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Higher prices at the pump

A freezing winter in the East, turmoil in Venezuela and worries about the Iraq situation have all contributed to soaring nationwide gas costs, with Rogue Valley prices nearing two-year highs

Staff and wire reports

Heating oil and gasoline prices are soaring and likely to keep rising as energy markets cope with a colder than expected winter, the loss of Venezuela's production and worries about war with Iraq.

Prices at Rogue Valley gas pumps are reaching two-year highs, with prices Monday already about 30 to 40 cents higher than a year ago.

The average price in Oregon was &

36;1.578 per gallon of regular gas Monday morning, only slightly higher than the national average, according to the Oil Price Information Service (OPIS) data published by the AAA in its Daily Fuel Gauge Report.

Rogue Valley prices averaged &

36;1.575 for a gallon of regular on Monday, 21 cents higher than a month ago and 44 cents higher than a year ago. The valley's highest recorded price was &

36;1.878 on Sept. 16, 2000. Diesel averaged &

36;1.637 per gallon Monday morning, according to AAA and OPIS.

Some Rogue Valley gas stations bumped prices up as much as a dime over the weekend. Industry observers say the volatile trend isn't likely to stop anytime soon.

An oil analyst at OPIS predicts price fluctuations not seen since the Arab oil embargo of 1973.

In the next 90 days, we could see fuel price swings of 10 to 15 cents per gallon each week, says Tom Kloza, chief oil analyst for OPIS, on the OPIS Web site.

A bitterly cold winter in the East and turmoil in Venezuela have contributed to the prices. A deep freeze in the Northeast caused heating oil prices to spike by 20 percent last week. The Energy Department, citing low stocks ' as well as higher natural gas prices ' said heating bills could be 50 percent higher this year than last winter.

Nationally, gasoline prices increased for the ninth straight week to an average of &

36;1.61 a gallon for regular grades, 51 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.

Crude oil on Friday moved above &

36;35 a barrel, the highest it has been in two years. Government analysts forecast that prices probably will stay above &

36;30 a barrel this year, even if a war is avoided in Iraq.

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. On Friday, wholesale heating oil prices on the New York exchange soared to &

36;1.20 a gallon, a jump of 30 cents from a week earlier.

After a New Hampshire terminal couldn't get heating oil for four days, Jack Sullivan, chief executive of the New England Fuel Institute, warned in a letter to the Energy Department of a supply-and-pricing crisis if more heating oil isn't made available.

The demand is extraordinary. It's absolutely horrific, Sullivan said in an interview Monday. His organization, which represents 1,000 heating oil companies, urged the government to release stocks from an emergency heating oil stockpile. No decision on such a release has been made.

Economists say that the supply crunch and price spiral stem from a variety of factors, especially unease over war with Iraq and the possibility that Kuwaiti and Saudi production could be disrupted.

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.

Heating oil stocks in the Northeast are 35 percent below the 10-year average, according to the American Petroleum Institute. Gasoline stocks, while still at comfortable levels, fell 3.4 million barrels last week, the government said.

If the cold winter persists, refiners will need to keep up the heating oil supply and postpone their push to make 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, according to an Energy Department analyst. Whether the rubber band breaks or not will largely depend on the pace of demand in coming weeks.

A spokesman for AAA Oregon worries that price spikes at the pump could cause additional supply problems.

The information I get is that increases that large are excessive and probably in reaction to rising wholesale prices and fears that station owners will have to pay higher prices for replacement inventories, said AAA Oregon Public Affairs Director Elliott Eki. Station owners must avoid panic pricing. That could lead to panic buying by consumers and cause long lines at gas stations and create localized shortages.

Gas prices at Rogue Valley stations, like this Exxon station at the corner of Riverside Avenue and Barnett Road in Medford, have jumped dramatically. Mail Tribune / Bob Pennell - Mail Tribune Bob Pennell