Sunday, January 28, 2001

Get used to higher prices at the pump




By James Pilcher
The Cincinnati Enquirer

        Now that the OPEC cuts are official, many analysts are saying yet again that a $2 gallon of gas is likely for many regions of the United States.

        But they say that probably would have happened even if OPEC had not cut production by 1.5 million barrels a day earlier this month.

        “They've done a good job in ratcheting up the rhetoric, but it remains to be seen whether they have the internal discipline to stick to the cut,” said Tom Kloza, editor of OPIS, an independent oil industry newsletter. “And even if they do stick there, we could see oil prices at $25 a barrel and still see gas prices sky high like we did last summer.”

        Oil prices hit nearly $35 a barrel in September, and were above $30 a barrel for most of the summer — one of the reasons listed for last year's price spikes. OPEC then boosted production by 800,000 barrels a day in September, and prices bottomed out near $25 a barrel. But retail gas prices have remained at about $1.50 nationally.

        “Gas gets coupled with oil if oil goes up, but not necessarily if it goes down, especially during the summer,” Mr. Kloza said. “We just can't make enough gas here in the U.S. — and we have to because of reformulated and "boutique' gas - to meet demand. That's what causes the price spikes.”

       



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