DESPITE OIL GLUT, WAR COULD FORCE PRICES UP

CAPE GIRARDEAU -- Many people agree there is a "glut" of oil on the market now, but that any fighting in the Persian Gulf could prompt market speculation, panic buying, hoarding and price hikes.

Gasoline prices in Cape Girardeau are still hovering around $1.12, well under the national average.

"But, with the threat of war in the Mideast, I think we can expect oil price increases," says Bob Blank of Bi-States Oil Co. here. "I received information from one of my suppliers Monday that prices were increasing, effective immediately, from 11 to 14 cents a gallon, depending on what type of fuel we're talking about."

Blank points out, however, that he expects any hike in prices to be short-lived.

"Some people are in a frenzy just now," he said. "There's a glut of crude oil on the market, but there's a big difference in crude oil and a refined oil and traders don't know what to expect. I think the prices will come down again, and we'll be better off in a week to 10 days than we are now.

"I believe that if we get involved in a war that it will be a short one, maybe 72 hours. Then, we'll see the bottom drop out of oil prices."

Gasoline prices across the nation have dropped an average of nearly seven cents a gallon at the pump in recent weeks, reflecting the traditionally lower winter demand, said Blank.

In a survey released over the weekend, the average prices nationally for all grades of gasoline was $133.43, a drop of 6.85 cents since Dec. 21, according to the biweekly Lundberg Survey.

Since Iraq's Aug. 2 invasion of Kuwait, gasoline prices hit a high average of 147.09 cents on Oct. 19, up from a pre-invasion price of 117.71 cents a gallon on July 20.

During that October high, crude oil prices had jumped to almost $40 a barrel, before leveling off and dipping back to the low $20s. The price edged up to $25 a barrel by the middle of last week.

Following activities last week Secretary of State James A. Baker's meeting with Iraqi Foreign Minister Tariq Aziz Tuesday, and Congress' approval of a resolution Saturday giving President Bush authority to wage war in the Persian Gulf crude oil prices have steadily increased to more than $30 a barrel Monday.

"Oil prices were just over $27 a barrel Friday," said Joe Domian of Edward D. Jones & Co. here. "Today, it edged up to more than $30 a barrel."

Domian said crude oil closed Monday at $30.78 a barrel, but had traded as high as $32 early in the day.

"Any time a barrel of crude oil goes up a dollar, you can expect a two-cent increase at the pumps," said Blank.

"The fact that oil is now trading on the New York Mercantile Exchange makes the price situation more volatile," says Ken Bender of Jackson Oil Co. "With a little bad news the price will jump up. With a little good news, the prices will go down."

Barker said he felt that regardless of the news, if the supply is exceeding the demand it will come down.

"That's where it is today," said Barker Monday. "Even though traders have run the price up considerably through the fall, the supply is still there, and the prices have backed off from the high points."

Barker agrees that area prices are under national averages.

"We're consistently under the national average," he said.

A spokesman for a Missouri oil group, who requested anonymity, said Monday, "The glut of oil now is probably as high as it has been since 1982. I think the prices in the future will depend on what kind of war we have, and how long it will last.

"It's my understanding that increased production worldwide over the past five months not only has replaced the 4.3 million barrels a day of oil lost from Iraq and Kuwait, but has left the stocks at a level of over 300 million barrels," added the spokesman.

He noted that the government had no plans to regulate prices or ration fuel.

If war does erupt in the Persian Gulf, the Bush administration is betting heavily on market forces, the current glut of oil and the use of government-owned emergency reserves to head off an energy crisis.

"There is no reason to panic," says Charles DiBona, president of the oil industry's American Petroleum Institute, echoing the sentiments of Energy Department officials who a week ago said "the world had plenty of oil right now."