Exxon, Chevron freeze oil prices

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09/11/2001 - Updated 08:11 PM ET Exxon, Chevron freeze oil prices

From wire reports

WASHINGTON Two big U.S. oil companies said Tuesday they had frozen wholesale fuel prices, also known as "rack" prices, charged to distributors and dealers at levels in effect before the terrorist attacks in New York and Washington.

The announcements by Exxon Mobil and Chevron followed reports of gasoline lines and price gouging in some areas after the attacks.

Panic sent prices skyrocketing in Oklahoma, Mississippi, Michigan and other states.

R and L Texaco in Oklahoma City increased the price of unleaded gasoline to $5 a gallon after a supplier told owner Lewis Pfenninger it was unclear when the next shipment would be available and at what price.

At Sunshine Conoco in Springfield, Mo., gas prices were raised after the attacks by 40 cents a gallon to $1.99.

In California, gasoline wholesalers raised prices as much as 20 cents a gallon on supply fears, although traders said there was no evidence of a shortage.

Exxon Mobil and BP sought to calm energy markets. The companies said supplies would not be hampered. The companies tried to reassure consumers that there was no need to stockpile gasoline.

"We are asking all of our customers to maintain their normal buying habits," Exxon Mobil spokesman Tom Cirigliano said late Tuesday. "We have ample supplies. We're trying to avoid an artificial shortage."

But as distribution terminals closed down around the country for security reasons and motorists worried there wouldn't be enough fuel, gasoline prices rose almost immediately in parts of the Midwest.

Prices had already been soaring in the Midwest because of distribution bottlenecks long before Tuesday's catastrophe.

"It's supply and demand," said Pfenninger, owner of the Texaco station in Oklahoma City where gas sold for $5 a gallon. "My lines were so long."

Pfenninger said he could have sold out his supply at that price, but decided to close early. He said he would reconsider the price hike on Wednesday.

Greg Seiter, a spokesman at the AAA Hoosier Motor Club in Indiana, said his office has received reports of gasoline prices rising to $3 and $4 a gallon in parts of Indiana including Anderson, Bloomington and Indianapolis.

The AAA's national office is urging retailers not to impose large price increases.

Nationwide, the retail price of unleaded gasoline is $1.54 a gallon.

Tom Kloza, director of Oil Price Information Service, a Lakewood, N.J., publisher of oil industry data, said he expects petroleum companies to act with restraint in the face of intense marketplace jitters.

"To be raising prices frenetically in this atmosphere makes the entire situation more difficult," he said. "The last thing the American public needs to think about right now is that they need to be racing out to load up on fuel."

Rack prices for fuel are usually set one day in advance at the end of each business day, but spokesmen for Exxon Mobil and Chevron told Reuters prices for Wednesday would be held at Tuesday's levels, which were set on Monday.

Elsewhere, the American Petroleum Institute (API), which represents the U.S. oil industry, sought to reassure the public that supplies of gasoline and other fuels would not be disrupted.

"All information we have tells us that fuels are flowing normally to wholesale and retail markets throughout the United States. Our most recent data indicate that gasoline and diesel fuel inventories are adequate to meet demand. Refinery production remains strong," the API said.

World crude oil prices surged Tuesday after aircraft attacks destroyed the World Trade Center and damaged the Pentagon in a terror attack on the United States.

London Brent Blend futures hit a peak of $31.05 a barrel, its highest level since December last year, before closing at $29.06, up $1.61 or nearly 6% on the day.

"This has heightened uncertainties around the Middle East," said Tim Noest of brokers ADM in London. "Brent just went through the roof."

In Missouri, gasoline prices were reported rocketing at some stations Tuesday, though it was not immediately clear whether the spikes were related to terrorist attacks in New York and Washington. There were no immediate reports of price gouging elsewhere.

On St. Louis' north side, prices at a Phillips 66 station along Interstate 70 were $2.99 a gallon for regular unleaded gasoline, $4.99 for premium unleaded.

Long lines were reported at gas stations across the state Tuesday afternoon. In the Kansas City suburb of Lee's Summit, lines at some stations extended as far as 20 car lengths, the Associated Press reported.

Donna Cox, manager of Osage Beach Self Serve in the Missouri Ozarks, said prices are on the rise as people grow concerned about supplies. Prices at her station went from $1.59 to $1.79.

"We tried not to go up, but everybody's panicked and we're afraid we'd run out of gas," Cox said. "We don't know what the next few days hold. I think it's a lot like a run on the banks in 1929."

The attacks presented no immediate threat to world oil supplies, but professional crude oil dealers said traders had been forced into the market because of the uncertainty surrounding the terrorist attacks, and because commodities present a safe haven for jittery investors.

U.S. President George W. Bush called the deliberate aerial assaults an "apparent terrorist attack," and traders said there was speculation they could be linked to the recent explosion of violence in the Middle East between Palestinians and Israel.

Early speculation about the source of the attacks centered on Saudi-born dissident Osama bin-Laden.

U.S. companies unable to trade on the New York Mercantile Exchange, which closed after the attacks, had funneled their purchases through London's International Petroleum Exchange.

"We're seeing a flood of orders which have been exacerbated by the close of the New York exchange. International tension means oil up, gold up," said broker Christopher Bellew of Prudential Bache in London.

The Secretary-General of the Organization of the Petroleum Exporting Countries Ali Rodriguez said that the Arab-dominated cartel would ensure world oil supplies and price stability.

"OPEC member countries are committed to their promises to guarantee sufficient oil supplies and their policy of strengthening market stability," Rodriguez said after the attacks.

"Furthermore OPEC's members are prepared to use their spare capacity, if deemed necessary, to achieve these goals."

Rodriguez said there was no chance that any cartel members would threaten to use oil as an economic weapon in the Middle East situation.

OPEC is due to meet on September 26 and had been expected to leave oil supplies unchanged after cutting output from the beginning of the month by a million barrels a day.

http://www.usatoday.com/money/markets/2001-09-11-oil-surge-attack.htm

Rodriguez said OPEC countries had substantial spare production capacity and were prepared to use it in order to achieve their goals.

-- Martin Thompson (mthom1927@aol.com), September 11, 2001

Answers

It's good to see that the major oil companies are making a preemptive strike this time, announcing a wholesale price freeze BEFORE they get blamed by all the liberal politicians in Washington for price gouging. Good PR move. Now, if prices keep going up, voters can only blame their neighbors, the people who run all the little gas stations around the country.

-- JackW (jpayne@webtv.net), September 12, 2001.

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