Political unrest could fuel higher fuel prices

| Monday, March 31, 2003

American drivers this summer could see another round of high pump prices because of political tensions elsewhere in the world, The Boston Globe reported.

Political violence in Nigeria has cut production of high-grade crude oil used for fuel in the United States by 40 percent, forcing refineries on the East Coast in particular to scramble for replacement stocks and bidding up prices in the process. Meantime, Venezuela's state-owned petroleum industry, which still hasn't fully recovered from the civil strife begun in December, is in such poor condition that some analysts warn it may see a drop in output.

These developments come when stocks in the United States are so low that the U.S. Energy Information Administration March 26 said ''it will likely take many more weeks, or months, before U.S. petroleum inventories return to normal levels.''

Despite a recent surge of imports, the agency said gasoline stocks were declining when suppliers should be reloading ahead of the peak summer driving season. Meanwhile, analysts said the system was so tightly stretched that even small, unanticipated developments could push prices up further.

Another looming worry: a possible oil worker strike in Colombia, which sends its crude to American states located on the Gulf of Mexico for refining. If Colombia ''went down, clearly we would be looking at a very tight situation for the U.S. Gulf for gasoline production,'' said David Fyfe, an oil analyst for the International Energy Agency in Paris.

Meanwhile, the war with Iraq is the wild card in all of this global turmoil. For example, if the war takes longer than expected, and the United States is not able to return idle Iraqi oil fields to production anytime soon, crude prices could rise again.

Comments