Iraq goes from embargo to exports, consumers expect little change
DALLAS (AP) _ Crude oil prices tumbled 3 1/2 percent Tuesday on the lifting of sanctions against Iraq and its re-entry into the export market, but consumers were cynical about prospects for quick relief from a runup in prices at gasoline pumps.
``It doesn’t make a difference,″ said David Garcia of Dallas, who was filling his tank Tuesday with unleaded gasoline priced at $1.19 a gallon. ``The prices will stay the same.″
The skepticism might be off the mark. While the prospect of Iraq’s return had barely dented worldwide oil prices in recent months, there was an impact Tuesday after Saddam Hussein turned on a pipeline to carry oil to Turkey’s Mediterranean coast.
The price for January delivery of light, sweet crude oil dropped 88 cents to close at $24.42 a barrel Tuesday on the New York Mercantile Exchange. Falling crude prices eventually will be reflected at gas stations, said Mark Mahoney, associate editor of Oil Price Information Service.
``Crude definitely rules the rest of the market, if it goes down the rest goes down with it,″ Mahoney said.
Iraq’s oil has been off the world market for six years since its soldiers invaded Kuwait in August 1990, triggering the Persian Gulf War. On Monday, U.N. Secretary-General Boutros Boutros-Ghali authorized Iraq to sell $2 billion worth of oil to buy food and medicine for its people.
U.S. analysts say world demand is probably strong enough to support the extra 580,000 or so barrels that Iraq would ship per day without a collapse in oil prices. The amount is a small fraction of the 72 million barrels the world uses daily or the 17.5 million barrels that U.S. consumers demand.
But analysts say ultimately U.S. consumers will see a difference when they fill their tanks.
``It will take a couple of months for this oil to hit the market, hit our shores and knock crude down to about $19 or $20 a barrel,″ said Mahoney.
``You really won’t see any short term effect at the pump. Heating oil will probably not change much either because the commodities are bought early. Until they get rid of that supply, they can’t get rid of the prices.″
Before the invasion of Kuwait, Iraq exported more than 3 million barrels daily.
Osama Abdul Razzak Al-Hiti, an adviser to Saddam, said Iraq will not dump oil onto the markets causing prices to drop.
``I don’t think it serves us,″ al-Hiti said at an OPEC meeting late last month. ``It doesn’t serve OPEC.″
Those comments were opposed to his opinion in 1992 when he served as oil minister. At that time he said other suppliers in OPEC should not attempt to undercut Iraqi crude sales with lower prices once his nation regained the right to export.
``If anyone tries to take advantage of even one barrel, I’ll produce to my full capacity,″ al-Hiti said. ``Seven dollars a barrel is better than none. Six dollars is better than none. That’s not going to matter to me at all.″
Regardless of how Iraq deals with its new right to export, consumers were not eager to welcome the barrels from Baghdad.
``I’d rather they just stay out of it,″ said Michael Smith of Irving, Texas, who prefers not to deal with Iraq. ``The prices will stay too high anyway.″
Chris Sparks of Grand Prairie agreed: ``It’s our own taxation on the fuel that makes it so high. They should tax something that’s not a necessity.″
Gasoline prices have been high and unchanged in recent months.
A recent Lundberg Survey of 10,000 stations nationwide found the average price at self-serve pumps, which account for most gasoline sales, was just below $1.25 a gallon for regular; nearly $1.35 for mid-grade and about $1.43 for premium.
The average pump price for all gasoline grades, including taxes, was $1.30 a gallon on Friday, down one-hundredth of a cent from two weeks earlier.
Those prices are about 19 cents above last year, said Gil Teel, a Houston spokesman for the American Automobile Association.
``Really they were creeping up before Thanksgiving a penny every day or two,″ Teel said, adding that this year’s prices around the holiday were the highest since before the Persian Gulf War.
Those higher prices are preferable to relations with Iraq, said World War II veteran William P. Hess of Dallas.
``I’d like to see prices lower just like everybody else would. But they’re the enemy. I’m not in favor of helping the enemy in any way.″