Oil, Gas Prices Settling Down

Calm returned to oil and gasoline markets Wednesday as traders and retailers digested the good news of sufficient supplies--and got a stern talking-to from Energy Secretary Spencer Abraham and other government officials.

Oil prices had jumped to a nine-month high in London, and U.S. gasoline prices leaped as high as $5 a gallon in some places after Tuesday’s terrorist attacks in New York and Washington.

Although reports of isolated gouging continued Wednesday, the feared surge at the pump failed to materialize because of wholesale price freezes by some major refiners and government threats of retaliation against profiteers.

Gasoline demand was heavy Tuesday and Wednesday, producing lines at some stations and spot shortages, particularly the first day.

“After a trauma, people feel they need to defend themselves or prepare themselves in some way, and for some motorists that meant going to the gas station and topping off their tanks,” said Geoff Sundstrom, spokesman for AAA, the automobile association. “But as awful as these [attacks] were, there was never any threat to oil and gas supplies.”

By late Wednesday, most AAA clubs around the country were “reporting prices are stable and stations are open and things are functioning fairly normally,” Sundstrom said. AAA expects prices nationwide to rise only a few cents from the current average of about $1.53 a gallon for self-serve regular, he said.

Wholesale prices have risen between 8 cents and 20 cents around the country since the attacks, resulting in moderate retail increases, said Mary Welge, a senior editor with Oil Price Information Service, a New Jersey company that tracks gasoline prices.

Many of the big price hikes spotted Tuesday--largely in the Midwest and South, including $5 a gallon at a Texaco station in Oklahoma City--have since been rolled back, she said. That dealer, who raised his price because of shortage worries, was so chagrined about the resulting publicity that he is issuing refunds, Welge said.

More big refiners said Wednesday that they had frozen wholesale prices to dealers, joining BP, Exxon Mobil Corp. and Chevron Corp., which had fixed their prices to dealers a day earlier.

Several attorneys general threatened to prosecute any gasoline retailers that were believed to be profiteering during this unsettled time.

Abraham said during a news conference that summer antipollution requirements for Midwest gasoline will be lifted three days early to ease any supply bottlenecks. He said consumers should report price gougers to his agency and other authorities.

An Energy Department investigation found “there’s no basis for those kinds of charges,” said Abraham, who allowed that the agency has no enforcement powers over gasoline station prices. “But I may call them on the phone if I don’t think they are acting properly,” he said.

Oil prices also eased Wednesday. Although the New York Mercantile Exchange remained closed, oil was traded on the International Petroleum Exchange in London and in private exchanges operated by Enron Corp., Dynegy Inc. and El Paso Corp. that reopened for part of Wednesday.

The October contract for Brent crude oil, an international benchmark, slipped $1.04 on Wednesday to close at $28.02 a barrel, after spurting $1.61 a barrel higher Tuesday on concerns about Middle East supplies. The Organization of Petroleum Exporting Countries had vowed Tuesday to pump more oil if necessary, and that helped ease supply worries.

Spot trading was conducted for about 90 minutes in West Texas intermediate crude oil, the U.S. benchmark, and prices were stable near $28.60 a barrel. The physical crude oil market closely tracks the Nymex futures market, where West Texas crude closed Monday at $27.63 a barrel.

“The market was very rational and stable,” Enron spokesman Mark Palmer said. The Houston company decided to trade oil Wednesday to provide liquidity to the market because oil is not being unloaded from tankers in Los Angeles, New Orleans and New York, he said.

Nymex officials had not decided when the exchange will reopen but will do so “as soon as it is safely possible,” spokeswoman Nachamah Jacobovits said.

Bloomberg News was used in compiling this report.