A worldwide oil surplus has driven the average price of gasoline in the Washington area down 1.6 cents a gallon in three months, but experts differ on whether the decreases will continue. Some believe prices have bottomed out and will begin rising again by the end of the year.
A Washington Post survey of stations in the region this week put the average price of a gallon of gasoline here at $1.42.6 -- down 1 percent from late April, but still up 8 percent over the beginning of the year and up 26 percent over the beginning of 1980.
The price decrease here, which has been repeated in most areas of the country, is the largest and most sustained since the Iranian revolution sent world crude oil prices soaring at the end of 1978. Then, you could buy a gallon of gasoline here for 72 cents. There was also a decrease of 0.7 of a cent per gallon in September 1980.
This week's Post survey found widely different prices for the same grade of gasoline at different stations as dealers, under pressure from the big oil companies to sell high volumes, slashed their profit margins.
"I'm disgusted, broke, ready to quit. Nobody's making any money," said Southeast Washington Exxon dealer James Gouldin. Maryland Shell dealer Ralph M. Presutti said, "You wouldn't say it's a real gas war, but there's plenty of gasoline out there [because] people are cutting back and buying small cars. It's really tough for us dealers right now."
Gouldin was selling unleaded regular at his self serve pumps yesterday for $1.38.9 a gallon, while Presutti was selling the same grade at his self serve pumps for $1.29.9 - 9 cents a gallon less. Higher gasoline taxes in the District of Columbia account for 3 cents of that difference, but the rest is due to the complexities of the world oil market and pricing decisions by major oil companies and the individual dealers. m
Vic Rasheed, executive director of the Greater Washington-Maryland Service Station Association, said prices are so low that many dealers may be driven out of business. Predicted Rasheed: "Prices are not going down any more. They've reached rock bottom."
But the latest Lundberg Letter, a respected petroleum marketing trade publication, said it is "not improbable" that price decreases will continue. If so, the newsletter calculated, gasoline prices could fall another 4.4 cents a gallon by the end of the year.
The world surplus of crude oil that has driven prices down has resulted from a drop in demand in the industrial countries. Recessions in many countries contributed to the drop, and high prices caused a scramble to conserve by both industry and consumers.
Americans, for example, are using 7 percent less oil this year than last, when they used 8 percent less than the previous year, according to Ed Murphy, chief statistician for the American Petroleum Institute. Murphy said most of the decrease has been in gasoline consumption, which has continued to decline during the past few months even while prices were dropping slightly.
Nigeria, Libya, Algeria, Kuwait and many other oil producing nations have been cutting production in recent months in an effort to keep crude oil prices from dropping more than they already have, but Murphy said it is not clear whether this effort is succeeding. Free world oil supply is now about 44 million barrels a day, he said, and demand is thought to be about the same. He said nobody knows for sure what the balance is.
"Nobody is particularly concerned about the adquacy of supply in the short term," Murphy said. "The question is whether this surplus of crude oil worldwide is going to continue and, if so, how long."
"The surplus could continue, or it could disappear by the end of the year," said Daniel Yergin, an energy expert at the Harvard Business School. He said that there has been no "great downward movement" in price and warned that the so-called worldwide oil surplus "could turn around with a political crisis, or even without it."
But John Lichtblau, executive director of the Petroleum Industry Research Foundation, an industry-sponsored organization, said that gasoline prices in the spot market have recently been firming up after months of drops, "So that generally I don't see any further price drops. Individual companies may drop [their prices], but the underlying trend is not toward further drops. It has bottomed out."
Lichtblau added, however, that there is "Nothing at all approaching a shortage" of crude oil or petroleum products on the horizon.
Here in the Washington area, a recent Post survey found that more than a fifth of the stations have adopted metric pricing, but these per liter prices were often in disagreement with the per gallon equivalents handwritten or otherwise posted on the pumps by station operators.
More than half the stations with metric pricing slightly overestimated the amount being charged when they converted the figures to gallons -- thus making their prices seem higher than they really were.
Two stations, however, seriously underestimated prices on signs giving per gallon equivalents, making their prices look 5 and 10 cents a gallon lower than they really were.
Only one station calculated the equivalent prices correctly. A liter equals .26417 gallons and a gallon equals 3.78544 liters.