- The Washington Times - Friday, March 7, 2003

The average price of regular, unleaded gasoline is set to hit a record $1.76 a gallon next month even without a war in Iraq, the government predicted yesterday.
Gas prices already have risen near the previous record of $1.71, set in May 2001, and have soared to more than $2 a gallon in some areas such as San Francisco.
They will be pushed even higher as a result of near-record prices for crude oil, which recently touched close to $40 a barrel in New York trading, combined with the lowest oil inventories in decades, the Energy Information Administration forecast.
"If war breaks out, anything is possible" with prices, said John Lichtblau, analyst with PIRA Energy Group, who noted that the energy forecasting agency is using an optimistic scenario of no military conflict in Iraq.
"The market is assuming open conflict in Iraq, just like the media is. This is the most likely scenario," he said, while "Venezuela is not improving dramatically and won't be back to normal in two or three months."
For consumers, the hit to the pocketbook has been acute in the past month, affecting confidence.
The threat of war and shortages of energy have driven up gas prices, and the average home heating bill this winter has risen by 30 percent to 60 percent for households that use natural gas and heating oil, the agency said.
That has added hundreds of dollars to monthly heating bills even as a spending binge on fuel-guzzling sport utility vehicles and other large cars has locked many consumers into paying up to $70 for a full tank of gas.
Economists worry that another energy "shock" like the one experienced during the 1990 Persian Gulf war or even like the more recent, milder one in the winter of 2000 could cut short the recovery and send the economy back into recession.
In many ways, the oil outlook is bleaker than it was in 1990.
"During the Gulf war, the price of oil spiked and fell quickly," said Sung Won Sohn, chief economist with Wells Fargo & Co, but that is not likely now. "After a new war, terrorism could keep the price of oil high."
Another critical difference from 1990 is that worldwide stocks of oil are low and are contributing to high prices even without a shot being fired, he said.
That is mainly because of the three-month strike of oil workers in Venezuela that was suppressing more than 1 million barrels of oil exports each day. Venezuela was a critical supplier of oil and gasoline to the United States during the 1990 Gulf war.
Saudi Arabia and other producers in the Organization of the Petroleum Exporting Countries have increased their output to make up for the Venezuelan shortfall, but that has left them with less capacity to increase production in the event of war with Iraq.
Even if Saudi Arabia and other OPEC nations were to keep their pledge to pump flat out as much oil as they can in the event of war, "OPEC can't replace the shortfalls from both Iraq and Venezuela," Mr. Sohn said.
The energy agency estimated that OPEC may be able to produce only another 1.5 million barrels of oil a day in a world where nations consume 77 million barrels daily. The United States alone consumes about 20 million of those barrels a day.
"It isn't very much" of a cushion, said Mr. Lichtblau, adding that is why he and many other oil analysts expect the Bush administration to release oil from the Strategic Petrolum Reserve if it pursues a war in Iraq.
Mr. Lichtblau estimates that the U.S. oil reserves could supply up to 4 million barrels of oil a day for up to four months, if needed. Europe and Japan have additional oil reserves that are likely to be tapped in case of war, he said.
"We have twice as much spare capacity as Saudi Arabia," he said.

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