GAS PRICES SOAR TO $1.37 IN CAPE; STATION OWNER BLAMES 7-CENT WHOLESALE HIKE

That shiny sports utility vehicle that looked so great last year when gas cost about 80 cents per gallon may seem more like a money vacuum now that prices have reached the $1.37 mark.

"The price of gas has gone up about 50 cents a gallon since last spring," said Michael Right, vice president for public affairs for AAA in St. Louis. That's making it painful at the pump for those who drive cars like SUVs that don't get good gas mileage, he said.

Scott Blank, owner of Bi-State Oil Co., said the price for regular unleaded at his retail stations went up to $1.37 on Monday, and that's the highest price he has seen in years. Last week the price was $1.31.

"Last week the wholesale price jumped 7 cents overnight. That's the highest increase I've ever seen," Blank said.

Nationally, the average price per gallon of gas is $1.41.

Blank said prices began rising last spring when OPEC, the Organization of Petroleum Exporting Countries, announced it was cutting back on production. After that, prices, which had been less than $1 per gallon, began creeping up.

"It's been on a steady incline the last two to three months," said Jim Maurer, one of the owners of Rhodes 101 Stops, where the price for regular unleaded is $1.37.

On Monday, the price of crude oil futures closed at $30.25 a barrel -- topping $30 for the first time in nine years. Both Maurer and Blank said that as long as the price of crude oil keeps going up, it will keep forcing up the price of wholesale gasoline, which causes the retail price to rise.

Right said OPEC and other major oil-producing regions cut back on production earlier this year in response to the oil glut that resulted in the low gas prices, as low as 70 cents per gallon in 1998.

"In 1998 we had some of the lowest gas prices in history when adjusted for inflation," Right said.

Oil producers reduced output in order to raise prices, and that's just what happened, Right said.

Whether fuel prices come down again depends on what happens to production. Right said OPEC's annual meeting will be in March, and if members decide to increase production prices could drop.

The Associated Press reported that Roger Diwan, managing director for global oil markets at The Petroleum Finance Co. in Washington, expects OPEC will increase oil production 1.5 million to 1.7 million barrels a day. But because inventories at refineries already are low, "that won't be enough to bring prices down dramatically and change the gas outlook in the United States."

He suggests "people better get ready" for national gas prices averaging $1.60 a gallon before they begin easing.

The increase in fuel prices isn't just being felt at retail pumps; it also has an impact on trucking companies, shipping companies, airlines, farmers and those who depend on such companies, Right said. In other words, the rise in fuel prices can be felt throughout the economy.

"High gas prices are very bad for the economy," Maurer said. "Everything we deal with has transportation costs. In fact, transportation costs are one of the top two or three costs of most operations."