- The Washington Times - Tuesday, March 12, 2002

Washington-area drivers are getting hit with sharp increases at the gasoline pump.
Gas prices jumped almost 10 cents per gallon Friday at many local service stations and probably will climb another 4 cents today.
The average price for self-serve, regular gasoline rose to $1.22 per gallon last week, 7.9 cents higher than a week ago and the second-highest weekly increase on record, according to the Energy Information Administration.
"That's a mighty steep increase all at one time," said Harry Murphy, spokesman for the Washington-Maryland-Delaware Association of Service Stations.
Although gasoline has reached its highest price since early November, it is 19 cents lower than a year ago.
"Wholesale prices are going up, and the retailer just passes it through," Mr. Murphy said yesterday. "Some oil companies went up 8 to 11 cents a gallon in two or three days last week. [Exxon Mobil] just went up 4 more cents at midnight, so you'll see that on the pump tomorrow."
Exxon Mobil operates more than 300 service stations in the Washington area.
The price increases are caused by tensions in the Middle East, greater demand as the economy picks up, the summer driving season's approach, and no planned increase in production of crude oil, the natural resource in gasoline.
Petroleum supplies are threatened by violence between Israelis and the Palestinians, the risk of a U.S. attack on Iraq and labor protests by Venezuelan oil workers.
"It all has to do with supply and demand," said Mike Shanahan, American Petroleum Institute spokesman.
Iraq has said it will bar United Nations arms inspectors, raising concern that the United States might attack. An attack would threaten Persian Gulf shipping and halt exports from Iraq, which pumps about 3 percent of the world's oil.
"An attack on Iraq is looking more likely all the time," Chester Irvin, a crude oil broker at ABN Amro Inc. in New York, told Bloomberg News. "You are seeing a war premium being built in."
A strike by oil workers at Venezuela's state oil company would immediately hurt the country's 2.5 milion barrels a day of oil production. Venezuela was the fourth-biggest source of U.S. imports in December, according to the Department of Energy.
The agency predicts gasoline prices could increase as much as 20 cents per gallon by summer.
At some service stations Friday, D.C. motorists saw prices for regular gasoline at $1.15 per gallon as they drove to work and $1.25 when they returned home.
"Trying to predict prices is very much like playing darts blindfolded," said Justin McNaull, spokesman for AAA Mid-Atlantic. "However, there are trends indicating we will see prices rise through the spring and summer."
The Organization of the Petroleum Exporting Countries, which produces about 40 percent of the world's oil, already has slashed output four times in little more than a year to keep the price of crude oil around $25 per barrel.
Crude closed at $24.31 on the New York Mercantile Exchange yesterday, the highest level since Sept. 21. It stayed below $20 per barrel for most of the winter despite the oil cartel's efforts.
"OPEC nations have said they're probably not going to increase their output as we head into the spring and summer driving season," Mr. McNaull said. "We'll probably see another nickel or 10 cent price increase."
U.S. oil reserves will prevent shortages of gasoline, he said. The U.S. government is putting 160,000 barrels of oil a day into its Strategic Petroleum Reserve, according to the Energy Information Administration.
The United States consumes about 19.5 million barrels of petroleum a day.
Prices may drop briefly this month as wholesalers dump their conventional fuel onto the market and switch to cleaner-burning reformulated gasoline required by the Environmental Protection Agency during the summer, Mr. McNaull said.
However, there also is the issue of political rumblings in the Middle East.
"That's one of the uncertainties, if we were to get involved militarily in Iraq," Mr. McNaull said. In that case, both crude oil production and oil shipments from the Middle East could be jeopardized, making the demand for fuel outstrip the supply and driving prices higher.
John Papuchis, manager of Capital Amoco at 4900 Wisconsin Ave. NW, is trying to use increasing gasoline prices as a "marketing tool."
He keeps his fuel prices about 10 cents below nearby competitors, which has increased business at Capital Amoco in the last week.
The station makes most of its profit from automobile repairs. Lower-than-average gasoline prices bring in a steady stream of customers, many of whom also seek maintenance or repair on their vehicles.
The profit from gasoline represents "pennies," Mr. Papuchis said.
United Parcel Service, whose delivery trucks crisscross the nation, institutes a surcharge anytime the average price of fuel rises above $1.15 a gallon.
The surcharge increases at an indexed rate as fuel prices increase. Currently, it stands at 0.5 percent of the transportation fee charged to customers.


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