- The Washington Times - Saturday, September 14, 2002

NEW YORK Though the price of crude oil is high and could go higher, energy experts do not expect consumers to be pinched too much when fueling their cars and heating their homes in the months ahead.
The heightened prospect of war with Iraq and declining inventories of crude have put the price of oil near $30 a barrel. But barring a few worst-case scenarios, energy traders and analysts say the supply and output of refined products should be ample to meet demand and keep prices at reasonable levels through January.
"There's plenty of gasoline, a really comfortable amount of diesel fuel and beaucoup heating oil supplies," said Tom Kloza, director of the Oil Price Information Service, a Lakewood, N.J., publisher of industry data.
Crude oil prices have been inflated long enough, though, that consumers should expect gasoline and heating oil prices to nudge modestly higher in coming weeks, Mr. Kloza said.
Even so, futures prices for heating oil and gasoline ended the week below year-ago levels and the president of the American Petroleum Institute, Red Cavaney, told Congress this week that the country was in "good shape" on the supply front.
The nationwide supply of distillate fuel, which includes diesel and heating oil, stood at 134 million barrels on Tuesday, a 12 percent increase compared with last year, according to API. Gasoline supplies were 6 percent higher than a year ago at 206.5 million barrels.
Although conditions are pretty good for consumers, it has been a miserable time for refining companies. With the price of crude rising faster than prices for gasoline and heating oil, profit margins are being squeezed.
Shares of San Antonio-based Tesoro Petroleum are down 75 percent since the beginning of the year, when the price of crude started its steady climb. The stock price of Valero Energy, a crosstown rival, has fallen 20 percent during the same period.
Analysts cautioned that conditions could change.
Autumn is when refiners temporarily shut down their facilities for maintenance and industry watchers expect some financially strapped companies to stay closed longer than usual because there is no economic incentive to increase output.
"Production will get cut back significantly," said Ed Silliere, vice president of risk management for Energy Merchant LLC in New York.
Supplies could also dwindle if temperatures drop sharply this fall and homeowners crank up their thermostats earlier than usual. That could strain the industry's ability to satisfy demand when the coldest months of winter arrive.
Homeowners and motorists caught a break on prices in the winter because of the combined effects of the recession, warmer-than-usual temperatures and fewer people traveling after September 11.
Generally speaking, heating oil and gasoline prices increase by 2.5 cents per gallon with each $1 rise in the price of crude, which settled at $29.81 a barrel yesterday on the New York Mercantile Exchange.
Crude prices could soar above $35 a barrel if in one of several worst-case scenarios cited by analysts Iraq responded to a U.S.-led attack by bombing the oil fields and refineries of Saudi Arabia or other oil-producing nations. "That's a very low probability," said Ken Miller, an analyst at Purvin & Gertz in Houston.
President Bush met in New York yesterday with leaders from 11 African nations, many of which are steady oil producers, as the administration sought to secure supplies ahead of any military action against Iraq.
Iraq is producing less than 500,000 barrels of crude per day, an amount that could be replaced by other members of the Organization of Petroleum Exporting Countries as well as non-OPEC producers, such as Russia or Mexico.
Crude was priced at $25.08 on the first day of trading in June and has risen almost 20 percent since then even though domestic supplies are down 2 percent from last year.

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