Gas prices topping $2 a gallon OPEC weighing continued production cuts

Tuesday, March 28, 2000

By KATHY MULADY SEATTLE POST-INTELLIGENCER REPORTER

As OPEC oil ministers failed to agree yesterday on how much to produce, motorists in the Seattle area were already facing premium gas prices that had broken through the $2 per gallon barrier.

Ministers of the Organization of Petroleum Exporting Countries were expected to resume discussions today under pressure from the United States, where consumers -- especially in the West -- were already feeling pressure on their pocketbooks.

OPEC, which operates on consensus decisions, must decide whether to extend cuts it made in 1998 and 1999 that have propelled oil prices to their highest levels since the 1991 Persian Gulf War. The latest round of cuts expires at the end of the week.

In two weeks, self-serve gas prices in the Seattle area have climbed from 14 cents to 20 cents per gallon. Prices for regular gas at Texaco and Chevron stations throughout the city were about $1.77 per gallon for regular. Supreme prices reached $1.99 -- a point that seemed a barrier almost everywhere.

Everywhere, that is except at Bob's Summit Chevron on Snoqualmie Pass, where regular gas was $1.94 and premium was $2.14 per gallon.

West Coast gas prices -- from California to Washington -- average 20 cents per gallon higher than on the East Coast, according to weekly surveys by the U.S. Department of Transportation. The southern states have the lowest prices at $1.52 compared to an average of $1.77 in the West.

Drivers in Seattle seemed to accept the prices, though some stations reported that sales had fallen sharply as the prices rose. Others reported more customers leaving without paying for their gas.

"I think it's a nice wake-up call, especially in Seattle," said Susan Holmes of Wallingford, caught in the rare act of putting gas in her car. "It's the first time I've put gas in my car in three weeks," she said. "I think it's important for us to look at our dependency on gas and take back control."

On the other end of the spectrum, Mark Olsen said fuel prices will have to top $2.50 per gallon before he considers giving up gas. He commutes to work between Federal Way and Redmond each day and spends $100 a week filling up his big Ford F-150 truck.

"How am I going to travel if I don't use gas?" he asked. "There's no choice."

Puget Sound-area gas prices were the highest in the state. Prices for regular gas at Texaco stations in Seattle were about 16 cents higher yesterday than at Texaco stations in Spokane. The Indian Trail Service Station in Spokane dropped its prices Friday from $1.61 to $1.59 after sales volume dropped to half. The station normally pumps 5,000 gallons of gasoline a day. Last week, the volume dropped to 2,500 gallons per day.

"We had no business," said Sophia Harrington, a cashier at the gas station. "People were complaining about the price."

Although some stations are watching customers drive past after looking at the prices, others say they have had more than the usual number of drive-offs -- those who fill up, then leave without paying.

Tim Hamilton, executive director of the Automotive United Trade Organization, based in Olympia said, "Get used to the prices.

"What price are you willing to pay when you are stuck on the freeway with the needle on zero?" he asked.

"This is the first time we have seen prices this high. We are setting new records, and we see no end in sight," added Hamilton, who founded the independent gas dealers group in 1985.

"Street prices still haven't caught up with wholesale prices. If everything stopped right now, we would still go up a nickel. California is getting ready to break $2 a gallon on regular self-serve," he said.

Wholesale oil prices in the United States have tripled to a March 8 peak of $34.37 per barrel following OPEC's decision last March to slash production.

During the OPEC meetings yesterday, the Iranian Oil Minister Bijan Namdar Zangeneh said Iran accepts the need for OPEC to boost output. However, the amount of the increase favored by his country might not be enough to reduce petroleum prices.

Zangeneh spoke before the opening of the semiannual meeting of oil ministers from all 11 members of the Organization of the Petroleum Exporting Countries.

"I won't talk on numbers, but we don't want a market shortage," he said.

Iran, OPEC's second-largest producer, is known to favor boosting output by about 1.2 million barrels a day, an amount that probably would do little to reduce world oil prices.

For U.S. motorists and other consumers of refined products, such as gasoline, much hinges on efforts by Saudi Arabia, OPEC's top producer, to win Iran over to its point of view.

Throughout the country, American motorists are paying an average of $1.59 per gallon for unleaded gasoline, an increase of nearly 60 cents since prices bottomed out at 99.8 cents per gallon in February 1999, according to a Lundberg survey of 10,000 U.S. gas stations released Saturday.

Industry analysts warn of possible shortages and average gas prices nationwide climbing to $2 a gallon during peak driving season this summer if OPEC fails to increase production significantly.

In Olympia, Hamilton disputes that the latest gas increases have much to do with the cost of a barrel of oil and more with the level of profit to the oil companies.

"The dealers are making less, they pass on all the increases, and the stations are going broke one after another," Hamilton said.

He said wholesalers charge different prices for gasoline to stations, depending on geographic zones.

"But they don't define it," he said "One geographic area can be defined by a yellow stripe in the road. I watch gas prices all across the country, and when you look at the West, it is getting worse by the day."

Don Campbell, who just moved to Seattle from Salem, Ore., was stunned to see gas prices 20 cents more for supreme compared with the $1.79 he was paying in Salem 10 days ago.

He filled up yesterday for $1.99 a gallon.

But Seattle gas prices looked pretty good to Matt Olsen from Ketchikan, Alaska, who was filling up at a gas station on Northgate Way with $1.77 regular unleaded.

He said gas prices in Ketchikan were $1.99 a gallon for regular and $2.20 for supreme.

"The high gas prices are just a fact," he said. "You have to use it, there's no choice

http://www.seattle-pi.com/business/gas281.shtml

-- Martin Thompson (mthom1927@aol.com), March 28, 2000