Threat of war, Venezuela strike send gas prices upward

Tuesday, February 11, 2003

A significant upsurge in the cost of fuel last week has left motorists across the nation, including those in Southeast Missouri, wondering what the future will hold for the price of gasoline.

A report released Feb. 9 by gasoline industry analyst Trilby Lundberg found that fuel prices nationwide jumped an average of 11 cents per gallon last week alone.

In Cape Girardeau, Scott Blank, owner of Bi-State Southern gas stations, reported an increase of 10 cents per gallon in regular fuel prices last week, from $1.39 to $1.49.

Blank said prices on the wholesale market jumped anywhere from 3 to 8 cents per day last week.

"Prices don't usually fluctuate that much," Blank said. "I think everybody who is up on current events realizes we're about to go to war with Iraq and with that comes speculation of what the future holds for oil prices."

According to the Lundberg report, crude oil prices have risen by $8.19 a barrel to $35.12 during the past two months, largely due to the looming threat of war in the Middle East and an oil production strike in Venezuela.

"This affects me a lot because I drive a lot," said Kim Hurt of Cape Girardeau. "I usually fill up four times a week. What if the price keeps going up? How could people afford that?"

Jonathan LeGrand of Cape Girardeau said the increased fuel prices haven't affected him much.

"I'm not concerned at this point," LeGrand said. "Despite the situation with Iraq and Venezuela, I don't think the prices will go too much higher. And they'll eventually go down."

Ninth straight week

Nationally, gasoline prices increased for the ninth straight week to an average of $1.60 a gallon for regular grades, 50 cents a gallon higher than a year ago, according to the federal Energy Information Administration. Many parts of the country have seen price hikes of 20 cents a gallon in recent weeks.

Although OPEC oil producers have boosted production, they have yet to make up the oil lost to political unrest in Venezuela. Crude inventories fell "well below the low end of the normal range" at the end of January, said the Energy Department. With high crude prices and some shortages, refiners scaled back operations, choosing to perform normal maintenance a few weeks early, some analysts said.

That has caused suppliers to draw heavily on heating oil stockpiles, causing prices to jump.

"The dramatic price rise we've seen in the last couple of weeks is primarily associated with fear about war in Iraq, the disruption of oil exports from Venezuela and extremely cold weather," said Kyle Cooper, an energy analyst for Smith Barney.

If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to making gasoline. If so, gasoline inventories may not recover, leading to higher gas prices this spring and summer, analysts said.

"Oil markets now are as tight as a fully stretched rubber band," said an Energy Department analysis. "Whether the rubber band breaks or not will largely depend on the pace of demand in coming weeks."

Staff writer Callie Clark contributed to this report.

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