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Oil prices spike back up; pump prices may follow By George Hager USA TODAY

Crude oil prices shot up by nearly $1 a barrel Monday, continuing a trend that has pushed oil back above $30 a barrel and could eventually reverse a two-month decline in gasoline prices.

The price of benchmark light sweet crude oil soared to $31.94 a barrel on worries about unusually low U.S. oil inventories and fears that the Organization of Petroleum Exporting Countries may be content with prices where they are.

Crude prices fell below $28 a barrel in July after OPEC member Saudi Arabia said it would increase production to bring prices closer to $25 a barrel.

But the Saudi plan sparked dissent among OPEC countries. Venezuelan President Hugo Chavez, who will host the next OPEC meeting in September, said Monday that lower prices would be a ''death sentence'' for Venezuela and other oil exporters. Venezuela is still recovering from a sharp recession last year after oil prices collapsed, and it benefits from higher prices for its key export.

While oil prices have been steadily rising, gasoline prices have been dropping, according to the Energy Information Administration (EIA). The nationwide average price for regular self-serve fell for the eighth week in a row last week, dropping 23 cents, from $1.68 a gallon in mid-June to about $1.45 now.

Industry analysts say gasoline prices are down in part because gasoline is much more plentiful than it was earlier in the summer. At the same time, though, crude oil supplies have fallen to a 24-year low, reflecting increased world demand and persistent forecasts from the U.S. government and private analysts that prices will eventually fall -- and that refiners would be foolish to buy expensive crude now.

''If oil is $30 and you think it's going to go to $25, why the heck would you want to buy it at $30? You wait,'' says Michael Mayer, a managing director for Prudential Securities.

But forecasts of lower prices depend on OPEC nations' willingness to increase production. ''They're the key to everything,'' says Dave Costello, an EIA economist. ''Regardless of these short-term blips, we do expect supply to grow enough this year to generate some improvement.''

Oil traders are waiting to see if that's true. They -- and oil prices -- are hanging on OPEC officials' every word. ''We're going to look for any type of rhetoric, any type of headline banter that would suggest more output,'' says Jim Quinn, associate vice president for A.G. Edwards.

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-- Martin Thompson (mthom1927@aol.com), August 15, 2000