Many to blame for record-high gas prices by Robin Washington Monday, March 20, 2000

With gas prices hitting record highs and closing in on the dreaded $2-a-gallon mark, consumers getting soaked at the pump search for familiar targets to blame.

``It's OPEC,'' said Hopedale's Dixie Brack while filling up at the Mass Pike service area in Natick yesterday. ``They're the ones raising the prices and they're the ones that are controlling the demand.''

Yet while the world's oil producers earn most of the public relations fallout for the upward spiral of petrol, they're not the only ones responsible.

As shell-shocked consumers resign themselves to paying sky-high prices at the pump, middle men from the refinery to tax collectors to the dealer hold out their hands for their take of the cut.

``Who's making money? The producers and refiners,'' said Tom Kloza of the Oil Price Information Service.

``In the big wholesale spot markets, gasoline right now can sell for $9 a barrel over crude,'' he said of refinery charges that have previously been as low as $2.25 a barrel, which Kloza called the break-even point.

That markup means a $27.75 barrel of North Sea crude will leave the refinery at $39.06 a barrel, or 93 cents a gallon at 42 gallons to the barrel.

Helping to push up the cost of gas are lower prices paid for jet fuel and heating oil, after a spike that left oil heat homeowners in the cold this winter, Kloza said.

But oil companies deny taking advantage of supply and demand to push up gas prices.

``I'm not sure where they're getting that ($9 per barrel) number from,'' said Marianne Kah, the chief economist for Conoco, who declined to disclose the refining fee charged by the nation's fourth largest oil company.

``The number would not be meaningful to you. It varies tremendously from refinery to refinery,'' she said.

And putting the blame back on the OPEC, which sells crude at $27.75 per barrel, she said, ``The biggest single cost is the crude.

``OPEC took production off the market (during the Asian recession) and suddenly the Asian market came back. They've taken too much demand off the market and now they're trying to figure out how to get it back without the prices collapsing.''

With OPEC meeting next week, Kah said there is already a hint prices will fall. ``I think they've been trying to talk the price down. Just talking about it lowers it,'' she said.

But she pooh-poohed appeals for refineries to increase their output from the Clinton administration, itself under fire for refusing to relax gas taxes of 18.3 cents per gallon.

``Why would you buy crude this month if you expect to get a lower price next month?'' Kah said.

That's also the reasoning used further down the line, in a business that observers say is more about speculating than product.

``If you're in this business, you're not in the business of gasoline. You're in the business of negotiating,'' said Stan Hatoff, owner of gas discounter Hatoff's in Jamaica Plain.

Yesterday, Hatoff was selling regular for $1.48-9/10, among the area's lowest.

But that price comes after brokers have tacked on a few cents per gallon, as well as taxes and shipping costs. Pinning down exactly who gets what can be tricky in a market where pricing is as volatile as the fuel.

``These numbers will change by the time our conversation is over,'' Kloza said.

Regardless of how they're determined, though, by the time the dealer markup is figured in, consumers end up paying two-and-a-half times the cost of crude straight out of the ground.

Hatoff said his station makes money more on the volume of gas sold rather than dealer markup.

``The higher the prices go, the more business we do. We have 50 hoses. We can get them in and out quickly,'' he said.

Yet don't think that dealers aren't complicit in the price jumps, Hatoff said.

``It's up to the vendors what they want to sell it for,'' he said.

Kloza said the typical markup for dealers is 5.1 cents a gallon. But Hatoff said that figure is too low. ``At 10,000 gallons that's only about $500. You think somebody's going to make it at $500 a week?''

While drivers scramble for the lowest price, pumps are also busy at stations that don't discount gas.

``What are you going to do? You have to fill the car,'' said Kerry O'Donnell of Brookline, buying regular for $1.69 at an Exxon in the West End.

Driving a Jetta, O'Donnell taunted her gas-guzzling fellow motorists, saying, ``I think this serves those SUV people right.''

But with reports showing SUV sales up 22 percent from this time last year, her scorn may be falling on deaf ears.

``I said to my salespeople that's a good thing to use if somebody pulls in here with a bigger car,'' said Rhett Butler, general manager of Boch New-To-You Superstore in Norwood. ``Tell them we can put them into a Toyota and they can save on gas. But not one person has said anything about gas prices.''

The higher prices haven't forced large numbers of commuters into public transit yet, either. But that could change if prices reach the psychological barrier of $2 per gallon, said Art Kinsman of the American Automobile Association of Southern New England.

``People might start thinking about doing other things and taking shorter trips,'' he said.

While placing most of the blame on OPEC, Kinsman said AAA has asked the Clinton administration to lean on the refineries as well.

Washington is also where Hatoff places the blame.

``With all our clout, I can't see why OPEC has us by the throat,'' he said.

http://www.bostonherald.com/bostonherald/lonw/gas03202000.htm

-- Martin Thompson (mthom1927@aol.com), March 20, 2000