- The Washington Times - Tuesday, March 7, 2000

Gasoline prices, already at nearly $1.50 a gallon, 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 yesterday.

Oil-exporting countries may boost production soon to ease the acute shortage that has seen crude prices climb above $32 a barrel, but the extra oil "would undoubtedly be too late" to keep gasoline prices from rising, according to a report by the U.S. Energy Information Administration.

OPEC will cautiously increase production by about one million barrels per day in April to test market reaction before setting new ceilings for the year, a senior official from a member of the Organization of Petroleum Exporting Countries told Agence France-Presse.

"The consensus is taking shape around a million barrels per day," said the official, who was informed of talks held Thursday in London between oil giants Saudi Arabia and Venezuela, both OPEC members, and Mexico.

But they will have to persuade hawks Iran, Algeria and Libya to accept production increases. Production cuts imposed one year ago expire March 31.

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 showing few signs 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 might 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 yesterday from New Jersey to the District of Columbia, 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 agency said that the average gasoline price, now at $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.

OPEC members 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.

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 $32 a barrel to $25.50 a barrel by August and to $23 by the end of the year.

West Texas Intermediate crude for April delivery rose to as much as $32.20 a barrel on the New York Mercantile Exchange yesterday before settling up 67 cents at $32.18 the highest closing price since Nov. 29, 1990.

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 effect 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.

The 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 economic sanctions.

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