The recent spike in gasoline prices caused by pre-war anxieties in the crude oil industry is receding. The Charlottesville community now can look forward to falling prices at the pump, according to petroleum and service station industry representatives.
"In the past couple of weeks, crude oil prices have slowly begun to go down in the world markets," American Petroleum Institute spokesperson Chris Kelley said.
He noted gasoline prices also have begun falling and anticipates they will continue to do so.
The cost of crude oil, the "main ingredient" of gasoline, makes up 40 to 42 percent of the cost of a gallon of gas, Kelley said.
According to the Energy Information Agency statistics released Monday, April 7, gasoline prices along the East Coast have continuously fallen from a two-month high three weeks ago. On average, prices for regular grade gasoline began steadily increasing in mid-December and peaked at $1.644 a gallon on March 17. By Monday they quickly had dropped off, falling to $1.546.
Kelley attributed the substantial pre-war hike in gasoline prices to fears a war with Iraq would result in America being cut off from Middle Eastern oil. Iraqi oil makes up 2 percent of the world's total supply. However, the present paralysis of the Iraqi oil industry has not adversely affected the United States because other countries are making up the difference.
Bill Hanger, assistant manager of the Citgo on Ivy Road, said business at his station has slightly trailed off recently because of the high prices. Prices rose from a low of $1.19 in December and eventually reached a high of $1.61 two weeks ago. Pump prices since have fallen two cents to $1.59.
Both Kelley and Hanger, a local resident since 1987, said prices also shot up in anticipation of the 1991 Persian Gulf War. Prices fell rapidly after the allied invasion, and both predict a similar plunge in the coming weeks.
Economics Prof. David Mills, however, noted crude oil prices are only one of the variable factors contributing to what consumers pay at the pump. Other factors include refining and distribution costs.
The colder than normal winter on the East Coast, which resulted in more crude oil being processed into heating oil, and a Venezuelan oil workers' strike could also have contributed to the increase in wholesale prices, Hanger said.
Scott Ramm, owner of the Texaco in the Barracks Road Shopping Center, said a station's portion of the profit remains the same whether the final cost of oil is high or low. This is because retailers only tack on a small additional cost to consumers over the wholesale price.
"Oil companies decide all that and let everyone yell at us when they raise the prices," Ramm said.
Prices could remain high, though, according to Mills, because of the potential fluctuations in the amount of crude oil being exported from the Middle East.
"Once the oil being produced in Iraq ... is back in the world market, prices should move downward unless there are some other disturbances," Mills said.
Such disturbances could include increased demand, breakdowns in distribution networks or collective action by Middle Eastern nations to apply pressure to international markets.
Kelley added that it is uncertain whether a regime in Baghdad friendly to the United States, free of President Saddam Hussien's grip, would result in further diminishing of prices because of the "clouded situation" surrounding current international politics.
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