OPEC stranglehold sends gas prices skyward i

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By Christopher TraY
EDITOR
Americans have been holdins
their collective breaths in recen-i
months, hoping that gas prices
will eventually come down. At
this point, however, many of
them are probably beginning to
tum blue in the face.
To the dismay of many the Organization of Oil
drivers, gas prices did not Exporting Countries' (OPEC)
decrease after Labor Dav. or the cut in production has affected
end of the driving seaion. In both the consumer and retailer
fact. if anything. the prices in much the same fashion.
have, for the most part, leveled "We're getting squeezed by
off. the high costs, just like the
Keith McGarvey, the consumers are," said
presidentof Country Fair McGarvey. "Consumers are
convenience stores, feels that paying much more money for
gasoline, and we too are feeling
the affects, making 35 to 40
percent less profit margin than
last year at this time."
Because of the cut in
production by OPEC, the cost
of crude oil per barrel has more
than doubled since last spring.
Eight months ago, barrels were
sellins for $10.50 on the free
{
market. As of last week, these
very same barrels were selling
at the high rate of $24.00.
"The real culprit for these
high gas prices are our friends
at OPEC," agreed Lance
Hannes, a.business professor at
Edinboro University. "I have
continued on Page 2

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 OPEC StranglghOfd . . . corrinued from page I
to my students in
explained
class that this problem comes
down to a simple issue of
supply and demand. Because
OPEC has since cut production,
the supply of crude -oil is low,
cau.sing the dcnrand to be high,
which,.. in turn, tlrivcs up -oii
pnces.-'
The most rcccnt ligurcs havc
suggested that the world
population uses 7S billion
barrels of crude oil per day. At
a June meeting with officials of
OPEC, Saudi Arabia, alone, had
agreed to cut its countrv,s
production of oil by
,o-e
billion barrels per dav.
"ln the end, it ieallv is
OPEC's best interest to cut
production," Hannes said. ..Bv
influencing gupply and causing
a greater demand, OPEC is
really putting themselves in
command of the crude oil
market."
Despite OpEC's shagglehold
on the market, numeious oil
experts have been relativelv
surprised that these oil_
producing countries in OpEC
have remained steadfast in their
adherence to the production
cut-dovrn.
l/vupt(i ilao Io
Aside from OPEC cuttins
production, McGarvey offered
other reasons as to whv the
price increase occurred it the
rapidity that it did.
From Pennsylvania
England, gasoline prices are
indexed on the Ne* york
I lrrrlxrr irrtlcx. I'lris
reflects the economic situation
in the Middle East
shipping.
Besides the New york Harbor
index, there are also two other
pricing indexes found within the
contiguous 48 states. Typically,
4 these price indexes remlin tlie
same, but approximately three
in months ago, they each began to
fluctuate differently from
another.
"For our company,',
McGarvey said, "it was more
benelcial for us to buy our gas
off the Ohio market, maiily
because itwas priced at the
puch lower Chicago price
index."
..-Mqy other local companies,
like County Fair, soon began to
buy gasoline out of other
markets, like the Chicago
market, simply because the
prices of gasoline
. in
exercice a^ f.- f_^.,,__.r rr-__.:-.
Pennsylvania were far
expensive.
Although the pricing indexes
are.at a subsiding ebb and flow
nght now, other issues such as
to New the purity of the gasoline are
also up for scrutiny.
"ln some urban nrarkets,
rrr.icc girsolirrc statiorrs ar.c ablc to
blend their gas with ethylene,
upon and by doing this, they can sell
the gas at less cost to ihem." he
said.
State and local taxes are also
burdensome to the consumer.
especially when it comes to the
cost of gasoline per gallon,
McGarvey explained. As of
press time, Pennsylvania was
one charging 46.5 cents per gallon,
while Ohio was coming In at a
clip of 41.5 cents per gallon.
"Since Pennylvania
charging five cents more per
gallon, many people have been
crossing the border to Ohio in
order to purchase their gas," he
said. "Despite the five-cent
differential in tax collection. the
savings of purchasing gai in
Ohio haven't been -
monumental."
Despite the somewhat high
tax collection on the part of
qvvtu
i,r,! .,....t.
more bgth states, gasoline prices
'within the area really aren;t that
hig_h, according to McGarvey.
"Gasoline prices
Northwestem Pennsylvania are
right at or around iverage for
the nation," he said. "ln Los
Angclcs or cverl in Chicago,
pricos pcr gallon have
been
ranging anywhere from $1.55 to
$ 1.90."
- .As mentioned previously, the
hike in gas ratei has affected
retailers in negative ways as
well. According to McGarvey,
Country Fair is-wOll below iis
budget on'gas for the year.
"Since we are well below
budget, we are strongly looking
building newe-r- Countr!
Tt9
Fairs with more pumps,
in
effort that*e can make up the
is difference in lost revenue." he cenalnty .hlnges
said. . "Because the price of gas
rs twrce as much now as it was
last year, we, in essence. have to
sell twice as much'gas in order
to make up the difference."
Although local companies
continue to worry that the prices
that of gasoline may not comeiown
in-1h9 near future, McGarvey
still elicited a glimmer of hope.-
"When you look at
::yTl heishl and.weishr. ovenveishi ao"lt ir a ;"il ;; ;j::if,fr?,
situation now," he said, ..OpEC
rs cnearlng amongst themselves,
as many of the organization's
countries are beginning to sneak
banels onto the iree mirket."
Ap,art from the smuggling of
in
-barrels, the upcoming-
winter
weather season may have the
biggest impact on t-he price of
gasoline.
"l
bclievc that if rvc don't
have too harsh of a winlilr. the
lupqly of crude oil u{d for
heating purposes wil be
plentiful, hence decreasine the
cost of gasoline per gaiion,"
McGarvev said.
Added Hannes: "Less drivins
naturally means a greater suppl!
oI oll anct less demand of it as
well, which, in turn, may or
m?y not cut down on gas
prices."
thL Yet, Hannes' believes that the
decreasing of gas prices
.
upon
the
historiciry of pasf OPEC
agreements.
"Looking
into the history of
^
OPEC, there is a natural
tendency for these aqreements
to break down," he noi-ed.
Gasoline prices in Edinboro
have ranged anywhere from
$ I .25 to $ I .29 per regular
unleaded gallon thrbughoul the
the past week.