www.globeandmail.com Bloomberg News Saturday, January 11, 2003 – Page B15

Crude oil fell, completing its first weekly decline since mid-November, on expectations that the Organization of Petroleum Exporting Countries will boost production to make up for a shortfall from Venezuela.

Tomorrow, OPEC will probably raise its output quota by one million to 1.5 million barrels a day, analysts said. Prices have risen 16 per cent since Dec. 2, when Venezuelan workers went on strike seeking the ouster of President Hugo Chavez. The country's daily output has since dropped by about 2.3 million barrels.

"OPEC, outside of Venezuela, is already increasing production," said Jay Saunders, an analyst at Deutsche Bank Securities in Edinburgh. "OPEC should be worried about all of their increased production hitting the market at the same time Venezuelan oil comes back."

Soybean futures had their biggest drop in 18 months after the government said U.S. farmers harvested a larger crop than expected.

The U.S. Department of Agriculture raised the estimate of last year's harvest by 1.5 per cent to 2.73 billion bushels partly on increased production in Iowa and Minnesota, which escaped the drought conditions that reduced crops in other growing states. The U.S. government also boosted its estimate of the surplus of unsold beans on Aug. 31 by 8.6 per cent from December.

Copper prices fell for the first time in three sessions after the U.S. Labor Department reported an unexpected drop in U.S. payrolls last month, signalling that the economy is too weak to stimulate industrial demand for metals.

Prices slipped from a five-week high on increased concern that the U.S. economic recovery is proceeding too slowly to boost use of the metal by car makers and other manufacturers. The number of employed Americans fell by 101,000 in December, the biggest decline in 10 months, the report showed.

www.globeandmail.com By JUDITH TIMSON

Saturday, January 11, 2003 – Page B2

A friend who is a retired oil company executive noticed last week that gas at his Toronto neighbourhood station was 72.9 cents a litre.

Oh good, he thought, I'll fill up the tank on my way home. By the time he returned, an hour or so later, the price had leaped to 77.9 cents. "That's five whole cents!" he said, sounding momentarily affronted.

At least he had what the rest of us are only painfully acquiring: perspective. Having purchased crude oil from the Middle East in the seventies when prices were also wonky, the former executive sighed and said: "Supply and demand."

The story of a gas price hike these days is easily the plot of an international novel of intrigue.

Start in Venezuela, with a rock thrown by a striking oil worker through a window, which then results in enough political and economic instability to cripple the crude oil output, halt exports to the United States and spike up the price per barrel. (It went to $33 U.S. in the past 10 days before settling down around $30).

Segue to the Middle East, where oil sheiks awaiting a possible war in Iraq have gone into hoard mode, and then, cut to Vienna, where the leaders of the Organization of Petroleum Exporting Countries have convened an emergency meeting tomorrow to try to prevent further oil price shocks.

Finally, cue the local price provocateurs of the North American major oil companies, hunched over their computers, deciding daily or even hourly whether our gas should go up or down.

And voilà, a blockbuster novel -- "Pumps." Or perhaps something more dignified: "A Clear and Present Crude Shortage?"

Whatever the title, one of the characters way down the supply chain could be George, my local Petro-Canada dealer, a man of few words, most of them mumbled.

George, whose price was 77.9 cents (Canadian) a litre yesterday, said he gets an automated message from Petrocan, a female voice advising him of the new price.

"It could be in an hour, it could be tomorrow," said George, whose reaction to all the international goings-on was a big shrug. His customers were not complaining he said, because "you gotta fill the tank."

His guy at the pumps even joked: "This is a bargain compared to Italy."

Not too far from George's station was a gentleman who introduced himself as Bawa.

He was presiding over a Tonka gas stand so small it looked like an ice fishing hut.

Bawa said the price was holding at 72.9 cents, and the stand was selling "5,000 more litres per day" than some of the bigger stations.

The price turnaround is happening faster than it used to, and prices are often higher at the start of the week, according to Spencer Knipping, an oil adviser at the Ontario Ministry of Energy.

Mr. Knipping is so passionate and knowledgeable about oil -- his father was a petroleum engineer in Calgary -- that industry insiders call him for stats because, as one lobbyist said, "Spencer knows everything."

"Ah, now here's an interesting spreadsheet," Mr. Knipping said over the phone as he tracked prices.

He said Canadian drivers have been surprisingly tenacious in pursuing a lower gas price, "even if it's just a few tenths of a cent."

Paradoxically, they'll drive farther, or spend valuable time hunting down a bargain. (There are several Web sites that offer price alerts in each province.)

According to Mr. Knipping, the reason your gas price is so volatile is less Tom Clancy than Economics 101. Yes, supply and demand, and international goings on, but mainly tremendous competition at the local retail level.

If price wars don't provide enough drama, the story of gas has also become a morality play. A series of SUV-bashing ads have surfaced in the United States, reportedly depicting people who drive gas-guzzling vehicles as fuellers of terrorism.

My friend, the former oil company executive, filled his tank at his usual place, absorbing the 5-cent-a-litre hike. Like many others, he had better things to do than search out a bargain.

He writes now, and he once even tried to write a novel about the oil industry. "But it seemed so boring."

He should keep trying. It's a heck of a story. judithtimson@hotmail.com

www.news-journal.com By CHRISTOPHER TOOTHAKER Associated Press Writer

CARACAS, Venezuela (AP)--Lack of funding and disorganization in Venezuela's elections council could thwart opposition hopes to weaken Hugo Chavez's presidency in a referendum set for next month.

Chavez is opposed to holding the vote, arguing it's illegal, and the Chavez-dominated Congress has yet to authorize $22 million required for balloting.

Alfredo Avella, president of the National Elections Council, said Friday the vote may be postponed to ``a later date that permits the viability of the process.''

Venezuela's opposition launched a strike Dec. 2 to pressure Chavez, who was elected in 1998 and re-elected two years later, to resign and call elections if he loses the nonbinding referendum on his rule.

Chavez insists Venezuela's constitution only permits recall referendum on his presidency halfway into his six-year term, or this August.

The strike has paralyzed the world's fifth largest oil exporter and caused fuel shortages while opponents stage daily street marches and urge tax evasion to force Chavez from office.

Chavez has refused to give in to opposition demands. He threatened Friday to deploy soldiers to seize control of food-production facilities to deal with domestic food shortages.

The former paratroop commander told troops to be ready ``to militarily seize the food production plants.'' He asked state governors belonging to his political coalition to be ready to cooperate.

This is an economic coup. They are trying to deny the people food, medicine and even water,'' Chavez told thousands of supporters in western Cojedes state. They won't succeed.''

The Venezuelan-American Chamber of Commerce repudiated the president's statements and told its members that seizures of food plants would be illegal.

The president also said he fired 1,000 workers from the state oil monopoly Petroleos de Venezuela S.A., or PDVSA. An estimated 30,000 of the company's 40,000 employees have joined the strike.

Thousands of anti-Chavez protesters fought through tear gas and gunfire from pro-Chavez street thugs on Nov. 4 to deliver 2 million signatures to convoke the Feb. 2 plebiscite. Venezuelan law requires at least 10 percent of its 12 million registered voters to call a referendum.

Opposition leaders say if they have to, they'll pay for the February referendum themselves. But many Venezuelans won't pay to vote during the nation's worst recession in decades.

``The politicians asking for money are the same ones who robbed the country, and they are responsible for the economic crisis. Why should I give them any money?'' said Manuel Arteaga, 45, who sells cigarettes on the sidewalks of downtown Caracas.

Other potential delays include organizing 180,000 volunteers to monitor voting booths, printing 12 million ballots, and protecting voting centers and materials.

While citizens opposed to Chavez wait to go to the ballot, the South American nation of 24 million is gripped with unrest.

Police used tear gas Friday to prevent pro- and anti-Chavez protesters from clashing in Venezuela's Margarita Island. Several children inside a nearby daycare were hospitalized for asphyxiation, a local civil defense spokesman said.

Five people have died in protests since the strike began.

Negotiations to end the stalemate, led by Cesar Gaviria, secretary-general of the Organization of American States, have made little progress.

``There's no exit from this crisis without an agreement,'' Gaviria said after Friday's round of talks.

In Washington, the Bush administration was talking with OAS-member nations on ways to end the strike, White House spokesman Ari Fleischer said Friday.

We remain deeply concerned about the deteriorating situation in Venezuela,'' Fleischer said. Asked about a possible U.S. role in a breakthrough, he said, An electoral solution is the direction the United States sees.''

www.voanews.com VOA News 11 Jan 2003, 07:05 UTC

Venezuela's embattled President Hugo Chavez is threatening to use the military to help run the country's economy in a bid to break a month-long opposition-led strike crippling the country.

In remarks directed at the business community, Mr. Chavez told a rally of supporters Friday he will do everything necessary to ending the strike, including sending in troops to seize privately-owned production plants idled by the protest.

Mr. Chavez already has ordered the military to take control of Venezuela's oil production facilities shut down by the strike and announced the firing of a thousand dissident oil workers.

The stern warning came, as fuel pumps again went dry at many service stations around the country and bank employees and supermarket employees completed a two-day walkout in support of striking petroleum workers and managers.

President Chavez's opponents began the general strike in December second to force him to resign and call early elections. He refuses to step down, saying the labor action amounts to a coup attempt.

The opposition says government policies are to blame for the shortages.

Venezuela is the world's fifth-largest oil exporter and a key U.S. supplier. The political crisis has paralyzed the petroleum industry, which accounts for about 80 percent of Venezuela's export revenues, and has helped push up world oil prices.

washingtontimes.com EDITORIAL • January 11, 2003

     The potential political contagion of the turmoil in Venezuela, where warring factions are killing each other in the streets, is cause for serious concern. However, much of the world also is focused on Venezuela's ability to affect a more tangible matter — oil prices. A six-week-long oil strike, waged to oust Venezuelan President Hugo Chavez, sent prices up to two-year highs, to almost $34 a barrel last week. Prices have tapered off on news that Russia and Saudi Arabia will step up production, but continue to hover around record highs.

     America has long depended on the world's fifth-largest oil exporter as a reliable standby in the market and a convenient counterweight to the oil-rich Middle East, getting more than 13 percent of its imported oil from Venezuela. The Venezuelan strike has reduced the flow of oil to world markets by about 2 million barrels per day and has caused U.S. oil companies' inventories of crude and petroleum products to drop to a 26-year low.

     Plans by Russia and Saudi Arabia to bolster production are cushioning the blow somewhat, but oil from these countries takes more than a month to arrive to the United States, while oil from Venezuela arrives within five days. This gap in supply may be felt over the next four months. So, the Energy Department has allowed oil companies to sell on the open market the oil that was slated to go to the government's Strategic Petroleum Reserve in February. The reserve currently has about 598 million barrels of crude oil, which is comparable to the stockpile in the reserve leading up to the 1991 Persian Gulf War. Still, the reserve couldn't compensate for the worst case — simultaneous supply disruptions from Venezuela and Iraq.

     Venezuela is only outputting 200,000 barrels a day, compared to prestrike levels of 3 million, while the possibility of an oil crunch already is seen on the global market. Meanwhile, Mr. Chavez continues to take a hard line, saying striking oil workers will be fired and replaced with new hires from other countries, and the opposition refuses to deviate from its demands that Mr. Chavez hold a binding referendum or election amid the current chaos.

     The Bush administration has reportedly been working behind the scenes to try to broker a deal that would restore stability and the flow of oil from Venezuela. The State Department has publicly called on both sides to show "maximum flexibility." If some kind of deal isn't reached soon, Venezuela will be the primary loser. Oil generates 80 percent of Venezuela's export revenue, and half of the government's revenue. The Venezuelan economy was tottering before the strike, with a contraction of 8 percent expected for last year and unemployment close to 20 percent. The government says it has lost about $2 billion as a result of the strike.

     It is hoped that the White House and other parties move Venezuelans toward a truce sooner rather than later.