Posted on: Friday, March 4, 2005

Consumers likely to feel oil-price rise

By Justin Blum
Washington Post

WASHINGTON — Prices for crude oil and wholesale gasoline surged yesterday, extending a recent run-up and leading analysts to predict steep increases at the pump in coming weeks.

A combination of high worldwide oil demand, cold weather and fears of tight supplies has helped push prices higher in the past two weeks. Oil traders also cited an influx of speculators moving their money from the stock and bond markets into oil.

On the New York Mercantile Exchange yesterday, U.S. benchmark crude oil for April delivery hit more than $55 a barrel before receding to close at $53.57, up 52 cents from Wednesday. Traders pushed the wholesale price of gasoline to a record high on Wednesday and again yesterday.

The increases will quickly be passed along to consumers at gas stations, analysts said.

"It is coming," said Tom Kloza, chief analyst for the Oil Price Information Service of Lakewood, N.J. "It's not going to be like raindrops. It's going to be like an anvil falling on the consumer in the next 40 days."

Kloza said he expected prices for a gallon of regular gasoline to increase nationally from yesterday's average of about $1.92 to between $2.10 and $2.25 by later next month. Prices could go even higher, he said, depending on whether crude oil-price increases continue.

Analysts attributed the recent rise in crude prices partly to higher-than-expected demand from China and other countries. Cold weather also has caused prices to rise as consumers use more home heating oil.

The Organization of the Petroleum Exporting Countries also has played a role in pushing up prices in recent months. The cartel in December agreed to cut some production as oil traded in the $40-a-barrel range. Analysts said OPEC followed through with some of those cuts, taking oil off the market. The cartel is scheduled to meet on March 16 and could set new production levels.

U.S. Energy Secretary Samuel Bodman said the Bush administration was in contact with OPEC members in an effort to hold down prices.

In October, prices reached a record of more than $55 a barrel before dropping to around $40 a barrel in December. Since the beginning of 2005, prices are up more than 27 percent. Adjusted for inflation, prices have remained well below the peak reached in 1981.