www.cfcnplus.ca POSTED AT 3:17 PM Tuesday, January 28

Don't expect a break at the pumps any time soon. The price of oil is still over the $30 mark.

It has now been over that mark for more than three weeks. On Tuesday, oil closed at $32.67 US per barrel.

One factor driving up the price is the uncertainty over Iraq, but according to international experts there's a more dominant reason.

Dozens of economists, political scientists and oil-industry officials from around the world are meeting in Calgary this week.

Julian Lee is a senior analyst at the London-based Centre for Global Energy Studies. He said there is no doubt uncertainty over Iraq is helping push up the price of oil.

“The world is short of oil and is afraid it's going to become shorter still,” said Lee.

But, he believes the biggest stressor is Venezuela. A general strike there is in it's ninth week. It means more than two-million barrels of oil a day isn't getting to North American markets.

Venezuelan oil is cheaper, easier to refine and takes five to six days to deliver. Middle East oil takes five to six weeks to deliver.

“The Venezuelan disruption is here, and it's real. The Iraqi disruption is potentially in the future,” said Lee.

Whatever drives up the price, we're the ones paying at the pumps.

Mike Lynch, a political scientist at the Center for International Studies, MIT, said OPEC won't allow the price to stay high for long because we'll stop spending.

“They are concerned about that, because in the end they are the ones who lose the sales,” said Lynch.

Even when the Venezuelan and Iraqi situations are resolved, Lynch said spikes in oil prices are something we'll have to get used to.

“The market has changed in certain ways in the last few years, where you no longer have a lot of surplus capacity acting as a buffer against unstable supply or demand,” explained Lynch.

On top of what's readily available to take out of the ground, Lynch said oil companies have also cut back on inventories.

High inventories are costly and when demand increases, having oil on hand keeps the price down. That eats into profits.

Report: BofA cuts South American staff

charlotte.bizjournals.com

According to Dow Jones News service, BofA will eliminate 150 jobs in Brazil and 25 in Argentina. Another 15 to 20 Latin America-related positions in Charlotte and New York will also be cut.

BofA follows other U.S. banks, such as J.P. Morgan Chase & Co., Citigroup Inc. and FleetBoston Financial Corp., that have recently cut exposure to increasingly volatile Latin American markets.

According to Dow Jones News, BofA will halt investment-banking operations in Brazil, but maintain its asset-management unit there. The bank's Brazilian operations will keep 40 employees, and 25 will remain in Argentina. BofA will continue to run offices in those countries, Mexico, Chile and Venezuela.

BofA officials were unavailable for comment.

www.guardian.co.uk Tuesday January 28, 2003 9:10 PM

CARACAS, Venezuela (AP) - President Hugo Chavez's government scored a victory in Venezuela's political crisis by producing more than 1 million barrels of oil Tuesday, frustrating a 2-month-old opposition drive to strangle the world's No. 5 oil exporter.

By raising production to a third of its normal rate, Chavez seized another advantage over his opponents - jump-starting Venezuela's oil industry while defeating calls for a February referendum on his rule.

But the 58-day-old strike has put Venezuela on the verge of economic collapse, caused long-term damage to oil infrastructure and forced Chavez to extend his ban Tuesday on U.S. dollar purchases to preserve foreign reserves.

Chavez surpassed the 1 million-barrel benchmark by focusing on newer oil fields where crude is easier to extract. But production may not reach 2 million barrels a day if the government doesn't revive older wells, said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.

They are going for the lowest hanging fruit on the tree, the easiest to grab,'' Silliere said. In a few weeks, it is going to be a struggle.''

Energy analysts warn that Venezuela has lost production capacity during the strike and that it could take months to restore it. Refining is curtailed, and Venezuela is purchasing its gasoline abroad.

Dissident executives at the state oil monopoly, Petroleos de Venezuela S.A., confirmed production surpassed 1 million barrels, compared to a low of 200,000 during the strike.

Oil provides half of Venezuela's government revenue and 70 percent of export earnings.

Chavez has fired more than 5,000 striking workers at the state oil monopoly, which employed 40,000, eliminating dissent and trying to increase government control over the semiautonomous corporation.

State oil company executives warn the firings will make it even more difficult to reach full production.

Opposition leaders insist the oil strike will continue. But they are scaling back in other areas, worried about a public backlash over food, gasoline and medicine shortages.

Most small businesses are open - either because they never joined the strike or because they couldn't sustain losses.

Factories, shopping malls, restaurants and schools may reopen next week, at least on a part-time basis, said Julio Brazon, president of the Consecomercio business chamber and a strike leader.

Citing political and economic turmoil, Venezuela's opposition called the strike Dec. 2 to force Chavez to call a nonbinding referendum on his rule in February. They delivered 2 million signatures demanding the vote.

Last week, Venezuela's Supreme Court postponed the referendum indefinitely, citing a technicality.

Chavez's foes are now gathering voter signatures to demand an amendment to reduce the president's six-year term to four years - allowing an early binding referendum on his rule.

A similar idea was floated last week by former President Jimmy Carter, whose Carter Center has joined the Organization of American States and United Nations in trying to broker an electoral solution.

Carter also proposed an alternative: Dropping the strike, and holding a binding referendum halfway into Chavez's term, or next August.

Venezuela's opposition - a coalition of labor, business, leftist and conservative political parties - has won international backing for early elections.

Over Chavez's objections, Spain, Portugal, the United States, Brazil, Mexico and Chile have formed a ``Friends of Venezuela'' initiative and are urging both sides to work quickly on the Carter proposals.

Recession, capital flight, stalled investment and strike damage led Santander Central Hispano investment bank to forecast a 40 percent collapse in economic activity the first quarter of 2003.

The finance ministry on Tuesday extended for another week a freeze on foreign currency sales to protect the bolivar, which has lost 25 percent of its value this year. The government, meanwhile, plans exchange controls that could hurt businesses that depend on dollars to import goods.

``Chavez many have the initial advantage, but over the long term, he's going to have a much more difficult path,'' said Steve Johnson, senior policy analyst for Latin America at the Washington-based Heritage Foundation.

abcnews.go.com The Associated Press CARACAS, Venezuela Jan. 28 —

Schools, restaurants and malls may reopen amid fears that a 57-day-old strike called to force President Hugo Chavez from office could backfire, business leaders said, as the government extended a freeze on foreign currency sales for another week to protect its battered currency.

Business representatives expressed concern Monday that discontent with food and fuel shortages caused by the strike could undermine its objective of removing Chavez from office.

Julio Brazon, president of the Consecomercio business chamber, which represents about 450,000 stores and retailers, said businesses need "to recover earnings and avoid labor problems." He said shopping malls and franchises may be permitted to open part-time next week.

Carlos Avila, executive president of Subway de Venezuela, said fast food franchises were considering opening four days a week. Each of Subway's 76 branches in Venezuela have lost an average of $30,000 during the strike.

The National Association of Private Education, which represents 911 private schools, convoked assemblies this week to decide whether schools should open Feb. 3.

Strike organizers, who accuse Chavez of dragging this South American country into political and economic chaos, warned that easing the work stoppage would be counterproductive.

"If some sectors of the opposition, business sectors or political sectors, think they can save themselves from this regime by easing the strike, they are totally mistaken," labor boss Carlos Ortega said.

Strike leaders said the work stoppage in the oil industry, which provides half of government revenue, would continue.

"The protest by oil workers will continue because this is the path we are taking to find a solution to the crisis," dissident oil executive Juan Fernandez said at a press conference.

Crude output reached 966,000 barrels a day on Monday, according to striking executives at state oil monopoly Petroleos de Venezuela S.A., or PDVSA. Chavez claimed Sunday that daily production had surpassed 1 million barrels.

Oil production dropped as low as 150,000 barrels per day in December compared to pre-strike levels of 3.2 million barrels per day.

A waning strike could give Chavez the upper hand in negotiations with the opposition. Negotiations, mediated by the Organization of American States, have focused on whether to hold early presidential elections.

Meanwhile Tuesday, the Finance Ministry extended a freeze on foreign currency sales, first imposed last Wednesday, until Feb. 5. The suspension is designed to give the government more time to implement a new policy of foreign exchange controls, which will limit the amount of dollars and other foreign currencies Venezuelan can buy.

Exchange controls would stem the slide of Venezuela's bolivar currency, which has lost a quarter of its value this year. But they could hurt businesses that depend on dollars to buy imported goods.

The strike has cost Venezuela at least $4 billion so far. The economy could shrink by as much as 40 percent in the first quarter of 2003, the Santander Central Hispano investment bank has warned.

Chavez, a firebrand former paratrooper, was elected in 1998 and re-elected two years later. His term in office ends in 2007.

Government adversaries are now pinning hopes on amending the constitution to allow early elections. They must gather signatures from at least 15 percent of Venezuela's 12 million registered voters to call a referendum to cut the presidential term to four years.

Another option is waiting until August, when the constitution allows for a legally binding referendum on the president's rule.

Opposition parties are organizing a massive signature collection campaign on Feb. 2, the same day a nonbinding referendum on Chavez's presidency was supposed to be held. Citing a technicality, Venezuela's Supreme Court ruled last week balloting must be postponed indefinitely.

www.forbes.com Reuters, 01.28.03, 4:17 PM ET  

CARACAS, Venezuela, Jan 28 (Reuters) - The number of Venezuelan oil workers who have been fired from their jobs topped 5,000 on Tuesday and will keep rising as the government steps up its attempts to break an eight-week-old strike that has crippled the world's fifth largest oil exporter, the state news agency said on Tuesday.

The total was 2,000 more than the previous estimate given on Sunday by President Hugo Chavez, who has vowed to break the general strike, which has involved state-owned Petroleos de Venezuela (PDVSA) rather than negotiate early elections in the bitterly divided country.

The official Venpres news agency quoted PDVSA chief Ali Rodriguez as saying the number of dismissals for dereliction of duties had reached 5,111 and would continue to rise.

The company had 37,000 employees before the strike, which began Dec. 2.