- The Washington Times - Monday, April 17, 2006

From combined dispatches

Gasoline prices in the District of Columbia topped the rest of the continental U.S. yesterday as oil prices settled at a record high at more than $70 a barrel.

A gallon of regular gas in the District averaged $2.97 yesterday, soaring 40 cents in one month and surpassing California’s average price of $2.94, according to AAA Mid-Atlantic.

“If it keeps at this pace, we’ll reach $3 gas in D.C. before the week is over and we’ll reach it soon in the adjoining jurisdictions well before Memorial Day,” said John B. Townsend II, spokesman for AAA Mid-Atlantic.

Some stations in the District have already eclipsed $3.

The District last topped California’s traditionally high pump prices after Hurricane Katrina, which shut down two of the Washington area’s supplying pipelines.

In the Washington area, the average price of gas hit $2.86 yesterday. Maryland consumers paid an average of $2.82 per gallon, while it cost Virginians an average of $2.79 at the pump.

Nationally, gas reached an average of $2.78 per gallon, 55 cents higher than a year ago and 30 cents higher than a month ago, according to the Energy Information Administration.

Meanwhile, a barrel of crude oil on the New York Mercantile Exchange rose more than $1 to $70.40 on concerns about diplomatic tensions between the West and Iran over Tehran’s nuclear ambitions as well as supply disruptions in Nigeria.

So long as these and other geopolitical issues persist, oil analysts said it will be difficult for prices to fall far — unless there is a significant drop in demand, which they aren’t seeing. In the short term, oil prices could climb above $75 per barrel, they said.

“Where the top is is pretty hard to say at this point,” said New York oil broker Tom Bentz.

Light sweet crude for May delivery settled $1.08 higher than Thursday’s close and 59 cents above the previous closing record set Aug. 30, the day after Katrina struck the Gulf Coast. The exchange was closed Friday for Good Friday.

Futures touched $70.45, the highest intraday price since Aug. 31. The record intraday price, $70.85 a barrel, was reached Aug. 30.

Gasoline futures on Nymex also jumped yesterday, up 6.18 cents to settle at $2.17 a gallon — the highest level since late September.

On an inflation-adjusted basis, oil prices would have to rise above $90 to exceed the records set a quarter-century ago, when supplies became tight in the aftermath of a revolution in Iran and a war between Iraq and Iran. In 2005 dollars, the average price of crude in 1980 was just under $77 a barrel.

ABN Amro broker Lee Fader said the trigger for yesterday’s rally was “heightened fear about military action” against Iran, which has said it would go ahead with plans to enrich uranium, defying the United States, Europe and U.N. nuclear specialists. Iran says its nuclear ambitions are peaceful, but the West fears the country is intent on arming itself with nuclear weapons.

“If somehow this got resolved diplomatically, that would definitely take a few dollars off” the price of crude oil,” he said.

Almost a quarter of the world’s oil flows through the Straits of Hormuz, a narrow waterway between Iran and Oman at the mouth of the Persian Gulf.

“It’s the same cast of characters,” said Rick Mueller, an analyst with Energy Security Analysis Inc. in Tilburg, the Netherlands. “Nigeria, Iran, U.S. gasoline and Iraq are making us nervous. We will stay around $70 as long as none of these problems is resolved.”

The market also was driven by the disruption of crude supplies in Nigeria, where more than a half-million barrels a day of crude production capacity are being blocked because of militant violence. Production has been added in other parts of the country, though, and that has offset the impact. According to energy-information group Platts, Nigeria produced 2.15 million barrels per day in March, down from 2.37 million barrels per day in February.

In the Gulf of Mexico, more than 300,000 barrels a day remain shut because of damage from last year’s vicious hurricane season.

U.S. gasoline consumption increases between Memorial Day and Labor Day as motorists take to the highways for summer vacations. More than 10 percent of the world’s crude oil is used to make gasoline for U.S. consumers.

The introduction of new gasoline blends may make it harder for refiners to meet demand this year. Gasoline using MTBE, or methyl tertiary-butyl ether, is being phased out. Refiners don’t want to be liable for groundwater contamination caused by the additive and are switching to ethanol-blended fuel.

Underlying the nervousness about supplies in the Middle East, Africa and the U.S. is the global industry’s thin margin for error. Worldwide demand is expected to average 85 million barrels per day in 2006, leaving just 1.9 million barrels per day of excess production capacity that could be called upon in an emergency, according to Cambridge Energy Research Associates.

• Staff reporter Kara Rowland contributed to this article, which is based on wire service reports.



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