- The Washington Times - Friday, January 28, 2000

Gasoline prices at area pumps jumped by 31 cents in 1999, reaching a record $1.31 for January, and there's no end in sight.

The average cost of a gallon of self-serve, regular unleaded gas a year ago was $1, according to American Automobile Association's survey of local gas stations released yesterday. Many gas stations are well above the average, while prices around the region for high-test gasoline have reached $1.60 at some stations.

"This is getting to be a real problem," said Lon Anderson, spokesman for AAA Mid-Atlantic, which released the gas price report. "When you are staring at close to $1.50 for a gallon of gas, that can begin to add up to real financial hardships for consumers."

The rise in gasoline prices is being felt throughout the economy, cutting into personal incomes as well as hurting the bottom line for all businesses that depend on oil for production.

If fuel prices continue their upward trajectory, some analysts believe widespread inflation could result, putting the brakes on the nation's record period of economic expansion.

"Consumers are now putting dollars in their gas tanks that they could spend last year on food and clothing," Mr. Anderson said.

Businesses also are feeling the pinch of higher fuel costs, and some are passing those costs through, posing another financial burden to consumers.

Major airlines, citing the steady rise in jet fuel costs, last week announced they would add a $10 per one-way trip surcharge to airline tickets.

What is more, with colder weather now blanketing much of the United States, prices for home heating oil also have jumped.

Energy analysts said the steady rise in oil prices is a result of cutbacks last year in crude oil production by the members of the Organization of Petroleum Exporting Countries (OPEC), which control 43 percent of the world's oil market.

After years of internal squabbling over depressed oil prices throughout the 1990s, OPEC last spring began cutting production by 2 million barrels a day.

By April last year, crude oil prices rose above $17 a barrel for the first time in a year. Last week, crude oil prices approached $30 per barrel before settling back to $27.19 per barrel Thursday.

"The oil ministers from OPEC have signaled their intent to continue restricting world oil supplies well into 2000," Mr. Anderson said.

That means motorists could soon be paying the highest prices ever for gasoline, he noted.

The Energy Department announced Wednesday that it would delay deliveries to the nation's emergency oil reserves, hoping to ease surging fuel prices. Meanwhile, Energy Secretary Bill Richardson planned to meet with the ministers of oil exporting countries to discuss prices, which have approached a nine-year high.

One analyst warned consumers not to get too concerned about inflation, despite the steady rise in fuel costs.

"The world economies have almost doubled in real terms since the late 1970s, while oil prices in constant dollars actually have declined," said Gary N. Ross, chief executive officer of PIRA Energy Groups, an international energy consultancy in New York.

He said oil costs represented almost 9 percent of the nation's gross domestic product (GDP) in 1980. But now oil costs account for just 1.2 percent of GDP.

"These oil price increases will have a modest impact, but their net impact on the economy are nothing like they were in previous oil shocks," Mr. Ross said.

Mr. Ross said he believes that OPEC countries will likely ease production restrictions sometime in April, a move that could temper rising fuel costs in time for the summer vacation season.

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