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The Honolulu Advertiser
Posted on: Thursday, March 27, 2003

Gas prices hinge on war's length

By Sean Hao
Advertiser Staff Writer

Ben Alaimaleata, an employee at Lex Brodie's on Queen Street, pumps gas that has gone up in price steadily in recent months, although it has fallen back slightly since hitting a record $2.06 per gallon last weekend.

Deborah Booker • The Honolulu Advertiser

Discussion on war, oil

What: Oil experts from the East-West Center discuss the impact war in Iraq has on oil prices.

When: 11 a.m. today.

Where: John Burns Hall, East-West Center, 1601 East-West Road at the University of Hawai'i.

Cost: Free.

Gasoline prices in Hawai'i could head lower within months despite a recent spike in crude oil costs caused by concerns of a drawn-out conflict in Iraq.

That's the message an East-West Center energy expert, Fereidun Fesharaki, plans to deliver today during a presentation at the University of Hawai'i's John Burns Hall. Initially falling after the start of war last week, crude oil prices have gone up in recent days on concern the conflict will take longer than expected and because of a drop in exports from Nigeria, where there's fighting between government troops and local forces, Fesharaki said.

Yesterday crude oil for May delivery rose 66 cents to $28.63 a barrel on the New York Mercantile Exchange. During the past year the price has risen 13 percent.

However, a seasonal drop in demand for oil that starts in the second quarter should offset crude oil imports now being lost from Iraq, Fesharaki said. Increased imports from Organization of Petroleum Exporting Countries also should alleviate supply concerns. Prices could come down sooner with a breakthrough in the U.S.-led war in Iraq, Fesharaki said.

"I think prices will have no choice but to go down," he said, unless war drags out until winter.

As far as prices at the pump, it could take four to six weeks for gasoline prices to drop in response to lower crude oil prices, Fesharaki said. That's how long it takes crude oil to complete the refinery and distribution process.

"When crude oil prices go down, product prices take a while longer," Fesharaki said. "When they go up, prices go up quicker.

"It's sticky going down, but it's loose going up."

In Hawai'i, the price of a gallon of gasoline has dipped slightly since hitting a record $2.06 last weekend. Yesterday the average price was $2.039, down from $2.05 Tuesday, according to AAA Auto Club.

Prices for other petroleum products such as jet fuel and fuel oil used to drive electrical power plants could fall faster than gasoline prices, Fesharaki said.

Bloomberg News contributed to this report.

Reach Sean Hao at shao@ho noluluadvertiser.com or 525-8093.