Economy affecting gas prices

Crude oil prices and Milwaukee area gasoline prices are flirting with record highs, and there's no sign when either will come down.

And the rising prices are showing up in areas of the economy beyond motorists' wallets.

An analysis by Power Information Network, a unit of J.D. Power & Associates, found that consumer interest in full-size sport utility vehicles has dropped substantially over the past year. Full- size SUV sales fell 21% in February after a 31% drop in January, when compared with the same month a year ago.

"Rising gas prices are certainly a contributing factor to this trend," said Tom Libby, senior director of industry analysis at the Power Information Network. "We've had two dramatic increases in gasoline prices in the past year, and that begins to have an impact on consumers."

The waning popularity of large SUVs is being felt in Wisconsin, where General Motors' SUV plant in Janesville has been shut again for this week, idling 3,600 workers.

Through February, production of SUVs at the Janesville factory is down 35% from last year, including an 80% drop in the number of Suburban full-size SUVs coming off the assembly line.

To spur interest in the models, General Motors has added extra rebates this month to models such as the Suburban that dealers have had a tough time selling.

Crude oil rises

Meanwhile on Tuesday, crude oil rose again, advancing to within 12 cents of a record close on speculation that OPEC won't increase production enough to meet peak gasoline demand. Crude oil for April delivery rose 10 cents to $55.05 a barrel on the New York Mercantile Exchange.

OPEC, the Organization of Petroleum Exporting Countries, meets today in Iran amid growing concerns about how long the global economy can remain in high gear with crude oil prices hovering near $55 a barrel.

"OPEC can't bring the price down because they don't have enough excess capacity to meet growing demand," said Bill O'Grady, director of fundamental futures research with A.G. Edwards & Sons Inc. in St. Louis. "OPEC has the ability to drive prices higher but is powerless to move them lower because of capacity constraints."

Saudi Arabia, though, is trying to wrestle oil prices lower with a pledge to pump more crude with or without OPEC. But so far, it isn't working. On Tuesday, the world's largest oil producer said it might boost supplies unilaterally to bring relief to world markets if other members of OPEC balked at its earlier proposal to raise the cartel's output quota.

The Milwaukee area is experiencing near-record gasoline prices, according to AAA, the auto club. The average price in Milwaukee was more than $2.16 per gallon, a half-cent less than the record price set in October, said Michael Bie, AAA's Wisconsin spokesman.

A Journal Sentinel survey of 10 Milwaukee area stations Tuesday found prices at $2.16.

Statewide, the average price is $2.12, 1.5 cents below the record, Bie said.

Typically, gasoline prices spike in the spring, anywhere from 15 cents to 25 cents a gallon, Bie said. Given the recent run-up in prices, "the question is what happens between now and the month of May," Bie said.

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Copyright 2005 Journal Sentinel Inc. Note: This notice does not apply to those news items already copyrighted and received through wire services or other media
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