vh80299.vh8.infi.net John Sullivan January 7, 2003   Striking oil workers of Petroleos de Venezuela, SA, hold their daily meeting recently in front of anchored oil ship Morichal in Maracaibo Lake in western Venezuela. The strike has paralyzed oil exports and helped drive international oil prices above $30 a barrel. Venezuela is the world's fifth-largest oil exporter and a top supplier to the United States.

LAFAYETTE - Motorists will soon be seeing the effects of civil unrest in South America in the prices they pay for gasoline, and just where they are will depend on how much.

"We are finally beginning to see the see the actual impact of the Venezuelan strikes in U.S. markets," said John Eichberger, Director of Motor Fuels for the National Association of Convenience Stores. "As the crude market continues to rise and supplies become more constrained, there will be a market reaction and retail prices will increase."

According to U.S. Energy Information Administration, a branch of the Department of Energy, crude imports into the United States reached a three-year low on Dec. 27.

The United States was importing about 7.6 million barrels of oil per day, a low that hasn't been seen since Jan. 28, 2000, the EIA reported.

The EIA reported that refiners will begin drawing from their inventories to make up for the loss of crude oil from Venezuela. Venezuela is the fifth-largest producer of oil in the world and during 2002, the country imported an average of 1.2 million barrels of oil in the United States each day.

"The EIA reports that unofficial data indicates that Venezuela imports last week were almost nonexistent," Eichberger said. "Marketers should be prepared to explain the situation to their customers."

In Louisiana, the Louisiana Oil Marketers and Convenience Store Association reported no problems yet from their members, according to executive director Natalie Babin.

"There has been no major disruption of our supplies due to the situation in Venezuela," Babin said. "There may be some indirect effects later, but for right now, we have not had any complaints from our members."

The organization represents 350 businesses - such as convenience stores - across the state, Babin said.

"We are kind of the middle man in this situation," Babin said. "Whether we are affected as time goes, we will just have to wait and see."

The EIA reported Monday that the national average price for a gallon of gasoline rose for a third week in a row, increasing by 4 cents per gallon as of Dec. 30 to end at $1.44.

The average for the Gulf Coast, according to the federal report, was $1.389 a gallon. This is an increase of almost 5 cents a gallon from the previous week.

The Venezuelan crisis has also affected Murphy Oil refinery in Meraux, Lyondell-Citgo Refining joint venture near Houston; and Farmland Industries refinery near Coffeyville, Kan.

Officials at Citgo announced Monday that the Texas refinery, which has an operating capacity of 268,000 barrels per day, is operating at half capacity. Citgo is owned by Petroleos de Venezuela, the state controlled oil company of Venezuela.

Murphy Oil, headquartered in El Dorado, Ark., said its Meraux plant, which has a 100,000-barrel-a-day capacity, will cut back production by 15,000 barrels.

The Kansas refinery, owned by Farmland Industries, can process up to 95,000 barrels of oil per day. Company officials have said the refinery will scale back production by 15 percent.

"What will happen with our members is yet to be seen," Babin said. "For right now, we haven't seen any problems. But we are keeping an eye on the situation as it develops."

vh80299.vh8.infi.net John Sullivan January 8, 2003 The Associated Press

An oil leak is seen Monday near a pump in Maracaibo Lake in western Maracaibo, Venezuela. According to members of the opposition in a news conference, new workers who were trying to resume oil production had an accident, resulting in the leakage.

LAFAYETTE - A spokesman for a Louisiana congressman said Tuesday the United States will not tap into its energy savings. The administration is instead hedging its reserves in the event of a war in the Middle East.

Last week, U.S. Rep. Billy Tauzin, R-Chackbay, had requested the U.S. Department of Energy open the Strategic Oil Reserves to offset the loss of oil coming from Venezuela.

Venezuela is the fifth-largest producer of oil in the world, and during 2002, the country imported an average of 1.2 million barrels of oil in the United States each day.

"The administration is caught between a rock and a hard place right now," said Ken Johnson, a spokesman for Tauzin. "On one hand, the White House wants to do whatever is necessary to keep the price of gasoline down for consumers.

"On the other hand, though, they want to keep their reserves in the event of a war with Iraq and the Middle East oil lines are disrupted."

With the loss of oil to American refineries because of the Venezuelan shutdown, Tauzin had requested the Department of Energy open the strategic reserves.

"The administration has continued to assure us that they are monitoring the market," Johnson said. "The congressman has continued to say he is worried that the continuing shortage will eventually begin hurting consumers in the form of higher prices at the gas pumps."

Tauzin had requested the Strategic Petroleum Reserves be tapped because the stoppage of oil coming from Venezuela has affected five refineries in the United States.

The refineries are: Citgo in Lake Charles; Murphy Oil in Meraux; Exxon Mobile in Chalmette; the Lyondell-Citgo Refining joint venture near Houston; and the Farmland Industries refinery near Coffeyville, Kan.

"None of these refineries have reported they are going to stop operations," Johnson said. "But all have indicated they are scaling back."

He said a large shipment of oil from Russia has been delivered to the Lake Charles refinery, which boosted its inventory up. Russian officials have said they will continue to increase

"The wild card will be what happens in the Middle East," Johnson said. "If the United States goes to war and the oil lines from the Mideast are cut, then the president has the reserves to fall back on."

He said that the Strategic Petroleum Reserves are similar to a savings account.

"It's obvious the administration is using the reserves as a rainy day fund," Johnson said. "Use them too early and a major disruption of the oil fields and oil supply happens, then we won't have the reserves and we will see severe shortages."

The Strategic Petroleum Reserves consists of four large underground storage sites in Louisiana and Texas that contain about 570 million barrels of oil. In Louisiana, the sites are at West Hackberry near Lake Charles and Bayou Choctaw near Baton Rouge.

The two Texas sites are Bryan Mound near Freeport and Big Hill near Winnie.

The Strategic Petroleum Reserves were ordered developed after the Arab Oil Embargo of the United States in the late 1970s because of the nation's support of Israel.

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World oil prices bubbled to new two-year highs on Tuesday amid escalating US war rhetoric over Iraq even though cracks started to appear in a Venezuelan strike that has cut deep into exports to the US.

US light crude in New York for February delivery, which expired at close of trade, settled up 70 cents at US$34.61 a barrel after hitting a peak of US$35.20, the highest level since November 2000.

March crude in New York, which took over as the front month contract, rose 23 cents to US$33.19 a barrel.

London Brent blend rose 9 cents to US$30.74 a barrel.

Fears of war in Iraq, the world's eighth largest oil exporter, rose as President George W Bush warned that Iraq had squandered "ample time" to avert war by disarming voluntarily, and the US ordered two more aircraft carriers to the Gulf.

Concern that war in the Middle East could disrupt the region's oil flows outweighed news from Venezuela that tanker pilots in Lake Maracaibo, a strategic export route, had ended their part in the nationwide strike.

With Venezuelan exports running at just 500,000 barrels a day, a fifth of normal levels, crude stockpiles in the US have slid close to 26-year lows just as a fierce cold snap in the US Northeast has boosted heating oil demand.

While an end to the tanker pilots' action in Venezuela could be expected to lift exports, shippers said deliveries were not likely to rise rapidly until foreign ship operators began using Venezuelan ports again.

www.austin360.com By BRAD FOSS AP Business Writer

NEW YORK (AP)--Oil prices soared above $35 per barrel Tuesday before settling considerably lower as traders balanced fears of a war in Iraq with the end of a tanker pilot strike in Venezuela.

``It was quite a move,'' Ed Silliere, a trader at Energy Merchant LLC in New York, said of the up-and-down trading session on the New York Mercantile Exchange.

The price of crude for February delivery, which had an intraday high of $35.20, closed 70 cents higher at $34.61 per barrel. It was the highest closing price since Nov. 30, 2000, when it closed at $33.82.

Silliere and other traders said some of the heaviest buying, which occurred toward the end of the day, appeared to be tied to short covering before the expiration of the February contract. That is, investors who had sold on expectations that the market would keep dropping were forced to buy to adjust their positions when prices advanced.

The advance was sparked by rhetoric from President Bush on Iraq and the realization that--even with tanker pilots back at work _ Venezuela's oil industry remains severely hobbled by a 51-day strike.

Nothing has changed,'' said Mike Fitzpatrick, a trader at Fimat USA in New York. The intensity of the strike (in Venezuela) seems to be getting worse.'' Oil production has dropped by more than two-thirds in Venezuela, from 3 million barrels a day to 800,000 barrels, the government claims. Strike leaders put the figure at 627,000.

In addition, Fitzpatrick said, ``it seems to me we've passed the point of no return for war in Iraq.''

President Bush on Tuesday chided U.N. member nations for demanding more time to search Iraq for illegal arms. A decision on whether to end diplomacy with Iraq and wage war is expected in a matter of weeks.

Another bullish factor, traders said, is the anticipation that Energy Department data scheduled to be released Thursday will show that U.S. inventories of crude have fallen below the so-called operating minimum, which typically triggers reductions in refinery output.

The operating minimum is 270 million barrels. Last week, the Energy Information Administration, the agency's statistical arm, reported storage at 272 million.

Reduced refinery output would likely send heating oil prices higher, Silliere said.

On Tuesday, heating oil for February delivery dropped 0.39 cent to 89.47 cents a gallon. February unleaded gasoline fell 1.01 cent to settle at 90.10 cents a gallon.

On London's International Petroleum Exchange, March Brent closed up 9 cents at $30.74 a barrel.

February natural gas futures trading on Nymex finished at $5.433 per 1,000 cubic feet, down 10.3 cents.

www.wbko.com Shane Holinde

The cost of farm items such as diesel and anhydrous ammonia is up considerably from this time last year. With the threat of war in Iraq and a crude oil strike in the South American country of Venezuela, it's unlikely that prices will fall anytime soon.

One employee at a Bowling Green farm supply store says he's received a few complaints lately from farmers about the rising costs of several items. Although he says costs for fuel generally climb in the winter months due to higher demand, the current world events are having an impact locally.

The average price for diesel is up about 30% nationally from this time last year, while most nitrogen-based products have seen a 9% jump in price from last January.