By Matthew L. Wald The rising tide of oil prices is producing
some puzzling swirls. Crude oil is up by about 53 percent since
Iraq invaded Kuwait, but gasoline, which comes from crude, is up
less than 28 percent. Heating oil is up about 45 percent. Jet fuel
is up 78 percent.
And Saddam Hussein's impact on the asphalt market has made this
a relatively good time to repave the driveway.
The scattered trajectories of oil prices is only one of the
anomalies in the business brought on by the Persian Gulf crisis.
Consumer advocates, for example, are now complaining that the
oil giants should have raised gasoline prices more. Their
restraint, the argument goes, erased the usual difference between
the price of gasoline at the major, ``branded'' outlets and at the
independent stations. This squeezed minor competitors severely.
Elected officials denounced all gas price increases, however,
and recycled cliches about obscene profits.
At the same time, some companies showed profits that, far from
obscene, were modest in the extreme. Some had losses. For the
industry as a whole, the third quarter was nearly unchanged from a
And the worst may not be behind the industry. Analysts are
starting to brood about how the crisis could end without yet another
jarring shock, perhaps sending oil to record lows.
At the beginning of July, just before Iraq began threatening
Kuwait, the price of a barrel of crude oil in the shortest-available
futures contract on the New York Mercantile Exchange was under
$17.50. After zigzagging, the market set a record on Oct. 11,
closing at $40.42. Ten days later, prices were back in the $20s.
The close Friday was $34.
In a broad way, crude oil sets the pace for all petroleum
products, but gasoline has risen less than half as much; heating
oil is up only about three-quarters as much, and jet fuel has risen
nearly 20 percent more.
Oil company executives talk circumspectly about their pricing
decisions. But George H. Babikian, president of the ARCO Products
Co., explaining a jump in jet fuel prices that has sent airlines
into a tailspin, said, ``Our industry, despite what critics say, is
almost completely driven by supply and demand.''
With the Pentagon's deployment of troops to the Persian Gulf, he
said, ``the government came in here and wanted everything they could
get their hands on, and the industry had an obligation to supply
The Saudis are supplying jet fuel in their country, but the
planes flying there from this country need fuel, he pointed out, and
some oil obtained by the Pentagon here may be swapped for supplies
The deployment may have pushed demand up by 500,000 barrels a
day, above a normal requirement of about 3.5 million barrels a day,
industry analysts say.
And the supply is constrained by chemistry. ``There are only so
many molecules that qualify as jet fuel in a barrel of crude oil,''
said Michael E. …