Drivers face higher fuel prices as crude hovers at record levels

Over the past week, crude prices have touched a record high of $75.35 a barrel and were trading at $73.95 midday Monday in New York.

delek gas station 88 298 (photo credit: )
delek gas station 88 298
(photo credit: )
As crude oil prices trade at all-time highs, Israeli drivers had better brace themselves to pay higher prices at the pump. Over the past week, crude prices have touched a record high of $75.35 a barrel and were trading at $73.95 midday Monday in New York. "If fears of significant harm to the supply of oil, due to geopolitical reasons from places like Iran, Nigeria and Venezuela are realized, it is certainly possible that prices would rise even to $100 per barrel," said Amit Mor, CEO of EcoEnergy Financial and Strategic Consulting. If the price of crude oil rises to $100 per barrel, the price paid at Israeli pumping stations would reach about NIS 7 per liter of gasoline, from approximately NIS 6 in April, he estimated. National Infrastructures Ministry Director General Eli Ronen would not speculate what the end price of a liter of gasoline would be if crude oil rose to $100 for fear of unjustifiably "spreading panic among the public," saying only that there is a "correlative link" between the two prices. Drivers in France, Germany and Italy already pay more than NIS 7 per liter of gas, while Dutch and British motorists pay more than NIS 8 per liter, due to higher taxation levels, Mor noted. In the US, the gas price recently reached a relatively high $3 per gallon, or about NIS 3.60 per liter. A quick look at figures from the past few years indicates that although the price of crude oil has more than tripled from roughly $20 in early 2002 to about $65 per barrel during the last sample period (late March 2006), the price paid by Israeli consumers per liter at the country's gas stations added about 50 percent, from about four shekels then to about six shekels this month. If the price of crude stays at its current $75 per barrel price during the sample period (April 22 or 23 to 28), or reaches $80 per barrel, then the Ministry's May prices would be about 30 agorot or 5% higher than April's, Ronen said. At the beginning of April, the price of one liter of 95-octane gasoline, with full-service, was set at NIS 6.01, or 5.1% higher than March's NIS 5.72, while the price of a liter of 96-octane rose 4.7% to NIS 6.03 from NIS 5.76. Mor said that if the price of crude reaches $100 per barrel, it would be necessary to handle the crisis by making limited use of strategic petroleum reserves in the US and Europe and encouraging increased production from Saudi Arabia (which currently has an excess production capacity of more than one million barrels daily). Governments could also impose temporary limitations on fuel consumption. In any event, high prices likely would cut demand for crude oil by about 1 million barrels per day, Mor said. Ronen, meanwhile, believes fuel prices are approaching their upper limit since oil-producing countries will be the first hurt by drops in fuel consumption prompted by higher prices and fuel consuming countries are searching for alternative energy sources. "Everyone who tries to prophesize what the oil price will be is making a mistake," he said, advising car owners to shop around for competitive prices. Mor advocated big steps toward decreasing Israel's dependence on imported fuel. "It is crucial for Israel to adopt an aggressive policy of energy conservation and develop massive penetration of renewable solar energy into the country's energy mix," he said.