Market keeps gas suppliers guessing

Published 5:00 am Monday, September 8, 2003

Officials in the wholesale gasoline industry are hopeful priceswill continue to decrease, but they are cautious of makingpredictions.

Robbie Meteer, inventory control manager at R.B. Wall OilCompany, said the current market is unpredictable.

“Compared to the past, it has been absolutely crazy,” he said.”The prices are jumping up and down. Right now it’s headed down,but how long that will last I don’t know.”

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Kevin Matthew, business manager for Buffalo Services,agreed.

“It should drop a good bit over the next few weeks,” hesaid.

Secretary of Energy Spencer Abraham announced Sept. 3 that hisdepartment would conduct an inquiry into recent gasoline priceincreases. The inquiry will compare recent supply and demandfactors affecting prices against historical data to determine ifthose factors justified the increases.

Abraham did not say when the department would release theresults of that inquiry to the Federal Trade Commission and theU.S. Congress.

“They’re going to find that the industry was short on inventoryand when the refineries shut down that really put a crimp on thebig oil companies. They had to increase prices to lower demand,”Matthew said.

The drop in prices is not a reaction to the inquiry, Meteer andMatthew agreed, but rather a return to more normal circumstancesand an increasing inventory.

Several events occurred simultaneously to trigger the largestprice increase in U.S. history, Meteer and Matthew said. Thosefactors include low crude oil and gasoline inventories, seasonaldemand, the war in Iraq, and a disruption of service caused by theAugust 14 power outage that affected the entire Northeasternseaboard and shut down four major oil refineries.

Although the blackout only lasted a few days, it takesrefineries more than a week to two weeks to return to normalservice, Matthew said.

“It’s not flipping a switch,” he said. “They have safety andenvironmental procedures to follow to bring them back online.”

The blackout, coupled with other damaging factors, drove upprices, Meteer said.

“Any time a major event occurs the prices seem to want to goup,” he said. “Whether it affects prices or not, I think (the oilcompanies) feel they will eventually so they raise prices tocompensate.”

Both Meteer and Matthew expect prices to drop as those factorsstabilize.

“I really look for the demand to go down a bit now that thesummer driving demand is over,” Matthew said. “Their inventory willbe able to build back up now and that will drop prices. We’re atthe mercy of the big oil companies also. We’re not too differentfrom the average consumer.”

Meteer said prices two weeks ago were as high as he can everremember than being, but added that they have already seen pricesdropping a small increments during the last week.

“Overall, it’s been decreasing at a good pace,” he said. “Anytime it drops more than a nickel a day it scares you because youdon’t know what will happen next.”

He encouraged caution among the retailers. Prices shouldn’t dropfast, but should decrease slowly to give the market time to recoverand stabilize.