asia.cnn.com Monday, January 27, 2003 Posted: 2:49 PM HKT (0649 GMT)

Blix is due to brief the U.N. Security Council Monday

SINGAPORE (Reuters) -- Oil prices stayed on an upward track on Monday, awaiting a key report from U.N. weapons inspectors for a signal of the likelihood of war in Iraq.

U.S. light crude rose 21 cents to $33.49 a barrel, extending Friday's gains of more than $1 in New York.

Brokers said oil markets were likely to be volatile with several potential price-moving events in the next five days.

Just hours before chief weapons inspector Hans Blix was due to brief the U.N. Security Council, Washington made it clear it was ready to attack Iraq alone if needed, while Britain said Baghdad was hiding banned weapons, spying on arms inspectors and hindering their movements.

Blix, in charge of chemical, biological and ballistic weapons teams, and Mohamed ElBaradei, in charge of nuclear arms teams, will submit on Monday their first full report to the U.N. Security Council on Baghdad's 12,000-page weapons declaration and Iraq's cooperation with arms inspectors.

Bush, Blair to meet

U.S. President George W. Bush will to make a State of Union address on Tuesday and is due to meet key ally Britain's Prime Minister Tony Blair later this week. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

"Each of these stages will provide further clarity and we can expect a timetable to war to become a little clearer," said Sydney-based independent oil analyst Simon Games-Thomas.

"It's a busy week and all it will take is a couple of words of moderation and we could see prices really come off, it's that volatile," said Games-Thomas.

U.S. secretary of State Colin Powell said at the weekend that time was running out for Baghdad to disarm voluntarily.

"We will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction," Powell said at the World Economic Forum in Davos, Switzerland.

The world's biggest oil producer, Saudi Arabia, signalled at the weekend that it was not planning to raise supplies any further despite fears that war in the oil-rich Middle East could lead to a supply crunch and a spike in crude prices.

Near two-year high

Benchmark oil prices are running close to two-year highs on concerns that an attack on Iraq might coincide with the ongoing strike in Venezuela, which has strangled oil exports from the world's fifth-biggest exporter.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel at the WEF.

The Organisation of the Petroleum Exporting Countries agreed in December to raise output by 1.5 million barrels per day to counter some of the shortfall due to the opposition-led strike in Venezuela.

"What can we do more? I do not agree there is a lack of oil," OPEC Secretary-General Alvaro Silva also said at the forum. "The problem of the price is the threat of war."

Venezuela's President Hugo Chavez hinted at the weekend that he may be forced to take up arms if he were defeated by the opposition movement, which is calling for Chavez to step down.

Venezuelan crude output has recovered from lows in December when it was running at a trickle of about 150,000 bpd against more than three million bpd before the strike, which started on December 2.

Strikers said on Sunday that crude output was about 986,000 bpd, 30 percent of pre-strike levels, while Chavez claimed production had reached 1.32 million bpd.

www.globeandmail.com By MIKE CEASER Special to The Globe and Mail Monday, January 27, 2003 – Page A10

CARACAS -- Engineering major Felipe Marquez fears that the loss of a full semester of university will delay his graduation and increase his education costs. That hasn't stopped him from rallying against the resumption of classes at Central University in Caracas, where students have been grappling with a strike against President Hugo Chavez that enters its eighth week today.

"We might lose our holidays, our summer vacation," said Mr. Marquez, 19, "but make [Mr. Chavez] leave."

The plight of the universities shows how the strike, led by a coalition of business and union leaders and most stridently implemented in the petroleum industry, has affected nearly all aspects of life for Venezuela's 24 million people.

Students say a gasoline shortage makes commuting difficult, that the capital's near-daily political violence makes the campus dangerous and that the strike has slashed even basic services; the campus cafeteria, for example, has stopped serving dinner.

Shortly after the strike began, university directors told students and professors to decide on their own whether to attend classes. The school's green lawns and covered walkways were quickly deserted.

Since then, students and professors have begun trickling back to classes. Chemical-engineering student Maria Eugenia Velasquez, 20, has been collecting signatures on a petition against the strike. Although she too opposes Mr. Chavez, she doesn't see the strike as the right way to oust him.

"This could set me back a semester, maybe more," she said. "The right to an education shouldn't be subject to politics."

Venezuelans are being forced to make choices in an environment where simply pursuing an education or serving a meal has become a political gesture.

When strikers shut down Venezuela's oil industry in early December, demanding that Mr. Chavez either resign or agree to early elections, few expected the confrontation to last this long. After all, petroleum exports normally produce 70 per cent of the country's international revenues and half of government income.

But Mr. Chavez has fought back, partly restarting the industry and importing gasoline to a country that is ordinarily the world's fifth-largest exporter of crude.

The strikers, who accuse the President of authoritarian rule and ruinous economic policies, have refused to back down too. Many middle- and upper-class Venezuelans say the upheaval and sacrifice are worthwhile if it means victory.

Leocadio and Carolina Sanchez were in a Caracas bookstore recently looking through workbooks for their six-year-old son Daniel, whose private school shut when the strike began. Even though the strike has left their real-estate business moribund, the Sanchezes recently joined 117 out of 120 of the school's parents in voting against a resumption of classes.

There is also a major economic motive for the Sanchezes. Since Mr. Chavez's election in 1998, their business has dwindled so much that they have had to reduce their staff from 35 to four.

For some small businesses, the cost of striking has been even higher. Many owners who joined the strike in its early days have chosen to reopen, even at the risk of being considered traitors by other strikers. A few blocks from the Sanchezes, a line of cars waited to park at the Mamma Mia Italian restaurant. Mamma Mia closed when the strike began, but in mid-December it reopened part-time. Now it operates normally.

"We endured 15 days" closed, manager Duarte Batista said. "One wants to take part, but there are too many costs."

Unintentionally, the strikers have fulfilled one Chavez goal. The President is a fervent opponent of globalization. Now, although many small independent businesses are open, most larger franchises and malls are not. Across from Mamma Mia, a Subway sandwich shop and a Domino's Pizza restaurant were closed and dark.

For other enterprises, cut off from gasoline and oil, there is no choice. Many plants and warehouses have ceased distributing their products; bakeries are running low on flour, and beer has been a rarity for weeks.

The shortages have combined with Venezuela's plummeting currency to double the cost of many goods, including food. On Wednesday, the central bank suspended trading in foreign exchange for a week to try to keep the bolivar from dropping further.

One of the most conspicuous costs of the strike can be seen at the country's gas stations. Citizens used to subsidized fuel and gas-guzzling SUVs must choose between leaving their vehicles at home or facing kilometres-long lines at the pumps.

At 5 p.m. one recent Friday afternoon, Juan Carlos Trejo, 34, pulled his blue Chevy Vitara into the line for a Mobil station near downtown Caracas. The station closed that evening before he could fill up, so he returned the next morning at 6 a.m., only to have the gasoline run out at noon, just as he pulled up to the pump.

With hundreds of cars waiting behind him, Mr. Trejo held his ground and waited.

"They say some could arrive during the afternoon," he said with a grimace.

And it did, the next afternoon. Mr. Trejo and others in line spent all of Saturday night in their cars.

www.globeandmail.com By AMANDA LANG

Monday, January 27, 2003 – Page B6

There is a notice posted inside Heathrow airport in London that surely wins a world-class award for subtext. "It is unlawful to strike airport employees," it reads, which raises the question: Do employees face injury on a regular basis? It may as well add, "no matter how annoying they are." The physical abuse isn't funny, of course, it's just that airlines -- like divorce lawyers -- see us at our worst. They are easy marks for humour or scorn because we tend to be overwrought or at least nervous around them.

That may be why it was so easy to make fun of WestJet,beloved Western no-frills airline -- which reports earnings this week -- when it recently implemented a fuel surcharge.

It must have been a painful decision for the company; WestJet vocally opposed such charges in the past.

But the length of time that oil prices have stayed uncomfortably high is taking many by surprise and the airline finally succumbed, saying it would start defraying the additional cost by implementing a surcharge that ranges from $5 per ticket on short-haul flights to $10 on flights more than 1,600 kilometres.

The rationale behind the surcharge is clear: Fuel is one of the biggest costs for an airline, along with labour costs and the planes themselves. Many airlines slapped on the surcharge in the past when oil prices sent fuel costs to levels they hadn't predicted.

But this is where the issue gets a little troublesome. Surely, if one of your top three costs is fuel, predicting its price is an important part of doing business. Hedging prices, or buying contracts in the forward market to ensure price stability -- while it may not guarantee the cheapest rate -- is common practice.

The current combination of events that is keeping oil priced at two-year highs -- the war premium that by some estimates is adding $4 to $6 a barrel, and a strike in top-producing Venezuela -- could hardly have been guessed at a year and a half ago. So for many airlines and other transportation firms, fuel costs have been taking a bite out of margins.

But that still doesn't explain why airlines have been permitted to separate out that cost. After all, when you buy a pizza the price doesn't come with a base rate, plus the prevailing stipend to cover fluctuating cheese prices. It would be shoddy marketing if it did, since we buy our products and services already assembled for a reason, namely to ease the purchasing decision.

While your local pizza place is probably not going to complicate its pricing system any time soon, the chances of the airlines simplifying their methods isn't highly likely.

In fact, the list of add-ons seems to be growing, not shrinking. In part that is because the airlines are labouring under a new tax that most industry analysts want to see abolished or at least reduced dramatically.

The Air Travelers Security Charge shows up as an additional cost after the advertised or listed price of a ticket, although for self-preservation, agents or airline representatives often quote a price that includes the tax. If the tax were a permanent item there would be a strong case that airlines shouldn't separate it. The logic is the same as the fuel surcharge: Airport and airline security is surely an important part of doing business.

But since it is a new tax, many are hoping it will disappear once the perceived risk of terrorism subsides.

But leaving aside how well the money is being deployed by government on security, the ATSC is a real threat to the health of Canadian airlines.

Analysts calculate that on pricier tickets, the tax amounts to 7 per cent of the total. But on cheaper fares, that percentage rises. For tickets in the $400 range, the tax is 10 per cent. It jumps to 14 per cent on fares between $200 and $300, and a whopping 23 per cent on tickets priced between $100 and $200. But the worst aspect of the tax, according to analysts, is that it gets at the high-growth low-cost fares most of all. The tax is more than 40 per cent of the base fare for tickets priced below $100.

The tax should either be abolished or made more progressive. And until there is clarity on its future, airlines will continue to list it as a separate line item -- along with fuel surcharges and who knows, maybe one day soon, peanut costs. Amanda Lang is the host of AM Business on Report on Business Television and CTV. She can be reached at alang@robtv.com

www.shreveporttimes.com Staff and Wire Reports Posted on January 27, 2003

With futures prices for natural gas at their highest level in two years, homeowners across the country are shocked has they open their winter energy bills.

But Shreveport-area homeowners aren't seeing a dramatic hike in their bills. Monthly bills climbed about 5 percent from December to January. said Joe Chambers, CenterPoint Energy district manager for Northwest Louisiana. There may be another 5 percent jump next month as the market price of natural gas increases, he said.

About half of the company's current supply comes from its reserves, which are filled when gas prices tend to be lower. That helps smooth out spikes in price in the winter months.

"It is true that gas prices are inching up ... but not the 20 percent increase like some places across the country," Chambers said.

The price gains elsewhere have been much higher than predicted. In September, the EIA estimated the cost of heating a home with natural gas would rise 17 percent for the October-March winter season from last year. Now, the agency is expecting the gain to be twice that, with bills totaling more than $800 this winter.

The factors driving the increases are the same no matter where customers live:

• It's colder this winter. Last winter was the ninth warmest in the United States since record-keeping began in 1895, according to The Weather Channel, and the warmest on record for the Northeast. Lower temperatures this year are leading to increased demand. Forecasters anticipate lower temperatures to continue in coming weeks.

• Oil prices are higher. Prices have been rising for months because of a general strike in Venezuela and concerns about what will happen to oil supplies if the United States goes to war against Iraq. Because natural gas can often be used in place of oil, especially in industry, a rise in oil prices usually translates into higher natural gas prices.

• Prices are also up for other forms of energy. The EIA estimates winter heating bills will be up 43 percent for heating oil customers, 20 percent for propane and 12 percent for electricity this year. Despite the gain, prices are not expected to come close to winter 2000-01, when costs rose to the highest in more than a decade.

www.forbes.com Reuters, 01.27.03, 1:15 AM ET Latin America  OPEC   By Tanya Pang

SINGAPORE, Jan 27 (Reuters) - Oil prices stayed on an upward track on Monday, awaiting a key report from U.N. weapons inspectors for a signal of the likelihood of war in Iraq.

Just hours before chief weapons inspector Hans Blix was due to brief the U.N. Security Council, Washington made it clear it was ready to attack Iraq alone if needed, while Britain said Baghdad was hiding banned weapons, spying on arms inspectors and hindering their movements.

U.S. light crude rose 21 cents to $33.49 a barrel, extending Friday's gains of more than $1 in New York.

Brokers said oil markets were likely to be volatile with several potential price-moving events diaried in the next five days.

Blix, in charge of chemical, biological and ballistic weapons teams, and Mohamed ElBaradei, in charge of nuclear arms teams, will submit on Monday their first full report to the U.N. Security Council on Baghdad's 12,000-page weapons declaration and Iraq's cooperation with arms inspectors.

U.S. President George W. Bush will to make a State of Union address on Tuesday and is due to meet key ally Britain's Prime Minister Tony Blair later this week. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

"Each of these stages will provide further clarity and we can expect a timetable to war to become a little clearer," said Sydney-based independent oil analyst Simon Games-Thomas.

"It's a busy week and all it will take is a couple of words of moderation and we could see prices really come off, it's that volatile," said Games-Thomas.

U.S. secretary of State Colin Powell said at the weekend that time was running out for Baghdad to disarm voluntarily.

"We will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction," Powell said at the World Economic Forum (WEF) in Davos, Switzerland.

SAUDI ARABIA SAYS NO OIL SHORTAGE The world's biggest oil producer, Saudi Arabia, signalled at the weekend that it was not planning to raise supplies any further despite fears that war in the oil-rich Middle East could lead to a supply crunch and a spike in crude prices.

Benchmark oil prices are running close to two-year highs on concerns that an attack on Iraq might coincide with the ongoing strike in Venezuela, which has strangled oil exports from the world's fifth-biggest exporter.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel at the WEF.

The Organisation of the Petroleum Exporting Countries agreed in December to raise output by 1.5 million barrels per day to counter some of the shortfall due to the opposition-led strike in Venezuela. "What can we do more? I do not agree there is a lack of oil," OPEC Secretary-General Alvaro Silva also said at the forum. "The problem of the price is the threat of war."

Venezuela's President Hugo Chavez hinted at the weekend that he may be forced to take up arms if he were defeated by the opposition movement, which is calling for Chavez to step down.

Venezuelan crude output has recovered from lows in December when it was running at a trickle of about 150,000 bpd against more than three million bpd before the strike, which started on December 2.

Strikers said on Sunday that crude output was about 986,000 bpd, 30 percent of pre-strike levels, while Chavez claimed production had reached 1.32 million bpd.