Analysts say there likely will be no respite from high gas prices
this summer because Middle East suppliers will probably continue to
limit oil exports.
For millions of Americans, that means having to stash a bit more cash
in their pockets when packing the family into the car for that yearly
The next meeting of the Organization of Petroleum Exporting Countries
is scheduled for June 21 in Vienna, Austria, and though some member
states — mostly U.S. and Western allies — are considering production
increases, others — chiefly Iran — will continue to push for limited
production and higher prices. On Friday, the price per barrel of oil had
reached about $30, but by Tuesday, oil futures skyrocketed to
three-month highs on news that OPEC wasn’t likely to increase
While uncertainty over OPEC’s output policy worried some, bullish
gasoline futures encouraged heavy buying from others. NYMEX crude oil
futures rose to a three-month high of $33 a barrel on Wednesday — the
highest since March 8, when front month crude hit $34.37 in overnight
Also, NYMEX July gasoline futures earlier exploded to a post-Gulf War
high of $1.096 a gallon, up 3.38 cents, after U.S.-wide stocks of
reformulated gasoline fell by more than 1.5 million barrels last week.
Gasoline futures prices are calculated without local, state and federal
Though the Clinton administration continues to pressure OPEC for
production increases, oil ministers within the cartel and in non-member
states predict that next week’s meeting will be unlikely to reach a
consensus — or much enthusiasm — to boost production.
Increased oil production and export would cause prices to fall,
something few OPEC and non-member states want. Industry experts said
OPEC, stung by historically low prices throughout 1998 — when oil
plunged to just $10 per barrel — is looking to make up the difference
Last week, Iraq, after repairing oil production facilities damaged
during its wars with Iran and the allied coalition, threatened to
increase its exports by about 700,000 barrels per day — about half of
the 1.4 million bpd increase agreed to by OPEC in March.
However, Iraq remains under UN-imposed oil-export limits. In order to
move more oil to market, it must sail its tankers through waters
controlled by Iran. While Tehran has, in the past, allowed Iraqi tankers
through, about two months ago it began seizing them and is threatening
to continue the practice to prevent Iraq’s oil from making it to market.
Consequently, analysts said, Iraq’s threat to release more oil has
now become dependent on whether Tehran will allow more Iraqi oil
“The announcement of a potential increase in Iraq’s export capacity
effectively gives Iran considerably more influence in negotiations with
OPEC. It allows Tehran to speak with the weight of two countries’ export
capacities behind it,” said an analysis published by
Stratfor.com. “If Tehran gets its way, as is likely, production increases will be minimal — and the price of oil will stay high in the months to come.”
Meanwhile, the price crunch has already hit historic highs in many parts of the country. For example, by late May, prices
reached nearly $2.50 for premium unleaded at one station in Chicago. And other residents of some Midwestern states —
where prices are highest — report gas locally reaching $2.00 per gallon for regular unleaded.
Last Friday, the federal government — which has pledged to investigate why prices remain high — said gas had risen nearly 44 percent since last year. This summer, prices nationally are averaging $1.56, while last summer, they hovered near $1.11.
According to Red Cavaney of the American Petroleum Institute, “there are seven or eight factors” that have begun to simultaneously affect gas prices, including new Environmental Protection Agency regulations mandating cleaner gas, refinery problems, supply problems and OPEC, which has doubled the price of crude oil.
But others doubt those explanations. Tim Hamilton, who represents service station owners in Washington state, told CBS News on Friday that oil companies knew the EPA changes were coming for years and they shouldn’t act surprised now.
“No one can seem to explain, after a hundred years, how they price gasoline. And I believe if they ever do explain, there’ll be people going to jail,” he said.
On Monday, federal officials met with representatives from nine oil companies and asked them to explain why gas prices are so much higher in the Midwest and to determine if any price-gouging is occurring.
Oil company executives denied the price-gouging charges and blamed supply shortages on OPEC’s decreased production levels. OPEC, meanwhile, blamed the prices on new EPA regulations requiring more cars to burn reformulated gas, which, U.S. industry executives said, is more expensive to refine.