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Record High Crude Prices Could Crimp Gas Demand: Area Drivers Striving to Trim Their Travel, Improve Cars' Efficiency

Posted on: Saturday, 22 April 2006, 03:03 CDT

By Darryl Enriquez and Katharine Goodloe, Milwaukee Journal Sentinel

Apr. 22--Jitters over Iran, rebellion in oil-producing Nigeria, the lingering effects of Hurricane Katrina. All big reasons prices at the gas pump have jumped to $3 a gallon and higher.

But prices could drop as fast as they've risen, experts say, for a bunch of small reasons: more drivers cutting back on trips or sharing rides, keeping their tires properly inflated and laying off the accelerator.

"The market will get so high that it will look for a reason to come off," said Mary Welge, an analyst with Oil Price Information Service, a privately owned pricing and information service for U.S. markets. "Because it's running high makes it vulnerable for a fall."

That's where gas conservation plays a role, she said.

The American Petroleum Institute reported that gas deliveries to retailers in March were 0.6% below last year's figure, showing that high gas prices have put a crimp in demand.

"If everybody cut back a little bit, that certainly would help," said Bob Bartlett, president of Wisconsin Petroleum Marketers & Convenience Store Association. "People are reluctant to car pool and cut back on driving, and people yawn when talking about gasoline conservation.

"But keeping tires properly inflated can save $50 to $75 a year and changing an air filter, that's another big gas saver."

As gas prices around the Midwest increased this week 10.1 cents to levels 60.5 cents higher than this time last year, some motorists in the Milwaukee area are heeding the call to conservation.

Jim Schaff, 57, of Cedarburg, a receiving checker for Delphi Corp. in Oak Creek, said he checks the air in his tires twice a week to help ensure maximum gas mileage on his 2003 Impala, which gets 29 miles per gallon.

Four months ago, Samih Omari, 45, of Shorewood parked his Lincoln Town Car after the $60 it guzzled each week in gas no longer seemed doable. He bought a smaller, two-door Honda Civic.

He said he tries not to buy too much gasoline at once -- purchasing just 4.5 gallons on Friday in his stop at BP station on Milwaukee's Capitol Drive. Instead, he walks to his job as a math and engineering professor at the University of Wisconsin-Milwaukee and tries to run errands on foot.

"The prices go up so fast," Omari said. "I don't think we'll stop driving, but we have to find a better way."

Ann Lemons, 43, of Saukville said she's been plotting her trips more carefully the past few weeks, running errands on the way to her children's sports practices or to work, rather than making separate trips.

Between violin lessons and grocery shopping, she stopped Friday to fuel her minivan at a Port Washington Citgo charging $2.95 a gallon for regular gasoline.

Although her 15-year-old daughter Liz is learning how to drive, Lemons said she won't let her daughter hop into the driver's seat just to practice.

"The only time we go out to drive is when we actually need to be going somewhere," Lemons said.

Prices may fall

Prices nationally rose for the third week in a row, reaching their highest level since Oct. 10, 2005.

During that period, the cost of a gallon of regular gas increased 28.5 cents, the U.S. Energy Information Administration reported.

But experts say there are plenty of factors in the pipeline that should send prices falling.

Welge says prices historically drop after Memorial Day, and the Energy Information Administration is predicting that average cost of regular-grade gasoline will not stay at $3 per gallon.

According to the Energy Information Administration, unusual factors that pushed prices higher should change, including:

-- A larger-than-normal amount of refinery capacity is offline. Three refineries on the Gulf Coast shut down last fall's hurricanes are beginning to return to operation. Other refineries are undergoing scheduled spring maintenance.

-- Crude oil prices have risen to record highs because refiners are building their inventories as a hedge against possible supply problems later.

-- The transition from MTBE reformulated gasoline to ethanol reformulated gas in parts of the country.

The optimistic predictions assume no new major disruptions.

"Our forecast assumes that there are no major problems in U.S. refineries, pipelines, or any part of the distribution chain," the agency said. "It also assumes that no additional oil production disruptions occur overseas."

The industry keeps a constant eye on oil-producing countries such as Nigeria, where militants reportedly have cut daily oil exports more than 20%. Market attention is focused on tensions over Iran's nuclear ambitions.

"Any potential military action against Iran (OPEC's second leading producer) would be the sort of thing that would push crude up to $100 a barrel," Welge said.

Tom Kertscher of the Journal Sentinel staff contributed to this report.

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Copyright (c) 2006, Milwaukee Journal Sentinel

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Source: The Milwaukee Journal Sentinel

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