Gas prices hit record
April 3, 2003
Motorists experienced record-high gas prices for February this year. On March 18, the national average rose to the highest price it has ever been at $1.72 for a gallon of regular grade gasoline. With records abounding recently, what should motorists expect in the coming months?
The answer is unclear according to Norma Cooper, manager of community affairs at the AAA Chicago Motor Club. Crude oil is the major component of gasoline, and there is so much uncertainty in the crude oil market that predicting prices is impossible, she said.
“This market deals with so much speculation,” Cooper said. “It reacts to things that really happen, [and it] reacts to things that don’t really happen.”
Historically, prices increase in April as demand increases for the coming summer months. Demand for seasonal uses, such as lawnmowers, motor boats, tractors, golf carts and additional travel cause the increase, she said.
“We are at the beginning of the time of year when refineries start changing to summer blend,” which is a cleaner burning type of gasoline, Cooper said.
This type of gasoline is more expensive to produce, which further increases retail gasoline prices during the summer, Cooper said.
Doug MacIntyre, a senior oil market analyst for the National Energy Information Administration, said prices are affected by two different factors: crude oil prices and gasoline.
It takes several weeks for a change in one of these factors to translate into price changes at the pump. However, a change in one does not necessarily translate into a change in prices depending on the influence the other exerts, he said.
MacIntyre gave the example of a recent drop in crude oil prices. He said the price dropped $11 a barrel. Each dollar a barrel changes translates into a 2.4-cent change in retail gasoline prices, he said. But the recent decrease in crude oil has only produced an 8 cent decrease at the pump. This, he said, is because of pressure on gasoline prices with the increased seasonal demand.
The recent burning of oil wells in Iraq has not had an effect on the price consumers pay at the pump, Cooper said.
“At this point that effect is negligible,” she said, pointing to the fact that the fires consumed several wells, but not the more important oil fields, and that Iraq is only responsible for 2.4 percent of the world’s oil production.
As for the future related to the war, Cooper said no one can predict the effect it will have on retail gasoline prices because it depends on the course the war takes.
“Unless things change in the next week or two, which they could, we would expect to see prices decrease a little,” MacIntyre said.