www.chicagotribune.com By Melita Marie Garza Tribune staff reporter Published January 26, 2003

The oil price run-up, partly triggered by the threat of war with Iraq, has cut into milk money, and in some cases, the rest of the grocery bill too.

Just this month Oberweis Dairy, based in North Aurora, increased its home delivery charge by 10 cents to $2.30 to cover increased diesel fuel costs. What's more, the 76-year-old dairy, which has 40,000 home delivery customers, also is considering retrofitting trucks to run on gasoline to further cut fuel costs.

"We have been trying to ride out the price swings for the past three years, but this is completely out of control," said Robert Renaut, Oberweis' president. "We haven't passed any of the costs on. This increase just gets us back to even."

Diesel fuel, which sells for an average of $1.66 a gallon in the Chicago area, generally is more expensive than gasoline and supplies are more limited. As a result, Oberweis has looked into converting 54 home delivery trucks and about a dozen larger vehicles used to haul milk to grocery stores to operate on gasoline. "There is a time lag involved in ordering the required parts and having the trucks converted," Renaut said. "The other issue is that if supplies are disrupted, neither gasoline nor diesel might be available."

A prolonged war with Iraq likely would cause oil prices to soar further, contributing to a ripple effect of price increases as trucking companies and retailers try to pass off higher energy costs to consumers. The higher prices would be reflected in the bulk of the nation's goods, which primarily are delivered by truck.

The situation could be more serious than the one truckers and motorists confronted during the Persian Gulf war in 1991, when U.S. oil refiners were awash in crude inventory. Since 1999, oil companies have limited the amount of refined fuel kept in storage. As a result of an 8-week strike in Venezuela, one of the top five oil exporters to the U.S., oil companies have been tapping stored inventories to keep products flowing.

Such use has reduced the U.S. inventory close to a critical 270-million barrel level that the federal government says could lead to supply disruptions.

The truckers only have to look back to 2000 to get an idea of what could happen. A price spike in diesel fuel essentially stalled truckers in parts of New England.

"Diesel fuel cost between $2.50 and $2.60 a gallon, and trucks would not even go into Maine because there was not enough freight to pick up on the return trip to offset the cost," said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association in Grain Valley, Mo.

Any disruption in trucking would have an almost immediate impact on consumers and workers.

Businesses ranging from groceries to manufacturers have widely adopted just-in-time inventory practices to reduce costly warehousing and to avoid having money tied up in parts or goods.

"There is more dependence on just-in-time deliveries," said Mark Whitenton, vice president for resources and environmental policy at the National Association of Manufacturers. "Even a couple of days disruption could cause factories to close."

Spencer paints a dire scenario for small or independent truckers, who generally operate under contract and, as a result, cannot impose surcharges to cover fuel price hikes.

"Most small-business truckers don't have an operating cash reserve that would allow them to withstand a long run of increased prices," Spencer said. "We would quickly see repossessions of trucks."

Consider what happened to long-haul trucker Lee Klass in 1990 when crude oil prices nearly doubled to $41 a barrel after Iraq invaded Kuwait.

40-cent price jump

"The price of diesel fuel jumped 40 cents a gallon," Klass, now 55, recounted. Rather than pay the price at the pump, he parked his truck. "I decided not to take any loads for a couple of days just to see how things shook out. It reaches a point that unless rates are doubled it doesn't make sense to haul any freight."

The quick success of the U.S. and its allies in the 1991 conflict eased fears of oil supply shortages, and prices plunged as rapidly as they had risen, easing to $21 a barrel by February 1991.

"The war could have a positive effect on the economy," said Sung Won Sohn, chief economist at Wells Fargo Bank. "We have a decisive war in our favor so the price of oil drops dramatically to low teens. That would raise consumer and business confidence significantly. The price of oil could drop by more than half, which would amount to a huge tax cut for us, bigger than anything Bush proposes."

Still, these days, uncertainty, rather than oil, seems more abundant.

"The world oil market is being strained right now and people are trying to guess what's going to happen when we invade Iraq," said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas.

"I believe the market already has counted in the effects of Iraq. But they aren't counting on Iraq, Venezuela, and the effects of any refinery, pipeline or other mishaps on top of that," Baxter said.

Baxter noted that two weeks ago a couple of oil platforms in the North Sea were shut down due to a flaring problem, taking more than 100,000 barrels a day off the market.

Customarily, an event like this would add a couple of cents to the price of a barrel of oil. But in the context of war, these incidents could ratchet up prices more significantly.

Terrorist attacks?

Other unknowns about potential supply disruptions loom, including the prospect of terrorist attacks on oil tankers, something that had not been widely contemplated in 1990.

"What will Saddam do with those oil wells and those oil fields?" Baxter asked. "Is this an opportunity for overt actions by terrorists? Disrupting the shipping lanes for these oil tankers would be a major disruption to the oil supply."

Bill O'Grady, vice president, futures research, at A.G. Edwards in St. Louis, asked: "Why were the oil companies holding such huge inventories prior to the Persian Gulf war? You saw a similar buildup prior to the Iran-Iraq war. And why aren't they building them now?"

"It could be that they don't think there is going to be a war. Or, yes, there will be a war, but it will be very short and they don't want to be saddled with a lot of product to sell at low prices. Or it could be that they are relying on the U.S. Strategic Petroleum Reserve, and counting on the government to hold the extra supply for them."

Last May Peapod Inc., the Skokie-based Web grocer, raised its delivery charge in the Chicago area from $2.95 for an order of $100 to more to $4.95, partly to offset rising fuel costs.

In December it went a step further. It spent $15,000 to install its own gasoline storage tanks at its Lake Zurich distribution center. Drivers for its fleet of 70 trucks cover a combined 6,000 miles daily and had been driving off their routes to find gasoline stations that would accept the company's credit cards.

Scott DeGraeve, vice president and general manager for Peapod's Chicago region, explained: "The rising fuel prices spurred us to see what we could do to offset these costs. It saves us a few pennies, but it also saves us labor and time."

Copyright © 2003, Chica

www.newsday.com By Letta Tayler LATIN AMERICA CORRESPONDENT January 26, 2003

Caracas - Belen Coronado, a retired court employee, doesn't permit political discussion in the Caracas apartment she shares with her daughter and son-in-law. "If we talk politics, we argue," she explained.

Coronado, 69, is a fan of populist President Hugo Chávez. Her daughter, Natalia Coronado, and son-in-law, Tony Ponce, a food distributor, back an 8-week-old national strike that aims to topple the leftist leader.

Briefly lifting the ban on political discussion for a visitor one recent afternoon, the usually soft-spoken relatives remained polite for about a minute before the barbs began to fly across their comfortable living room.

"We've had it with Chávez, We want him out now," said Natalia, 29, a homemaker, her voice prickling with anger.

"Then you're willing to break with the Constitution," her mother shot back, noting that the law will permit Venezuelans to call a binding referendum on truncating Chávez's six-year term only after its midpoint in August.

"Chávez doesn't respect the Constitution either, and he's ruining the economy," counter-attacked Ponce, 32.

The polarization within Venezuela over Chávez's presidency is widely assumed to pit rich against poor. While in many cases that is the case, the fault line also cuts through social classes, institutions and professions, further complicating efforts to unify a nation teetering on chaos.

"The tensions generated within families who are divided over the president are profound and unprecedented," said Luís Vicente León, who heads the Caracas-based Datanalisis polling company.

"It's turning brother against sister and cousin against cousin," said Elizabeth de Barnola, 54, a Caracas leather merchant whose family is split over Chávez.

In a half-century of democracy, members of Venezuela's tightly knit families often have held divergent political views. In the past, however, "these distinctions were 'light,' generating the kind of discussion one hears among fans of different baseball teams," León said.

In contrast, political experts say, the flamboyant Chávez - a former paratrooper who led a failed coup in 1992 and was elected by huge margins six years later - incites extreme hatred or adulation with his combative rhetoric and autocratic style, particularly as the country slides further into inflation, unemployment and violence.

With Chávez having largely failed in his campaign pledges to distribute the nation's vast oil wealth among the poor, numerous polls show him popular among only 30 percent of Venezuelans, far fewer than the 80 percent who live below the poverty line.

At the same time, one in five middle-class or wealthy Venezuelans supports the president, León said.

They include Belen Coronado, a diminutive, unassuming woman who lost 15 years' worth of her modest pension benefits - almost half the total - under austerity measures instituted by one of Chávez's predecessors.

Although she now lives in a comfortable apartment appointed with oil paintings and a crystal chandelier, Coronado remembers waiting in lines for food handouts during acute economic crises under previous regimes.

"Finally, for the first time in more than 40 years, we have a president who wants to help the poor instead of only helping the elite," she said.

"There are more poor children walking the streets now than there ever were before Chávez," rebutted her daughter, momentarily losing her own quiet poise.

"You can't expect a president to turn the country around in a few years," Coronado countered, adding that the opposition is "committing a crime against young children" by closing schools as part of strike actions.

For the indefinite future, Coronado has banned her daughter and son-in-law from watching news on the television in the living room, because all but one of Venezuela's highly politicized networks broadcast almost nothing but criticism of the government and praise for the strike.

If Natalia Coronado wants to join the cacerolazos, the nightly protests in which Chávez opponents march through the streets banging on pots and pans, her mother has decreed that she may do so only from the apartment's fifth-floor window. Should Natalia participate in a march, her mother flatly refuses to baby-sit.

Natalia circumvents that ban by leaving her 2-year-old daughter with her husband, who's been home every day since Dec. 2 because he has joined the anti-Chávez strike.

"I resent it that I can't express myself politically in my own home," Natalia said.

"What you're expressing is a hatred that will eat you up inside," her mother rejoined.

Since the severe rupture over Chávez began a few years ago, "everyone has begun to express their differences," said Caracas sociologist Mercedes Pulido. "The problem is, no one accepts them. What we need is a leader who can heal the wounds."

If the next president is elected peacefully, families will mend their internal rifts more easily, Pulido predicted. "But if it ends by insurrections or violence, it will be more difficult."

Asked if they would forgive and forget their political differences if Chávez is unseated through widespread violence, Belen and Natalia Coronado shifted in their seats and looked at each other expectantly across their marble coffee table.

"I hope so," the daughter said.

"I don't think so," the mother answered, gently but firmly.

www.projo.com 01/26/2003

Here we go again.

The cold snap has pushed oil prices to two-year highs, raising heating bills and the cost of doing business.

Prices have spiked because of the huge demand for energy this winter, the possibility of a war with Iraq, which would disrupt the flow of oil from the Mideast, and a strike in Venezuela that has shut down refineries.

If that sounds familiar, it is.

Each time during the last 30 years -- when consumers and companies have complained about rising energy costs -- they have been given the same answer.

We are too dependent on foreign oil.

And these days, we are more reliant than ever.

In the early 1970s, when the Arab oil embargo caused gas shortages, long lines at the pumps and the realization that the United States was vulnerable to the Organization of Petroleum Exporting Countries, U.S. oil imports totaled 35 percent.

Today, imports have soared to 56 percent of the oil used annually in the United States.

Some changes have been made since the last crisis to diversify where we get our oil.

But now, three of this country's prime sources of oil -- Venezuela, West Africa and the Mideast -- are in turmoil.

That turmoil pushed the price of a barrel of oil to $35 last week for the first time in years. Home heating oil is at an average of $1.54 a gallon, up 32 cents a gallon from a year ago, and it is forecast to go higher

To reduce reliance on foreign oil, President Bush has set out a plan to search for new domestic sources.

He is following the path of his predecessors who also failed to push for a comprehensive, national energy policy that would cut consumption and encourage alternative energy while looking for new sources of oil.

Mr. Bush's policy

would tap new sources on land previously off limits. It provides tax incentives for new oil and gas drilling in the United States by opening the Arctic National Wildlife Refuge and more public lands in the Rocky Mountains.

There is little in the president's plan to encourage conservation or alternate energy sources, such as wind, sun or fuel cells.

The Senate last year killed the president's proposal for new drilling after fierce opposition from environmentalists and Democrats. But after Republicans took control of the Congress in the November elections, it has come back to life.

Sen. Pete Domenici, R-N.M., the new chairman of the Senate Energy Committee, said the measure could get to the Senate floor in March or April, perhaps attached to a spending bill.

Domenici said the Senate can't develop an energy policy on its own that includes energy conservation measures until it weighs how much more oil and gas might be produced in the future.

Vice President Dick Cheney, an architect of Mr. Bush's energy policy, said conservation is an admirable act of an individual, but had little relevance to national energy policy. He said the national policy has to concentrate on providing energy, not doing without.

Yet, conservation helped the United States cut its energy use growth rate after the embargoes in the 1970s.

And more recently, Californians eased their energy crunch -- after the failure of the state's deregulation plan -- by markedly reducing the demand for electricity.

Other energy initiatives from Mr. Bush leave a mixed message

While his administration has indicated it wants to push for new fuel-efficiency standards for automobiles, the president's $600-billion tax-cut plan includes incentives for business owners to buy gas-guzzling SUVS.

While Mr. Bush's policy seems less than comprehensive, there are national leaders trying to craft a substantive, centrist approach that balances energy use and environmental concerns.

They have formed a group called the National Commission on Energy to "make progress on the touchy issue of the nation's growing dependence on imported oil without screwing up our economy," said John W. Rowe, commission co-chairman.

Another goal, according to S. David Freeman, author of a Ford Foundation report on energy use, is to "have an energy supply without having to go to war to make it work."

The group includes energy policy planners from the administrations of George H.W. Bush and Bill Clinton and experts who represent industry and environmental advocates.

"There really hasn't been an energy policy in this country for 30 years," said Hal Harvey, an officer for the Hewlett Foundation, which is helping to pay for the commission.

"The cost of the absence of one is staggering."

www.centredaily.com Posted on Sun, Jan. 26, 2003 By Adam Smeltz asmeltz@centredaily.com

CDT/NABIL K. MARK Ryan Coleman pumps gas at the Sheetz store at 101 Valley Vista Drive in Patton Township.

STATE COLLEGE - Going for a ride?

With gas prices nationwide having swelled about 32 percent in 12 months, driving to your destination has become an increasingly costly prospect.

Add Venezuela's weeks-long oil strike plus a possible war in Iraq, and the United States might encounter petroleum prices that creep higher still.

"I won't drive any more than I have to," said Dean Smith, 52, of Spring Mills, pumping gas Saturday at the Uni-Mart in Pleasant Gap.

"I'll just do the bare necessities," he said. "That's it."

A year ago, the average price for a gallon of regular, unleaded gasoline was about $1.14 in Pennsylvania, according to the Oil Price Information Service.

By Saturday, gas stations in and around State College were advertising rates about $1.46 per gallon, roughly two cents below the current statewide average.

"Since I live down in Lock Haven and work in State College, it drains the wallet a bit," said Charles Walizer, 24. He said he spends some $40 on gas each week.

"With my commute every day, it's a rather large concern," Walizer said.

At least part of the price increases, which in Pennsylvania include a 4.4-cent jump since December, are blamed on the Venezuela oil strike. The strike, in its 56th day, has stifled exports from the world's fifth-largest oil exporter.

"(Prices) could be worse," said Bill Beard, 46, of Pleasant Gap. "They're manageable right now."

Likewise, local service-station attendants said gas sales have been stable despite price spikes.

"Our business stays pretty consistent unless there's a big hike in price," said Mike Glantz, who works at the College Heights Exxon in State College. "It's basically the same this time of year as it has been."

Traffic at gas pumps down the road seems similarly strong.

"Since (Penn State) reopened" for classes this month, "we've increased sales," said Richard Trialonas, manager of Snappy's convenience store on North Atherton Street.

"It's been nice," he said. "We miss the kids when they're gone."

Jessica Doherty, 19, of Bellefonte, said "it'd take a lot" to calm her driving habits.

"If the price was above $1.60, I think it might slow me down," Doherty said.

Analysts have said a U.S.-led war in Iraq could push the per-gallon expense closer to that point.

Concerns intensified last week when defense officials said Iraqi leader Saddam Hussein might try to sabotage his country's oil fields if the United States invades. Iraq's oil production is about 3 percent of the worldwide petroleum output.

"I think everybody (worries)," said Dondi Smeltzer, 41, of Pleasant Gap. "Whenever the price goes up, you have a little less to spend."

Beard suggested a lasting solution to the price woes may be to limit dependency on oil overall.

"I think we as a country, in the long term, need to move away from use of gas," he said, "and toward other resources."

Adam Smeltz can be reached at 231-4631. The Associated Press contributed to this report.

news.bbc.co.uk Sunday, 26 January, 2003, 02:26 GMT

Venezuela has been gripped by almost daily street protests

Tens of thousands of Venezuelans have gathered on one of the main roads in the capital, Caracas, to demand the resignation of the country's president, Hugo Chavez.

Chavez has refused to step down

The rally - intended to last 24 hours - was called in protest against a court decision to block a referendum on President Chavez's rule, which opponents say is dictatorial.

Venezuela, the world's fifth largest oil exporter, has been gripped by the eight-week strike, which has caused severe fuel and some food shortages.

President Chavez is refusing to step down, saying his opponents are being manipulated by Venezuela's wealthy elite.

At least six people have been killed in clashes between Mr Chavez's supporters and opponents since the strike began last December.

Devastating strike

The protesters have accused Mr Chavez of behaving like a dictator and mismanaging the economy and have called on him to resign or call early elections.

The strike has harmed oil output

They flooded a four-kilometre stretch (2.5 miles) of the major highway, chanting "Until he goes!" and waving the national colours of the Venezuelan flag.

Many took tents and sleeping bags to stay overnight, while others carried folding chairs, portable television sets and radios.

They are protesting against last week's decision by the Supreme Court to postpone a referendum on Mr Chavez's rule scheduled on 2 February - six months before a binding popular vote is due.

The president's opponents had gathered the required two million signatures to press for the vote.

They strike, which started on 2 December, has almost paralysed Venezuela's oil industry.

But there have been signs that the government has made some headway in breaking the oil stoppage, with latest shipping data showing that oil exports have increased.

'Friendly' pressure

As the political crisis continues, Venezuela is coming under increasing pressure to reach a diplomatic solution.

On Friday, the six-nation Group of Friends agreed in Washington to send a high-level mission to Venezuela next week to try to find a compromise.

US Secretary of State Colin Powell told his colleagues from Brazil, Chile, Mexico, Portugal and Spain that Mr Chavez should either hold early elections or call a referendum on his leadership.

The peace proposals - presented by former US President Jimmy Carter - put forward two alternatives:

• either to let the country vote on a constitutional amendment that would allow early elections
• or to wait until August - half-way through Mr Chavez's mandated office - when the constitution allows for a binding referendum on the president's mandate

Correspondents say as Venezuela is a strategic supplier of fuel to the US, Washington is particularly keen to end the crisis.

But they say the latest demonstration shows that there is little immediate sign of a solution.