
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, December 1, 1993                   TAG: 9312010047
SECTION: BUSINESS                    PAGE: B-6   EDITION: METRO 
SOURCE: By Associated Press
DATELINE: NEW YORK                                LENGTH: Medium

OPEC'S PUMPING GAMBLE WILL BENEFIT CONSUMERS

Motorists, homeowners, business people and other consumers should benefit\ from OPEC's decision last week to not cut oil production.

While the Organization of Petroleum Exporting Countries is gambling that cold weather will drive up demand and prices for oil, the immediate effect of its decision was to send prices plunging by more than $1 a barrel.

If the lower prices stick, consumers may see cheaper gasoline and heating oil in the next few weeks, according to industry analysts. Eventually, cheaper oil prices can reverberate throughout the economy, dampening expectations of higher inflation and lowering everything from mortgage rates to the cost of airline tickets.

But analysts cautioned against expecting too much.

"The key is whether the decline is transitory or more permanent in nature," said Lawrence Goldstein, president of the industry-supported Petroleum Industry Research Foundation. "For the moment, prices do look to be fundamentally weak."

Ann-Louise Hittle, director of world oil at Cambridge Energy Research Associates, cautioned that several variables could send the price of oil right back up next year.

Among them would be if Russia cuts its oil exports because of an especially cold winter at home or if Iraq hits snags in its push to have the United Nations lift the Persian Gulf War embargo on its oil exports, she said.

But in the wake of OPEC's decision, prices for light sweet crude oil, the industry's benchmark, tumbled in trading for January delivery on the New York Mercantile Exchange.

Energy analysts estimated retail gasoline prices would drop 3.5 to 7 cents a gallon in the next few weeks. Such a savings would erase the effects of the government's new 4 1/2-cents-a-gallon gasoline tax.

"We might see prices under $1 in the next month," said Morris Greenberg, manager of energy services at the Wefa Group, an economic forecasting service in Bala Cynwyd, Pa.

But others cautioned that price cuts may come slowly, depending on the demand for gasoline in different areas and competition among gas stations.

The average price of regular unleaded gasoline was $1.12 a gallon in the American Automobile Association's Nov. 16 survey, but it appears to have dropped since then, said AAA spokesman Geoff Sundstrom.

For heating oil, analysts predicted a drop of 4 to 5 cents a gallon. A particularly cold U.S. winter would quickly drive the price back up, however.

If crude oil prices stay low, the entire economy eventually could feel the effects.

"It will help business margins and offset some of the inflationary pressure we'd otherwise face" in an economic recovery, said Dan Seto, an economist at Nikko Securities Co. International Inc.

by CNB