Sunday, March 29, 1998

Prices for gasoline back on the rise

By JIM O'CONNELL / Scripps Howard News Service

WASHINGTON -- It was the bargain of the century, but it changed this week.

Gasoline prices were at their lowest ebb in U.S. history when adjusted for inflation and taxes. But new cooperation among oil producers, and a summer driving season turbo-charged by a strong economy, has revved gas prices up.

For now, consumers are enjoying the benefits of gas that averages $1.08 a gallon nationwide, down from $1.29 just six months ago. When adjusted for inflation, the prices are considered the lowest in U.S. history, lower even than the 26 cents-a-gallon consumers paid for gas in 1949, the first year the government kept records.

In Abilene, prices, generally in the 95-to-99-cent range early in the week, rose to $1.06-$1.09 by week's end. In the Big Country, prices range from slightly less to somewhat more than in Abilene.

"People do take advantage," said Bill Jackman of the American Automobile Association. "A lot of people now can't go past a gas pump that is under a dollar a gallon without filling up, whether they need it or not."

Nearly everyone except gas producers was benefiting. Airlines are spending $300 million a month less on fuel than they were last September, according to the Air Transport Association. Large trucking firms and taxi cab drivers are saving on fuel costs, too, and individual owners of recreational vehicles probably will feel a little freer to fill up and take a trip this summer.

"I usually let my gas get low, but this weekend when I saw it at 99 cents I topped off my half-tank.," Jackman said. "I was afraid the prices wouldn't last."

The drop in gasoline prices resulted in part from the Asian economic crisis and warm winter weather across North America and Europe reducing demand, while oil-producing nations couldn't agree on cutting back supply.

The economic crisis reduced anticipated demand in Asia by at least 400,000 barrels of oil per day, said Larry Goldstein, an analyst with Petroleum Industry Research Associates in New York.

The unusually mild winter in the U.S. and Europe reduced demand by another 500,000 barrels a day, Goldstein said.

"Clearly, a lot of people in Boston and Des Moines who depend on heating oil to keep warm needed a lot less of it this year," said Mike Shanahan of the American Petroleum Institute.

Many refiners, seeing the reduction in demand of heating oil, began producing gasoline instead, creating a glut in that market, and further depressing prices, said John Cogan of the U.S. government's Energy Information Administration.

An agreement reached last Sunday by Saudi Arabia, Venezuela and Mexico to turn back the spigot on oil production will add a nickel a gallon to the price of gasoline within a month, Goldstein said.

The summer driving season will drive prices up another nickel, he said.

The recent slump in the oil market has hurt even some oil companies toughened by recurring drops in a roller-coaster industry, said Morris Burns of the Permian Basin Petroleum Association in Midland.

Some companies have shut down low-producing wells and laid off workers, Burns said.

"This business is a roller-coaster that's always going up or down," Burns said. "No one is panicking yet, but if prices don't go up in June, July or then there will be panic."