Invasion Sparks Jump in Oil and Gasoline Prices

Motorists across the country saw gasoline prices surge about a nickel a gallon at most outlets Friday, as the price of crude oil soared on fears of a widening Middle East conflict.

Gasoline stations raised pump prices 4 to 14 cents a gallon, following wholesale price increases by major U.S. oil companies amid fears that Iraq’s invasion of Kuwait could disrupt oil production throughout the Persian Gulf.

Atlantic Richfield, the leading retailer on the West Coast, raised its wholesale prices for unleaded gasoline by 4 cents a gallon Friday afternoon. Chevron, the No. 2 West Coast retailer, increased the prices to its dealers by 5 cents a gallon.

Unocal said it planned to increase its wholesale gasoline prices 2 cents a gallon beginning at 12:01 a.m. today. Among the other companies also announcing price increases were Mobil Oil Corp., by an average of 3.5 cents a gallon; BP America Inc., by 4 cents and 5 cents, and Texaco, by as much as 7 cents a gallon.

Some consumers reacted with outrage.

“The oil companies are going to screw us one way or another,” said Ventura resident John Carrington at a Quality station in Chatsworth. “There’s not a hell of a lot we can do about it.”

Carrington also said the gas-price increase is another indication of the danger of U.S. dependence on foreign oil. “We’re selling off the country,” he said.

Consumer advocates also hurled accusations of price gouging. They maintained that U.S. oil inventories are sufficient to avert broad price increases. One analyst estimated that commercial crude oil inventories in this country total 385 million barrels, about 60 million barrels greater than this time last year.

“All the analysts say we have plenty of supply, internationally and domestically; it is not a reflection of a shortage of oil,” said consumer advocate Ed Rothschild with Citizen Action in Washington. “It is simply a panic market, and oil companies are using that panic to drive up prices in the short term.” But oil company representatives defended the increases, saying that dealers’ replacement costs surge almost immediately during times of production uncertainty.

Refineries hiked wholesale gasoline prices a total of 10 to 12 cents a gallon Thursday and Friday, estimated Michael Doyle, a St. Paul analyst, even though the oil from which the gasoline had been produced was purchased at the old, lower prices.

“Yes, we have the supply, but when we look at the retailer’s point of view, his cost of inventory replacement has gone up 10 to 12 cents a gallon,” Doyle said. “When he sends for a load of gasoline to replace his tanks, he pays more.”

George Babikian, president of Arco Products Company, Atlantic Richfield’s refining and marketing division, described a chain reaction that forces oil companies to match competitors’ price increases or face a flood of business that would deplete inventories. And he said that thin inventories leave oil companies more vulnerable to price fluctuations.

“The difference between shortage and glut throughout the world is only 2%,” he said. “When you have the kind of disruption in the Middle East that we have now, that could have very serious long-term ramifications for the crude oil supply.”

A few analysts blamed small retailers--who often set prices independently--of profiteering from the Mideast turmoil.

Oil prices surged Friday for the second day on rumors that Iraq might invade Saudi Arabia. The September contract price for West Texas Intermediate, the benchmark grade of U.S. crude oil, rose $1.38 to $24.49 a barrel in trading on the New York Mercantile Exchange after peaking during the day at $26.25.

Friday’s increase follows a $1.57 increase Thursday. Gasoline prices typically increase 2 to 5 cents a gallon for every $1 increase in crude prices.

Doyle estimated that higher oil prices could drive retail prices another 5 to 10 cents a gallon higher by Labor Day.

“Yesterday, I would have said a little closer to 5 cents than 10 cents,” he said. “I would say a little closer to 10 cents today.”

The rising oil prices will bring consumers costlier airline tickets, too. Northwest Airlines announced Friday that it would add $8 each way to the price of domestic tickets beginning Aug. 9. The carrier cited increased fuel costs, “since the military invasion of Kuwait by Iraqi troops in the Middle East.” It said its fuel prices had increased 8 cents a gallon since Wednesday.

Drivers gassing up at a Chevron station in Torrance expressed a mixture of disgust and resignation about the newly pumped up gasoline prices.

“I got gas here earlier this week, after that new nickel gas tax went into the price, and now it’s up 8 cents or a dime since then,” said Robert Nance, 48, of Rancho Palos Verdes.

“This, based on any rational thinking, has nothing to do with the invasion,” he said. “This is profiteering, pure and simple.”

Jim Schultz, 36, of San Pedro, shrugged off the increase as insignificant.

“They use any excuse to pump the price up anyway,” Schultz said. “There’s no point in getting upset about it. I didn’t even know that it had gone up until you mentioned it.”

But even the gas station workers were bowled over by the new prices.

“I came to work today and said, ‘Wow! Eight more cents overnight?’ and then I thought, I’m sure glad I wrecked my car,” said Tony Marzilli, a 16-year-old attendant.

Margaret Liang, manager of a Mobil station in Chatsworth, said that on Mobil’s orders she raised prices at her station by four cents a gallon Friday morning.

“First the tax,” she said, referring to the 5-cent-a-gallon, state-mandated price rise that took effect Wednesday, “and then this.

“People are complaining,” Liang said.

Staff writers Jeffrey Ball and Janet Rae-Dupree contributed to this story.