Gas Prices, Oil Futures Dip Slightly; OPEC to Meet Again

Retail gasoline prices fell this week for the first time since mid-January, although analysts say the decline is not likely to be sustained.

Oil futures prices also slipped Monday, even though the Organization of Petroleum Exporting Countries failed to agree on how much more crude oil to pump. As OPEC ministers met in Vienna, political rhetoric flared anew in Washington, where election-year pressures are mounting on lawmakers to do something about rising gas prices.

OPEC ministers will meet again today to resume discussions about increasing oil production, which was slashed a year ago to boost prices that were hovering near record lows. Despite apparent discord within the cartel, speculation has OPEC hiking production by as much as 1.7 million barrels a day, beginning Saturday, to bring down crude prices that have tripled in the last year and prompted complaints from the U.S. and other big oil consumers.

That would restore less than half the daily 4.3-million-barrel cut imposed last year by OPEC, which produces about 30% of the oil used around the world. But because OPEC members and key non-cartel allies such as Mexico and Norway have failed to comply with current quotas, this increased production would not add as much as consuming nations would like to see, analysts say.

OPEC needs to pump 2 million more barrels a day to meet the growing worldwide demand for oil, said Bob Christensen, energy analyst with FAC/Equities, a division of First Albany Corp. The anticipated production increase is only 2.2% of global daily demand of about 77 million barrels. The boost would not replenish extremely low oil and gasoline inventories, which means gasoline prices will soar again when demand increases or refinery disruptions occur, he said.

“This is really just the beginning of the beginning of higher oil prices, not the beginning of the end,” Christensen said, noting that oil ministers are now speaking of $25-a-barrel oil instead of the $20-a-barrel oil of six months ago. “I think OPEC has really tasted some blood here and would like to have some higher revenues for itself.”

Oil futures fell Monday, with West Texas intermediate, the U.S. benchmark, closing at $27.79 a barrel for May delivery, down 23 cents, on the New York Mercantile Exchange. Light sweet crude peaked March 8 at $34.37 a barrel.

And though it may not be obvious yet at the pump, average retail gasoline prices fell for the first time in 11 weeks, the Energy Information Administration said Monday.

The U.S. average price for self-serve regular gasoline was $1.508 a gallon, down about 2 cents in the last week, according to the EIA’s weekly survey of 800 gas stations.

California’s average price for self-serve regular edged half a penny lower to $1.788 a gallon.

A year ago, the U.S. average price was 43 cents a gallon lower and the California average 33 cents lower.

In Washington, the Senate was expected to debate as early as Thursday a measure pushed by Majority Leader Trent Lott (R-Miss.) to cut federal gasoline taxes in response to rising pump prices.

Sen. Rod Grams (R-Minn.), a vulnerable first-term incumbent seeking reelection, took to the Senate floor Monday to praise Lott’s plan as “quite simply a tax cut for the American consumer at a time when it’s needed the most. . . . Are we going to sit by and do nothing?”

Many Democrats are skeptical. They say the Republicans who control Congress have failed to put forward a tenable budget that would simultaneously cut taxes, pay down the national debt and preserve popular spending programs.

In Senate testimony Monday, Federal Reserve Chairman Alan Greenspan conceded that despite sharply higher oil prices, “currently we do not as yet . . . see any significant indication that crude oil price increases are in the process of embedding themselves in other areas of the economy and inflating the general price structure.”

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Times staff writer Nick Anderson in Washington contributed to this report.