- The Washington Times - Tuesday, March 19, 2002

From combined dispatches

U.S. drivers were hit with huge gasoline-price increases for a second straight week, as the cost for motor fuel jumped 6.5 cents over the last week to $1.29 a gallon, the Energy Department said yesterday.

Prices have climbed 22 percent from a 2½-year low of $1.059 a gallon on Dec. 17, the weekly survey of 900 filling stations showed. The increase of 6.5 cents reported yesterday sent nationwide average prices to the highest levels since Oct. 15.

The pump price has increased 14.4 cents a gallon in the last two weeks because of higher crude-oil costs, but fuel prices were still down 12 cents a gallon from year-ago levels.

Crude-oil prices are up 20 percent from a month ago partly on speculation that the United States may attack Iraq, the fourth-biggest producer in the Organization of the Petroleum Exporting Countries. The cost of crude oil accounts for about 40 percent of retail gasoline prices, according to Energy Department estimates.

"Motorists are paying for the possibility of a war in Iraq," said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. "Most of this doesn't have anything to do with gasoline. Gasoline inventories are higher than normal, and you've got a lot of excess refining capacity."

The national average price for cleaner-burning reformulated gasoline, sold at about one-third of the stations in cities and smoggier areas, was up 6.2 cents to $1.34 a gallon.

Reformulated gasoline has risen an average 14.5 cents a gallon in the last two weeks, according to a survey of more than 800 stations by the department's Energy Information Administration.

In addition to higher crude-oil costs, gasoline prices are up because of stronger motor-fuel demand as the United States enters the busy spring driving season.

The most expensive regular unleaded gasoline was found on the West Coast, where the average price was up 4.6 cents a gallon to $1.42, the EIA said.

Motorists in the lower Atlantic states again had the cheapest fuel, with the average price in that region up 7.6 cents to $1.22 a gallon.

The nationwide price for diesel fuel also rose, increasing 3.5 cents to $1.25 a gallon, down 14 cents from a year ago, but still the highest level since November.

West Coast truckers paid the most for diesel fuel at $1.36 a gallon, up 3.3 cents. The Gulf Coast states had the cheapest diesel at $1.22 a gallon, up 3.2 cents.

The EIA predicted in a report this month that average prices may rise to $1.33 a gallon this spring. Prices in May rose to a record $1.71 a gallon.

U.S. gasoline inventories probably fell for a fourth week as refineries processed less crude oil than normal for this time of year, a Bloomberg survey of seven analysts showed.

A report today from the industry-funded American Petroleum Institute will show that inventories in the week ended Friday fell by between 1.6 million and 2.1 million barrels, the analysts predicted. Supplies have been declining as refineries slowed processing because of poor profit margins, the analysts said.

"It will take time, even if refineries start to ramp up production again, for that to have a significant impact on gasoline supplies," said Mr. O'Grady.

Falling crude prices, which had dipped below $20 per barrel by the end of last year, prevented oil refiners from overstocking in recent months. Refiners typically hold tight inventories when oil prices fall for fear of being stuck with overpriced crude oil.

But analyst Kenneth Miller of Purvin & Gertz in Houston said that in recent weeks, a 6.5 percent cutback by OPEC and rising demand have pushed crude-oil prices above $24 per barrel, encouraging refiners to buy more for future delivery.


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