FUEL PRICING TRENDS "Headlines" Markets The U.S.-- and the whole world, really-- has been caught in the grip of rising crude oil prices since the heightening of tensions between the U.S. and Iraq. October crude on the New York Merchantile Exchange (NYMEX) has leaped from $22.25 per barrel to $25.00 per barrel over the period of August 30th through September 12th-- the equivalent of 6.5 cents per gallon in 2 weeks.

The reason for this strong oil market reaction is that the newest conflict with Iraq seems to have eliminated any possiblity of the long-discussed "one-time oil sale for humanitarian purposes"-- the market makers had already factored this additional oil into their calculations for crude supply for the 4th quarter of this year.

To some experts, without this oil sale, the market looks to be a little tight; the result: speculation pushes the prices higher. Higher crude prices translate into higher product prices. But there are other circumstances that influence a rise in petroleum products prices; in California (and other neighboring states) we have been subject to a series of localized events that have resulted in serious supply disruptions of finished products.

At the root of it all is a change in philosophy among the large refiners concerning inventory management, whereby they now operate with what is called just-in-time inventory. Working from the lower half of their tanks, these companies have less "cushion" to carry them through the times when their refineries fail. And fail they have done: since late last year, there has not been a month go by where there was at least one refinery suffering a major processing unit problem or blending problem. Throw into this volatile mixture the introduction of new product specifications of draconian proportions in the form of California Reformulated Gasoline (CARFG), putting further strain on an already stretched petroleum refining industry, and the result is a bull market that needs only the slightest goading to run.

We all know what has happened at the pump during the recent past, but what does this unsettled petroleum market foretell for the near future? Most signs point to an environment where prices will hold within a range of where they've been in recent weeks, particularly for the diesel and jet fuels.

There is an underlying fragility to the entire market, however, that can be affected quite dramatically pending the type of outcome of the sparring with Mr. Hussein. Watch the headlines.