Oil prices may stay high even after war
By Ken Moritsugu
Knight Ridder News Service
WASHINGTON — While uncertainty about a war against Iraq has contributed to a sudden spike in oil prices, those prices could remain high even if a U.S. invasion achieves quick victory.
And even if crude oil prices fall, gasoline prices likely would remain high at least into late spring, analysts say. It generally takes one to two months for oil price shifts to feed through to gasoline. Any postwar declines could be offset by upward pressure on pump prices as demand picks up with the start of the summer driving season.
The nationwide average price for unleaded regular is $1.67 a gallon, according to the American Automobile Association, 54 cents higher than a year ago.
Unleaded regular in Hawai'i averaged $1.95 a gallon as of Friday compared with $1.81 a month earlier, according to AAA.
"Unless it reverses itself quickly, the energy shock is big enough to threaten the economy," said Richard Berner, the chief domestic economist at the Morgan Stanley investment bank in New York.
Global Insight Inc., an economic consulting firm in Lexington, Mass., doesn't expect gasoline prices to ease from today's level until July or August at the earliest.
Certainly, war rumors have created short-term havoc in oil markets, pushing the price of oil on the New York Mercantile Exchange up to $37.70 a barrel on Wednesday — the highest since the Iraqi invasion of Kuwait in 1990 — before dropping back to close at $36.60 on Friday. A barrel is 42 gallons.
Yet some economists argue that oil prices would be high today with or without the so-called war premium. They note several other factors, such as low inventories of crude oil, high demand for heating oil because of the cold winter and the disruption of production in Venezuela due to political unrest.
These factors alone are enough to account for much of the 45 percent rise in oil prices from $25 a barrel since November, said Dave Costello, an economist with the federal Energy Information Administration.
