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Analysts expect gas prices to fall

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Posted: Thursday, June 10, 2004 9:49 pm

Gasoline prices dipped slightly for the second week in a row and most analysts expect them to continue falling through Independence Day as demand is slowing, inventories are rising and crude oil prices appear to be stabilized.

AAA Arizona said the average price for self-service unleaded gas in Arizona is $2.12 a gallon, nearly 3 cents lower than last week.

In the East Valley, prices dropped 2 cents a gallon to $2.17. In Scottsdale, prices fell 4 cents to $2.19 a gallon. “The worst is over for this first dose (of high prices), but there’s a real threat of a brief but horrid spike occurring most likely from the Aug. 1 to Sept. 10 period,” said Tom Kloza of the Oil Price Information Service, a private firm that tracks fuel prices. Experts expect demand to increase as families take to the road for summer vacations in July and August.

“It looks as though in the Western United States we finally, in the last couple of weeks, reached the numbers that made significant amounts of people drive a little bit less,” Kloza said. “Demand is still up, but it’s not up by the wild amounts it was up in April and May.”

Arizona, which dropped to seventh nationally for the highest gas price, is among 24 states and the District of Columbia with prices averaging more than $2 a gallon, AAA said. Nationally, the average price of gas fell more than 3 cents to $2.01 a gallon.

“There’s no unusual news out of California (which supplies 70 percent of Arizona’s gas), so there’s no reason for prices to go in any other direction,” said David Cowley, AAA spokesman.

“As we approach July Fourth and continue on, I think we’ll see it will kind of drop and there will be a period of time when it will hold |and then I think it will start to inch back up. I don’t know that we’ll ever get to where we are or have been,” Cowley said.

East Valley motorists interviewed Thursday said they hardly noticed any relief.

“Prices are absolutely still too high,” said John Smith, a stockbroker. “I don’t see any reduction in price at all. I’d like to see some regulation to fix rates at least below $2.50 a gallon. My salary hasn’t been raised accordingly with gas prices.”

Richard Nixdorf, a satellite dish installer, figures prices still need to come down 60 cents or more a gallon.

“The government should do anything and everything about it, but I know this’ll go in one ear and out the other anyway,” he said.

Solange Whitehead accused President Bush of asking drivers to subsidize the oil industry. “Do I blame George W. Bush? Yes, I do. But I’ll deal with that in November,” the engineer said.

Crude oil prices retreated after OPEC agreed earlier this month to increase its output by 2 million barrels a day in July and an additional 500,000 barrels a day in August. The wholesale price of gas dropped 30 cents in one week from $1.46 a gallon to $1.16.

John Felmy of the American Petroleum Institute said it’s too early to tell if prices will continue to fall. “The key is what is going to be the direction of crude,” he said. “We did see a pretty good jump in crude today (Thursday), I guess primarily driven by concerns of terrorism. The main northern pipeline in Iraq was attacked, and you’ve had some Nigerian strikes or threat of strikes that have roiled the markets a little bit.”

Crude prices went up almost a dollar Thursday to $38.45 a barrel, which he said is “a big jump day over a day.”

Felmy said it also remains to be seen if the nation’s pipeline and refinery system can keep up with demand. Refiners, he said, are running at 96 percent capacity, and any malfunctions could drive prices up. Gasoline stocks were up 2.1 million barrels last week, AAA said. Cowley said gas stocks were roughly 206 million barrels, the very bottom of the normal range for this time of year.

“If refiners can continue to build gasoline inventories, we’ll get a little cushion, but right now . . . we’re just not in a position where we can be really comfortable just yet,” he said.

AAA said the nation’s most expensive gas is in California, at $2.35, and the cheapest is in Oklahoma, at $1.84 per gallon.

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