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Oil prices hit lowest level in years

Oil prices are at their lowest level in years and talk of war in the Persian Gulf has done little more than prevent a further slide.

Oil supplies are so plentiful, analysts say, that even a U.S. air strike against Iraq is expected to have little impact at the pump unless the war spreads to other countries."It's not going to hurt anyone's pocketbook," said Jeff Kerr, an analyst in New York with Petroleum Intelligence Weekly.

Crude oil futures for delivery in March fell 1 cent Friday to $16.15 on the New York Mercantile Exchange. The March contract for unleaded gasoline fell 0.78 cents a gallon to $50.41.

A mild winter in the United States and Europe and faltering economies in Asia have forced prices down. In November, the Organization of Petroleum Exporting Countries contributed to the decline by raising its ceiling for production. Supplies now are extremely high, and gasoline prices at the pump are the lowest they've been since May 1994.

"Normally a political crisis would have pushed prices up," said Leo Drollas, deputy director of the Center for Global Energy Studies in London. "What this has probably done is keep prices from falling even lower."

During the five-month military buildup that followed Iraq's 1990 invasion of Kuwait, oil prices shot up about 50 percent amid worries that Iraq's army could threaten supplies from other gulf countries, which supply much of the world's oil.

Since then, however, the oil market has changed dramatically. Iraq has been unable to sell its oil on the open market since U.N. sanctions were imposed after the invasion of Kuwait. Saudi Arabia boosted its production from some 5 million barrels a day to more than 8 million barrels a day. Also, companies stepped up drilling in regions including the North Sea and Gulf of Mexico.

"Even if there is a war we are not going to see that increase in oil prices," said Graham Knight, an analyst with Arab Oil and Gas, an industry bulletin based in Paris.