Gas Prices Fall, but Future Declines Unpredictable
Robert B. Bluey
Staff Writer
A month after the start of the war in Iraq, the cost of gas has dropped nearly 13 cents per gallon, according to the federal Energy Information Administration. In the most recent survey taken this past week, the price stood at $1.60 a gallon.
Throughout much of February and March, the price at the pump increased steadily, topping out at $1.73 per gallon. At the time, some consumers pointed fingers at oil companies and the Bush administration's foreign policy.
At a Hess station outside Washington, D.C., Monday, the price of regular was $1.65 per gallon, and drivers regularly pulled in to fill up their tanks.
Troy Williams of Hyattsville, Md., a suburb of the nation's capital, said most people don't realize they're pouring hundreds or even thousands of dollars more into their vehicles every year.
The 13-cent drop was good news for Williams, who smiled, calling it an improvement from just a few weeks before. But he would like it to drop even lower.
"I don't want to be pessimistic, but let's not forget where we were just three years ago when gas was pretty cheap," he said. "It wears your pocket out when you realize just a couple years ago you could fill your truck up for $20, and now it's over $30. It's a lot a money for gas."
In fact, gas cost less than a dollar in some parts of the country back in the late 1990s.
There's no way to predict what the future holds for gasoline prices, which typically peak around Memorial Day and then slowly decline throughout the summer months, said Jerry Taylor, the libertarian Cato Institute's director of natural resource studies. Several variables might change that scenario, such as a broken pipeline, he cautioned.
Taylor downplays the price gouging argument, which some politicians have said led to rising gas prices beginning this past fall. He said oil companies are simply using the market to set the prices, and that's the case whether the price of crude oil is on the rise or falling fast.
"Oil companies are very, very, very cognizant of the fact that people generally don't shop around very much for gasoline," Taylor said. "They discover how much competition is in a certain area, and they price it at what they can get away with."
For years, supporters of drilling in the Arctic National Wildlife Refuge have made the case that it would reduce foreign dependence on oil, and therefore, lead to less fluctuation in market prices. A new, and even greater source of stability might come from Iraq, said Robert L. Bradley, president of the Institute for Energy Research, a Houston research firm.
Bradley said he hopes Iraq charts a course independent of the Organization of the Petroleum Exporting Countries (OPEC), which controls more than half of all oil exports. The result, he said, could diminish OPEC's power to influence oil prices.
"There are expectations that Iraq will eventually become a full-fledged member of the international oil community, and maybe, just maybe, that Iraq won't strictly follow the OPEC line," Bradley said. "With Iraq out of OPEC, there's a good chance we could break the monopoly power."
American Petroleum Institute spokesman Chris Kelley said Iraq will eventually play a bigger role as an oil-producing nation, but he wasn't as eager to predict any future trends that might lead to a decline in gas prices here at home.
"Right now, the crude oil prices are on the descent because of various relaxation factors in the Middle East. At least we know where Iraq is at now and other countries that supply crude oil to the global market have not cut off supplies, so as a consequence, I think there's a feeling of relaxation in the money market level where these prices get bid up and down."
Prices of crude oil rose slightly Monday to their highest levels in three weeks amid expectations that OPEC would cut back production. Last week, Iran called on the organization to limit supplies following the sharp drop in crude oil costs since the war began.
Regardless of OPEC's decision, the Energy Information Administration is forecasting higher prices this summer than any in recent memory. The agency predicts a nationwide average of $1.56 per gallon, which remains well below the adjusted $2.77 per gallon cost in 1980.
Also filling up his sport-utility vehicle Monday was Sal DiMauro, who runs Eastern of N.J., an oil terminal and trading company. He called the $1.65 price per gallon "steep" but cautioned that about half the cost was based on taxes.
"This winter was a cold one," DiMauro explained. "The strike in Venezuela had a lot to do with the price of oil here, and the uncertainty about the war was another story. It should come down another 14 cents a gallon when prices drop to $27 for crude oil."
DiMauro's estimate would mean consumers would begin seeing much lower prices for the first time in several months.
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