CRISIS IN THE PERSIAN GULF : Some Oil Firms Holding Line on Price Increases : Energy: Prodded by the President--or a desire to patch up their image--companies are freezing or cutting gasoline prices. A survey, however, shows costs still going up.
A dose of presidential pressure and easing crude oil prices prodded several oil companies to freeze or reduce gasoline prices Thursday after the sizable increases that were triggered by last week’s Iraqi invasion of Kuwait.
However, a daily survey of service stations nationwide showed that gasoline prices generally continued to rise, although at a slower rate than has been case during much of the past week.
Several oil companies rolled back gasoline prices--which have risen more than 16 cents a gallon at retail since Aug. 1--in reaction to a recent drop in crude oil prices.
Some of the price cuts announced: BP of America reduced pump prices by 3 cents a gallon at most stations; Conoco cut 3 to 4 cents off the wholesale price of gasoline; Texaco knocked an average of about 3 cents off its wholesale price; Phillips Petroleum, which cut wholesale prices by 4.5 cents on Thursday, said it will cut another 1.8 cents today.
Dealers’ prices usually rise and fall according to wholesale price levels.
In addition, Unocal and Getty Petroleum followed Atlantic Richfield’s lead by temporarily freezing their wholesale prices in response to President Bush’s request Wednesday for oil companies to restrain price hikes.
“We’re doing it basically because the President asked all the oil companies to exert some restraint in raising prices, and, of course, the oil industry has gotten a lot of bad publicity, which I don’t think is warranted,” said Stephen Salzman, senior vice president of Getty Petroleum, which froze prices for one-week beginning Thursday.
The drop in crude oil prices “really didn’t play a part in our decision,” said Art Bentley, a spokesman for Los Angeles-based Unocal, which will freeze the price of fuel it sells to dealers until Aug. 16. “Events are so volatile that prices could go up tomorrow. We are simply trying to cooperate with the President’s request.”
Political pressure and efforts to improve oil companies’ public image have played a greater role in spurring price cuts than a reaction to market forces, some analysts said.
“Companies are really trying to manage their images,” said Bernard J. Picchi, oil industry analyst with the Salomon Bros. investment firm in New York.
“They are on the front lines of image management for the whole oil industry, and, in that sense, the whole industry should applaud them. . . . (But) this is spin control; this is not economics,” he said.
The political heat was turned up Thursday when Senate Majority Leader Bob Dole (R-Kan.) sent telegrams to 11 top oil company executives warning them of potential taxes on windfall profits if the industry does not move to hold down price increases.
“The industry recognized that it’s not a wise thing to look like they are going to do something that will hurt the public,” said Bruce Pasternack, who heads the energy consulting practice at the San Francisco office of Booz, Allen & Hamilton, a consulting firm.
The recent round of price cuts and freezes, combined with relative calm in the Middle East, helped quiet energy markets.
After falling more than $2 Wednesday, the price of crude oil to be delivered in September fell 29 cents to $25.67 cents a barrel on the New York Mercantile Exchange.
However, on the spot market--oil to be delivered immediately--the price of a barrel of West Texas Intermediate, the benchmark U.S. crude oil, rose 65 cents to $26.65. It also had fallen more than $2 Wednesday.
Traders have an “impression that the large oil companies feel fairly confident that the market might not rally too much,” said Tom Bentz, director of trading for United Energy Inc., a New York brokerage.
But if war breaks out and Saudi production is impaired, “that would of course send prices to the moon. They would give those price freezes up very quickly. They would have no choice, Bentz said.”
Despite moves to cut fuel prices, a survey by the American Automobile Assn. of 200 service stations showed that the price of regular unleaded gas rose an average of one to two cents a gallon Thursday from $1.237 on Wednesday.
A similar but larger survey Wednesday showed that prices had risen 3.6 cents a gallon that day.
