Despite U.S. plan, gasoline prices likely to rise

Stephen Curran

Thursday, Sept. 1, 2005 | 10:57 a.m.

Analysts and Southern Nevadans are anxiously watching the price at the pump to see if there will be any change from the federal government's plan to release oil from the country's emergency supply.

What it will mean for Las Vegas Valley drivers paying on average $2.69 for a gallon of gasoline was unclear Wednesday afternoon, Michael Geeser, a spokesman for AAA-Nevada, said.

What is clear, however, is that prices here are expected to keep rising over the Labor Day weekend and in the months to follow, Geeser said.

"Now, after the (hurricane), it's unclear what that'll mean down the road," he said. "... It's hard to estimate prices coming down soon, for any reason, let alone from the strategic reserve."

Energy Secretary Samuel Bodman announced Wednesday that the administration would release crude oil from the Strategic Petroleum Reserve to help counter shortages in devastated regions of the Gulf Coast.

The announcement sent the cost of crude oil down 58 cents after jumping to $70.65 in light of extensive damage to offshore oil platforms off the Gulf Coast, Forbes magazine reported Wednesday.

Nevada, like other Western states, relies on oil drilled from Prudhoe Bay in Alaska that travels through a network of pipelines to ships and then refineries before arriving here. Releasing oil from the emergency supply means it is now unlikely Western states will be asked to send any oil to the ravaged region, Geeser said.

Complicating matters, however, was confusion over how much oil will be released and where it would be refined now that most of the Gulf Coast's refineries are under water, Geeser said.

Until the federal government determines where the oil will be refined -- likely at refineries in neighboring Texas -- the decision to release it is not expected to impact how much is available to consumers, he said.

"In the process of getting the gasoline to the consumer's tank, they're missing a step along the way," Geeser said.

Peter Krueger, state executive for the Nevada Petroleum Marketers and Convenience Stores Association, said he hadn't "heard word one" from his colleagues in the Deep South but was expected to discuss the tragedy over a conference call later this week.

Before the hurricane analysts estimated that prices climbing to more than $3 a gallon in the Silver State could last through the end of October, a spike that is not expected to change in the wake of Katrina, Geeser said.

By Wednesday afternoon, the statewide average for a gallon of gas was $2.74, up 2 cents from the day before and 20 from a month earlier, Geeser said.

There were unconfirmed reports this morning of a handful of pumps at or above $3 a gallon in Northern Nevada, according to the Web site www.nevadagasprices.com.

Krueger said the oil release could create a domino effect by which investors who trade on the New York Mercantile Exchange were likely to bid less, artificially driving down prices in regions that do not rely on Gulf Coast oil where the supply remains the same.

"It's psychological more for us than it is real," he said. "But it sends a strong signal to the marketplace that the speculators need to beware."