50. He is charging $1.45 per gallon of unleaded regular.

Mr. Ghon said his price is low enough to lure customers to the station, where they can spend money in his store.

For now, motorists appear to be willing to shoulder the higher gas prices, buoyed by other positive economic factors like low unemployment and steady wages.

Miss Michel said if gas prices climb above $2 many motorist will cut back on driving. But not her. She's got too much to do.

Other motorists seemed to agree.

"I may shop around once in a while," said William Balleste as he filled up his Mercedes at the Mobil station at the intersection of Bladensburg Road and New York Avenue in Northeast, D.C. "If it goes to $1.75 or $2, then I'll shop around."

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