From: Brent Hopkins, Daily News, Los Angeles
Published October 8, 2004 12:00 AM

Oil Costs Will Affect All

Oct. 8—Oil prices topped $53 a barrel Thursday, an abstract figure that will trickle down to nearly everything consumers use — from fresh food to a warm home to gifts for the upcoming holidays.

"Everything's going to cost more because of higher transportation costs. We've started to see an increase in gasoline prices directly attributed to that," said Rob Schlichting, a spokesman for the California Energy Commission.

The price settled Thursday at $52.67 on the New York Mercantile Exchange, having climbed 73 percent since last October. When oil jumps more than $20 a barrel in the course of a year, nearly everything must follow.

"All the costs added — the transportation, the cost of distribution — they're going to be passed through," said Ken Gilliland, transportation manager for Western Growers in Irvine. "Will the consumer be paying more at retail? Yes."

Southern California drivers are paying 32 cents more a gallon than they were a year ago, with the Automobile Club of Southern California reporting that a gallon of regular cost $2.23 on Thursday. Most consumers can easily relate to those costs, posted at the corner gas station for all to see, but they're only part of the equation.

Diesel fuel has been hit even harder, soaring 64.6 cents in the past year to $2.41 on Thursday. Though used by fewer drivers, diesel fuels the ships, trains and trucks that deliver goods on a daily basis and its costs must be passed along.

"Definitely, diesel is a big deal," said Josh Wellington, director of operations for Moulton Logistics Management, a Van Nuys-based company that delivers goods both to retail sites and direct to consumers. "Since we're a logistics company, we pass those costs on to our customers."

And eventually, buyers see that in small increments — celery seems a little pricier than the week before, a sweater sale doesn't offer as deep a discount as last year, an airline ticket has an extra $5 on the bill.

The Minerals Management Service reported Thursday that 16.6 million barrels of oil production have been lost in the Gulf of Mexico since Sept. 13, when crews began evacuating the region ahead of Hurricane Ivan, and that output remains 475,000 barrels a day below normal.

Nigeria's main oil workers union said it would join a national strike, set to begin next week, unless the government agreed to talks on rising fuel prices. And traders are also keeping an eye on Norway, where an oil-rig strike is expected to cut output by some 55,000 barrels a day, the Norwegian Shipowners Association told Dow Jones Newswires.

Moreover, analysts are already anxious that the world's surplus available oil-production capacity, or supply buffer, is dangerously thin, at 1 percent above global demand. As a result, fears of supply disruptions in Iraq, Russia, Venezuela and Nigeria have pushed prices higher for several months.

"The market is in this raging bull up move," said Tom Bentz, a trader at BNP Paribas Futures in New York. "The way this thing is accelerating is making me wonder if I've underestimated how bullish this thing really is."

The Associated Press contributed to this report.

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