Analysts: Gas prices
likely to drop soon

May 1, 1996
Web posted at: 12:30 a.m. EDT

From Correspondent Fred Wayne

SAN FRANCISCO, California (CNN) -- As consumers grumble and politicians point fingers, some experts say that rising gasoline prices are not as bad as they seem and that relief could be just around the corner.

Analysts predict prices could drop by 15 cents a gallon or more over the next two to four months.

But until then, escalating gas prices are raising temperatures. In sunny California, gasoline prices have soared by 30 cents a gallon and much more over the past two months, causing motorists to fret and fume.

Chevron pricing manager Jim Huccaby says the price jump can be explained by factors beyond the control of the companies.

He said an increase in the price of crude oil contributed about 15 cents to a gallon of gasoline over the past six to eight weeks, while the cost of producing cleaner burning gas in California added another 10 cents. Shrinking supplies combined with expanding demand added the rest.

Oil industry analysts say crude oil prices have gone up because of uncertainty over whether the oil embargo would be lifted against Iraq. Prices were driven up after companies cut production thinking the market would become flooded with Iraqi oil.

But some California politicians dispute the industry's rationale and charge the companies with profiteering.

Angry state legislators introduced a bill reducing the sales tax on gasoline to make it cheaper for consumers. The same bill would also make up the difference by imposing an "excessive profit" tax on the companies.

But some analysts say market forces provide the answer: What went up, they say, will come down again.

"The refineries, which have gotten low on stocks, are running at very high capacity and will end up producing a lot of gasoline, which will ease the shortage and drive prices down," said Severin Borenstein of the U.C. Energy Institute.

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