Tuesday, April 08, 2003

The truth is out! President Bush invaded Iraq only for the oil! That's what the critics have said all along, right?

Um... but wait... if he and his cronies were out to make 'billions' on the price of oil, what happens now that the price is dropping???

Oil worries shift: Glut now a fear
Tue Apr 8, 5:51 AM ET Add Business - USA TODAY to My Yahoo!

James R. Healey USA TODAY

It seems crazy after weeks of worry over shortages and high prices, but the big concern about oil now is that there's too much of it, not too little.

For motorists, a surfeit is good news. Gasoline prices are dropping steadily, if not yet quickly, as worries about shortages evaporate.

Petroleum traders have begun to envision a rebuilt postwar Iraq (news - web sites) pumping more than 3 million barrels of crude a day, as it did before its war with Iran in 1980. Prior to the U.S. invasion last month to oust Saddam Hussein (news - web sites), Iraq was pumping 1.75 million barrels a day.

Falling prices of crude oil futures and wholesale gasoline mean ''the consumer can expect 20 cents less at the pump'' if oil prices don't rally unexpectedly, says energy-pricing expert Peter Beutel, president of consultant Cameron Hanover.

For oil merchants, the bad news is that a barrel is worth 26% less than it was just a month ago. The Organization of Petroleum Exporting Countries, which controls 40% of world oil exports, is considering an emergency meeting April 24 to cut production.

''The market is full of oil. It's facing a glut, not a shortage,'' says OPEC (news - web sites) President Abdullah al-Attiyah, the oil minister for Qatar. ''My main worry is how to deal with the dramatic price drop.''

A barrel of benchmark West Texas intermediate crude oil for delivery next month was $27.96 at the close of trading Monday in New York, down 66 cents. A month ago, it was $37.78 and edged up to a recent high of $37.83 on March 12.

If it falls below $26.30, according to Beutel's technical analysis, it could free-fall to $20.70 before braking, good for another 10- to 15-cent drop in gasoline.

''It's going to be hard to stop. These prices are like an aircraft carrier -- hard to turn around,'' says Tom Kloza, senior oil analyst at Oil Price Information Service. ''Everybody wants to know when the price for them is going to drop, and the answer is really soon.''

Kloza says today's megastations sell gasoline so fast they refill their underground tanks every two days or so, meaning cheap wholesale prices resulting from cheap oil show up quickly at the pump.

Minnesotans are enjoying the biggest retail price drop the past month. The statewide average for regular is $1.496, motorists club AAA reported Monday. That's down 15 cents, or 9.1%.

Prices in New York and Western states, though, remain higher than they were a month ago, despite a downward drift from record average prices set last month.

That's especially perverse because, Kloza says, the wholesale price of West Coast gasoline has plunged 60 cents in a week, ''an incredible drop.''

Prices in California and surrounding states that use summer gas blends to cut pollution and in Alaska and Hawaii tend to go up sooner and faster than in the rest of the USA and drop slower.

In a report earlier this month, the California Energy Commission noted that extraordinarily high crude oil prices on war fears were mainly to blame. But, it said, higher gasoline prices ''are not completely explained by the higher price of crude oil. Especially troubling is the fact that gasoline prices climbed quicker and higher in California than in the rest of the country.''

Although CEC said an investigation by the attorney general didn't appear warranted at this time, it said it would continue to monitor supplies and prices.

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