Oil Officials Defend Gas Price Hikes

Oil industry executives called to testify before the Los Angeles County Board of Supervisors today blamed the rapid rise in gasoline prices on market pressures before Iraq’s invasion of Kuwait and the resulting turmoil in the Middle East.

Douglas Henderson, executive director of the Western States Petroleum Assn., noted that the price of a barrel of oil rose from $15.50 to $20 as the result of action taken in July by the Organization of Petroleum Exporting Countries.

Iraq’s Aug. 2 invasion of Kuwait, he said, drove the price of gasoline even higher because of the uncertainty it created in a region with the world’s most fertile oil fields.

“Companies are now pricing their gasoline at (their current) replacement costs,” he said.

Henderson and Stu McDonald, vice president of distribution for Atlantic Richfield, appeared before the board at the behest of Supervisor Kenneth Hahn, who wanted industry officials to explain why the price of gas at some stations has risen nearly 20 cents per gallon in the last month.

Henderson, who said the average increase has been 12 cents a gallon, said the cost in California has been exacerbated by the 5-cent hike in the state gasoline tax that went into effect Aug. 1.

McDonald said Arco on Aug. 8 became the first oil company to freeze its gasoline prices at the urging of President Bush. Although the one-week freeze has elapsed, McDonald said Arco’s gasoline prices are running “6 to 12 cents a gallon below the competition.”

“We’ve had record demands at our stations,” McDonald said, noting that Arco’s sales have increased 20% since the end of July.

Henderson said California produces 330 million barrels of oil a day but consumes twice as much. Forty-seven percent of the state’s oil needs are met by imports from Alaska, the remaining 3% from Indonesia.