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'Fear Premium' Pushes Oil, Gasoline Prices Ever Higher

POSTED: 6:52 am EDT June 2, 2004

A "fear premium" is driving up gasolineprices well past $2 a gallon.

Motorists may be paying as much as 36 cents a gallon more at thepump because of the petroleum industry's anxiety that terroristsmight disrupt oil supplies. That fear increased with two murderousrampages by al-Qaida-linked gunmen at oil compounds in the heart ofSaudi Arabia.

Estimates vary, but some energy economists said as much as $10 to $15 is being added to the cost of every barrel ofcrude oil. There's a fear that terror in Saudi Arabia, violence inIraq or unrest elsewhere could disrupt future oil supplies.

Oil prices soared more than $2 a barrel Tuesday.

It was the first trading since an attack in Saudi Arabia killed22 people. Most were foreign oil workers. The attacks didn't targetSaudi pipelines, terminals or oil fields directly, but thepsychological impact has rattled the markets.

Saudi Arabia pumps 10 percent of the world's oil. It's the onlyproducer with enough reserve production capacity to stem demand andprices.

It was the second attack in a month againstoil workers in the Islamic kingdom.

While gasoline prices have been rising steadily for months -- hitting retail records and then continuing higher -- they remained largely unchanged over the Memorial Day weekend. Some states even saw drops of a few cents per gallon, according to auto club AAA.


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