8/8/2019 OPEC stranglehold sends gas prices skyward

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OPEC stranglehold sends gas prices skywardBy Christopher TraYEDITOR

Americans have been holdinstheir collective breaths in recen-imonths, hoping that gas priceswill eventually come down. Atthis point, however, many ofthem are probably beginning totum blue in the face.

To the dismay of manydrivers, gas prices did notdecrease after Labor Dav. or theend of the driving seaion. Infact. if anything. the priceshave, for the most part, leveledoff.Keith McGarvey, thepresident of Country Fairconvenience stores, feels that

the Organization of OilExporting Countries' (OPEC)cut in production has affectedboth the consumer and retailerin much the same fashion."We're getting squeezed bythe high costs, just like theconsumers are," saidMcGarvey. "Consumers arepaying much more money for

gasoline, and we too are feelingthe affects, making 35 to 40percent less profit margin thanlast year at this time."Because of the cut inproduction by OPEC, the costof crude oil per barrel has morethan doubled since last spring.Eight months ago, barrels weresellins for $10.50 on the free

market. As of last week, thesevery same barrels were sellingat the high rate of $24.00."The real culprit for thesehigh gas prices are our friendsat OPEC," agreed LanceHannes, a.business professor atEdinboro University. "I havecontinued on Page 2

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8/8/2019 OPEC stranglehold sends gas prices skyward

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OPEC StranglghOfd . . . corrinued from page Iexplained to my students inclass that this problem comesdown to a simple issue ofsupply and demand. BecauseOPEC has since cut production,the supply of crude -oil is low,cau.sing the dcnrand to be high,which,.. in turn, tlrivcs up -oiipnces.-'The most rcccnt ligurcs havcsuggested that the worldpopulation uses 7S billionbarrels of crude oil per day. Ata June meeting with officials ofOPEC, Saudi Arabia, alone, hadagreed to cut its countrv,sproduction of oil by ,o-e 4billion barrels per dav."ln the end, it ieallv is inOPEC's best interest to cutproduction," Hannes said. ..Bvinfluencing gupply and causinga greater demand, OPEC isreally putting themselves incommand of the crude oilmarket."Despite OpEC's shaggleholdon the market, numeious oilexperts have been relativelvsurprised that these oil_producing countries in OpEChave remained steadfast in theiradherence to the productioncut-dovrn.

Aside from OPEC cuttinsproduction, McGarvey offeredother reasons as to whv theprice increase occurred it therapidity that it did.From Pennsylvania to NewEngland, gasoline prices areindexed on the Ne* yorkI lrrrlxrr irrtlcx. I'lris rrr.iccreflects the economic situationin the Middle East uponshipping.Besides the New york Harborindex, there are also two otherpricing indexes found within thecontiguous 48 states. Typically,these price indexes remlin tliesame, but approximately threemonths ago, they each began tofluctuate differently from oneanother."For our company,',McGarvey said, "it was morebenelcial for us to buy our gasoff the Ohio market, maiilybecause it was priced at thepuch lower Chicago priceindex."..-Mqy other local companies,like County Fair, soon began tobuy gasoline out of othermarkets, like the Chicagomarket, simply because theprices of . gasoline inexercice a^ f.- f_^.,,__.r rr-__.:-.

Pennsylvania were far moreexpensive.Although the pricing indexesare.at a subsiding ebb and flownght now, other issues such asthe purity of the gasoline arealso up for scrutiny."ln some urban nrarkets,girsolirrc statiorrs ar.c ablc toblend their gas with ethylene,and by doing this, they can sellthe gas at less cost to ihem." hesaid.State and local taxes are alsoburdensome to the consumer.especially when it comes to thecost of gasoline per gallon,McGarvey explained. As ofpress time, Pennsylvania wascharging 46.5 cents per gallon,while Ohio was coming In at aclip of 41.5 cents per gallon."Since Pennylvania ischarging five cents more pergallon, many people have beencrossing the border to Ohio inorder to purchase their gas," hesaid. "Despite the five-centdifferential in tax collection. thesavings of purchasing gai inOhio haven't been - thatmonumental."Despite the somewhat hightax collection on the part of

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bgth states, gasoline prices'within the area really aren;t thathig_h, according to McGarvey."Gasoline prices inNorthwestem Pennsylvania areright at or around iverage forthe nation," he said. "ln LosAngclcs or cverl in Chicago,pricos pcr gallon have beenranging anywhere from $1.55 to$ 1.90."- .As mentioned previously, thehike in gas ratei has affectedretailers in negative ways aswell. According to McGarvey,Country Fair is-wOll below iisbudget on'gas for the year."Since we are well belowbudget, we are strongly lookingTt9 building newe-r- Countr!Fairs with more pumps, in thLeffort that *e can make up thedifference in lost revenue." hesaid. . "Because the price of gasrs twrce as much now as it waslast year, we, in essence. have tosell twice as much'gas in orderto make up the difference."Although local companiescontinue to worry that the pricesof gasoline may not comeiownin-1h9 near future, McGarveystill elicited a glimmer of hope.-"When you look at the

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situation now," he said, ..OpECrs cnearlng amongst themselves,as many of the organization'scountries are beginning to sneakbanels onto the iree mirket."- Ap,art from the smuggling ofbarrels, the upcoming- winterweather season may have thebiggest impact on t-he price ofgasoline."l bclievc that if rvc don'thave too harsh of a winlilr. thelupqly of crude oil u{d forheating purposes wil beplentiful, hence decreasine thecost of gasoline per gaiion,"McGarvev said.Added Hannes: "Less drivinsnaturally means a greater suppl!oI oll anct less demand of it aswell, which, in turn, may orm?y not cut down on gasprices."Yet, Hannes' believes that thedecreasing . . of gas pricescenalnty hlnges upon thehistoriciry of pasf OPECagreements.^ "Looking into the history ofOPEC, there is a naturaltendency for these aqreementsto break down," he noi-ed.Gasoline prices in Edinborohave ranged anywhere from

$ I .25 to $ I .29 per regularunleaded gallon thrbughoul thepast week.l/vupt(i ilao Io