A plan by the Organization of Petroleum Exporting Countries to pump more oil failed to tame markets Monday, and OPEC's president warned of a looming worldwide energy crisis if consuming nations don't produce and refine more petroleum.
Some analysts are predicting oil prices of $40 a barrel and $2-a-gallon gasoline, especially if a cold winter hits. Worldwide inventories of gasoline and home heating oil are extremely low, which causes prices to surge with oil price increases or even minor production or supply disruptions.
"The hard, cold reality is OPEC may not be able to stop this ball that is rolling downhill," said Phil Flynn, senior energy analyst with the Chicago brokerage firm Alaron Trading. "This could be the beginning of the end for the gas-guzzling generation."
OPEC agreed Sunday to boost production by 800,000 barrels a day at a time when oil traders were predicting that 1 million to 1.5 million additional barrels are needed to rebuild scant inventories of gasoline and heating oil and to bring oil futures prices down from levels last seen during the Persian Gulf crisis. Oil analysts expect only about 200,000 new barrels to reach market because OPEC members are already pumping more than their formal allotments.
OPEC ministers, defending their third production increase this year at a flurry of news conferences after their meeting in Vienna, Austria, said they are ready to boost output again if oil prices don't fall. But the ministers blamed continuing "confusion in the oil market" on bottlenecks in the refining industry, speculation in the futures market and heavy taxes on petroleum products -- factors all beyond the cartel's sway.
"The world is facing a possible energy crisis and OPEC alone simply doesn't have the power to control it," said Ali Rodriguez, Venezuela's minister of energy and mines and president of the 11-nation cartel. "There isn't a big risk in the short term, but we could see $40 oil if there's a cold winter."
The head of an international energy watchdog said uncertainties surrounding OPEC's move may have made the oil market even more volatile, a fear backed up by trading Monday on the oil futures market. The U.S. benchmark price for October contract West Texas intermediate crude rose $1.51 to $35.14 a barrel on the New York Mercantile Exchange.
The world "clearly needs more oil," said Robert Priddle, executive director of the International Energy Agency in Paris. "The producers say they have set themselves the objective of achieving stability through unilateral market management. So far they have achieved just the reverse," causing prices to soar in the last 21 months from a $10-per-barrel low brought about by previous OPEC decisions to reduce production, he said.
The upward spiral in oil prices continues to be felt by consumers. In San Francisco, the average price of self-serve regular gasoline already has cruised into the $2 neighborhood -- $2.02 a gallon to be exact on Monday -- according to the AAA Fuel Gauge Report.
Nationwide, the average for self-serve regular rose to $1.56 from $1.53, based on a weekly survey of 800 gasoline stations by the information arm of the U.S. Energy Department.
Meanwhile, high fuel prices have led in recent days to fuel surcharges for airline passengers and for package and freight shippers, raising concerns about long-term economic affects.
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