What the options are for lowering oil prices

Energy prices are continuing to rise despite the fact OPEC is planning to meet next week in Amsterdam to discuss increasing production. "It looks like they are trying to come to a consensus to increase their quota level by 1.5 million barrels per day," says Kilduff.

However, analysts believe OPEC members are already cheating on their quotas and are producing an extra 2 million barrels of oil per day. "So that means if they increase their official quotas there is no new net oil on the market," says Mr. Felmy.

Only a month ago, Saudi Arabia lowered quotas. Now, the Oil Kingdom, with almost the only spare capacity around, is one of the leading proponents to increase output. "They see the $40 price as hurting the global economy," says Kilduff.

To get more oil on the markets, some in Congress are looking at the nation's Strategic Petroleum Reserve (SPR). During the budget debate last month, Sen. Carl Levin (D) of Michigan and Sen. Susan Collins (R) of Maine included language that asked the administration to stop filling the SPR. It passed but had no affect of law. This week, Sen. Charles Schumer (D) of New York is expected to ask for the release some of the crude from the SPR as President Clinton did during an oil spike.

One consumer group, Public Citizen, is asking the administration to investigate what it terms the "uncompetitive practices by large companies operating in the US."

In a recent study, the watch-dog group examined the impact of recent mergers on oil industry market share. "We found in the last 10 years there is a huge concentration in refining capacity ownership," says Tyson Slocum, the research director. "That increased market share has made it easier to do anticompetitive practices."

Spiking oil prices have become part of campaign rhetoric. Last week, the Kerry campaign accused the White House of having no plans. Scott McClellan, White House spokesman, says the president "remains concerned about rising gas prices."

Some energy experts believe the price of oil may be close to peaking. The EIA is projecting the national average for gasoline will hit $2.03 a gallon in June. Mr. Costello doesn't see the price falling below $1.90 a gallon for the rest of the summer. The highest price for gasoline was in 1981 when it hit $2.99 in today's dollars.

Other analysts, however, see higher prices. Kilduff expects prices to peak near Memorial Day at around $2.15 a gallon.

Market forces are already working to reduce prices, says Mr. Zandi. He points to an increased number of oil rigs in the Gulf of Mexico and increasing supplies from the Caspian Sea region. "The energy industry has been distracted by the mergers and acquisitions and accounting scandals," he says, "but all that is changing."

At the same time, he says the strong demand for oil in China should slow as that country's economy loses steam. He expects the US as well should slow from its 5 percent growth pace. "I think next year crude oil prices will be closer to $30 a barrel than $40," he says.

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