http://www.dallasnews.com/attack_on_america/economic/stories/483398_gasoline_29bus.html Gas prices may hit lowest levels in years

$1 a gallon possible for some markets, analysts predicts

09/29/2001

By CHARLENE OLDHAM / The Dallas Morning News

Drivers will soon see gasoline prices fall to their lowest levels in years as declines in the wholesale market make their way to the pump in the next few weeks.

Although wholesale gasoline prices have recovered some of their losses in the last few days, they are still 15 to 20 cents lower than they were just two weeks ago.

The drop in prices should be seen at service stations soon, analysts say.

"You're going to see some prices that you haven't seen in a while," said Tom Kloza, chief oil analyst at Oil Price Information Service in Lakewood, N.J. "There is a potential that some markets could get in the $1 to $1.10 a gallon range."

Meanwhile, drivers are already getting a little relief after more than a year of daunting fuel prices.

Nationally, the average price for a gallon of unleaded gasoline was $1.476 Friday, down from a high of $1.718 set this spring. The declines are even more dramatic in Texas, where gas averaged $1.381 compared with a May 15 high of $1.611. In Dallas, the average was $1.391 Friday, down from a spring high of $1.666, according to AAA-Texas.

On the wholesale market, gasoline for October delivery rose 4.23 cents to close at 67.99 cents a gallon Friday on the New York Mercantile Exchange on hopes that the Organization of the Petroleum Exporting Countries would cut crude oil output soon.

The cartel decided this week to hold output steady at 23.2 million barrels a day but plans to reconvene Nov. 14 to review market conditions.

Crude oil closed up 69 cents Friday, at $23.43 on the New York Mercantile Exchange. Although that represents a recovery – crude closed at a two-year low of $20.30 Wednesday – it's still at least $10 a barrel lower than this time last year because of declining demand.

If the economy and demand for petroleum products havent' rebounded by November, OPEC could cut output to boost oil prices at their next meeting.

That could backfire if prices rise high enough to stifle the fragile U.S. economy.

"There will be no economic recovery until energy prices come down and stay there," said trucker Lee Klass, who spent $34,000 on diesel fuel last year.

Many energy analysts who fear the Sept. 11 terrorist attacks will plunge the already faltering U.S. economy into recession agree.

"Traders seemed to expect people will drive less in October, which is why prices tumbled," said Mr. Kloza, who collects the service station data for AAA-Texas.

An American Petroleum Institute report released earlier this week reinforced that view.

The API reported that U.S. gasoline inventories rose by a whopping 8.7 million barrels in the week ended Sept. 21 – indicating an astronomical decline in demand. Analysts had expected inventories to increase by about 1.75 million barrels.

Those numbers could be misleading because many Americans, fearing price spikes and supply shortages, rushed to top off their tanks in the days after the attacks. Analysts say that probably cut demand for the following week.

Analysts expect gasoline demand, and wholesale prices, will recover some ground in the next few weeks.

"I'm looking for oil to go to the $26 a barrel level, and I think heating oil and gasoline are going to rise in tandem," said Daniel Flynn, a senior account representative at Alaron Trading Corp. in Chicago.

That means wholesale gasoline price will be on the rise just as earlier declines are trickling down to drivers – something that doesn't surprise Mr. Klass.

"It always amazes me how quickly the prices go up and how they slowly they go down," he said.

-- Anonymous, September 28, 2001