Gasoline for $3 a gallon

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Thursday, November 30, 2000 Gasoline for $3 a gallon By Ken Moritsugu Knight Ridder Newspapers WASHINGTON A leading oil market analyst warned Wednesday that gasoline prices could reach $3 per gallon next summer and that crude oil could rise to $50 per barrel in the next two to four years. • L.B. firm suing AMC • Gasoline for $3 a gallon • State posts record exports • Gateway warning sends stock into dive "We're not quite in an energy crisis, but one is developing and I think this one's going to last longer and it's going to be a lot more difficult to resolve," said Philip Verleger Jr., who frequently testifies before Congress on energy issues.

His scenario is at odds with the view of most other analysts, who believe that both oil and gasoline prices will ease somewhat next year. The Department of Energy projects that regular unleaded gasoline will average about $1.40 per gallon next summer, down from $1.52 this summer.

But several experts agreed that the risk exists for higher prices if, for example, Iraq were to withhold its oil exports. There is little excess supply of oil, gasoline or heating oil in the United States, so any supply interruption or increase in consumption will create shortages that push prices up.

"I don't think it's the most probable outcome, but it's definitely possible," said Bruce Cavella, an oil industry analyst for Standard & Poor's/DRI, an economic consulting firm in Lexington, Mass. "There could be any number of factors that could make oil go up to $45 because the market is tight."

In a luncheon address to the Institute for International Economics, a think tank, Verleger painted a bleak picture for energy prices for the next four years. He predicted gasoline would reach $2.50 to $3 per gallon this summer and could reach $4 to $5 per gallon in two to three years.

Prices that high could drive the U.S. economy, already expected to slow next year, into hard times. "That run-up in gas prices would be like a huge tax increase," said Mark Vitner, economist at First Union Corp., a Charlotte, N.C.-based bank. "It would take money away from consumers and leave them less to spend on everything else."

Verleger blamed today's high prices mostly on bottlenecks in two areas: getting crude oil from overseas to the United States and refining that crude into gasoline, winter heating oil and other finished products. He added that aging U.S. pipelines to deliver those products leave regions such as the Midwest vulnerable to the pipeline breaks that helped drive up gasoline prices there to over $2 per gallon for a time earlier this year.

Old infrastructure and logistical constraints create "a sclerosis" of the energy system, said Verleger, who runs his own consulting firm out of Newport Beach. "It's freezing up."

OPEC nations, which produce 40 percent of the world's oil, has increased production this year. Despite tanker problems, that oil eventually should reach the United States, analysts say.

http://www.ptconnect.com/archive/today/biz02.asp

-- Martin Thompson (mthom1927@aol.com), November 30, 2000

Answers

We're not quite in an energy crisis, but one
is developing and I think this one's going to
last longer and it's going to be a lot more
difficult to resolve

As the unmentionable rumbles on, the waves
become larger and the people wonder of the
cause :-§

-- spider (spider0@usa.net), November 30, 2000.


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