onebusiness.nzoom.com

Oil prices edged lower on Friday after three days of gains as dealers marked time ahead of US Secretary of State Colin Powell's bid to convince UN powers next week of the need to use military force to disarm Iraq.

US light crude held gains of more than $2 on the week, while London Brent fell 11 cents to $US31.10.

Low global oil stocks and reduced oil exports from strike-torn Venezuela have combined with war fears to boost oil prices more than 30% since late November.

Analysts see little relief from oil prices, near two-year highs, as the White House positions itself for war against key exporter Iraq, which hold's the world's second largest oil reserves behind Saudi Arabia.

US Secretary of State Colin Powell is due to present evidence Wednesday to the UN Security Council to show that Baghdad is pursuing programs to build biological, chemical or even nuclear weapons in violation of sanctions.

news.bbc.co.uk Saturday, 1 February, 2003, 00:36 GMT

Thousands have turned out to demonstrate

Venezuelans are marching through the streets of the capital, Caracas, in a show of support for the country's radio and television stations and newspapers.

The demonstration comes a day after President Hugo Chavez started legal proceedings against a private television channel.

The legal move is seen as a crackdown by the president on those who oppose him.

The television channel is the third of the four private companies to be placed under investigation.

The president is accused of a media crackdown

The government accuses it of violating telecommunication laws.

The BBC's correspondent in Venezuela, Adam Easton, says the media has given wide coverage to the opposition-led general strike against Mr Chavez, which has been going on for three months.

Leading newspapers in Venezuela however have started to question the wisdom of continuing the general strike.

The dailies widely read by the middle class, many professionals and the wealthier sectors of society, argue that the strike has run its course and is now doing more harm than good.

'Irreparable damage'

A commentary in the right-leaning El Universal on Thursday expressed the fear its continuation will "cause the country irreparable damage".

On the same day, the centre-left El Nacional warns that the opposition strategy has "serious limitations" and that instead of weakening the government, had "strengthened the Chavistas' convictions".

When the strike began, they were generally optimistic the opposition would prevail and the president would be forced to step down or call a referendum on his rule imminently.

reuters.com Fri January 31, 2003 06:32 PM ET By Pascal Fletcher

CARACAS, Venezuela (Reuters) - Hundreds of thousands of Venezuelan opposition protesters clamored for elections Friday as envoys from six nations urged President Hugo Chavez and his foes to settle their political feud peacefully through the ballot box.

The demonstrators massed outside a Caracas hotel where envoys from the United States, Brazil, Mexico, Chile, Spain and Portugal met opposition negotiators at the start of a mission to try to solve Venezuela's political and economic crisis.

Two months into a grueling opposition strike that has pushed the world's No. 5 oil exporter deep into recession, the government said it had restored oil output to around half of pre-strike levels, regaining much-needed income flows.

The deputy foreign ministers from the six-nation "group of friends," formed this month to help solve the Venezuelan crisis, also held talks with left-winger Chavez about the political deadlock behind the strike.

The opposition stoppage is aimed at trying to force the populist president to quit and hold early elections.

The group has a mandate to back efforts by Organization of American States Secretary General Cesar Gaviria to achieve an agreement on elections between the government and opposition.

Outside the hotel, the huge crowd of protesters packed a highway, shouting "Elections now!" and "Not one step back!" and waving national flags. They called on the foreign envoys to press the government to agree to an early poll.

"They should do something so we can have elections, so all these marches are not in vain," 45-year-old housewife Jaini Fuentes told Reuters.

The demonstration was originally called as a massive show of support for Venezuela's private media, most of which are fiercely critical of Chavez. He accuses them of bias, while they charge him with trying to curb press freedom.

CONSTITUTIONAL COURSE

Opponents of Chavez, who was elected in 1998 and still commands significant support among the nation's poor majority, propose a constitutional amendment to trigger an early election. They plan to collect signatures backing the proposal in a nationwide action Sunday.

Foes of Chavez accuse him of ruling like a dictator and of trying to impose Cuba-style communism in the oil-rich nation. The president, who survived a coup in 2002 and whose term ends in early 2007, has condemned the strikers as "coup mongers" and says he will not negotiate with them.

Foreign Minister Roy Chaderton, a member of the government negotiating team, said after the foreign envoys' talks with Chavez that the opposition proposal was legal. But he made clear the government did not intend to encourage it.

"This government has no intention of trying to get rid of itself," he told reporters.

Chaderton said Chavez stressed to the foreign envoys that his government was democratically elected and legitimate. He also briefed them on the economic damage caused by the strike.

"He was combative," said one source who attended the meeting but asked not to be named.

The opposition strike has slashed oil production and exports, rattling global energy markets jittery over U.S. preparations for a possible attack on Iraq.

Facing plummeting oil revenues and capital flight that is bleeding foreign reserves, the government prepared emergency financial measures, including heavy budget cuts and foreign exchange controls to be introduced next week.

But the government said on Friday it had brought crude oil output back up to 1.5 million barrels per day, almost half of pre-strike levels. Striking oil employees say the output level is lower but acknowledge it has been rising.

The slow recovery in the oil industry comes as support for the strike in other sectors is clearly cracking.

Private banks have resumed regular operating hours, most shops have reopened and vehicles and pedestrians have returned to the streets of Caracas, although there are still shortages of gasoline and some food items.

Opposition leaders are demanding that more than 5,000 employees fired from the strike-hit state oil giant PDVSA be restored to their jobs as part of any election deal.

Chavez, who accuses the strikers of "sabotaging" the oil industry after backing a brief military coup against him last year, has so far ruled that out. He has condemned the strikers as "traitors" and said they should be jailed.

PDVSA President Ali Rodriguez said on Friday the government could end up firing as many as 6,000 company workers.

(Additional reporting by Patrick Markey)

www.miami.com on Fri, Jan. 31, 2003 By MELITA MARIE GARZA Chicago Tribune

CHICAGO - 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.

In January, Oberweis Dairy in North Aurora, Ill., 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, 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 eight-week strike in Venezuela, one of the top five oil exporters to the United States, 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.

"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 United States 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.

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."

www.dailytimes.com.pk Kurt Weyland

Both sides will have to work hard if they want to win. The fractious opposition will need to go beyond rejection of Chávez, elaborate a programme for the country’s reconstruction, and unite behind an attractive candidate. President Chávez will need to clarify the content and meaning of his “Bolivarian Revolution”

Venezuela is mired in a dangerous stalemate. President Hugo Chávez clings to power despite the obvious failings of his government: severe economic deterioration and dangerous political polarisation. The opposition, tainted by their botched coup of April 2002, now seeks to force Chávez from office through a costly general strike.

Both sides justify their intransigence with one-sided interpretations. His sympathisers glorify Chávez as a defender of the poor besieged by a selfish, coup-plotting elite. His fiercest opponents demonise Chávez as an autocrat pursuing a Cuban-style revolution and destroying democracy. Both interpretations are flawed.

The Chávez government has not helped Venezuela’s poor in any significant way. On the contrary, his belligerent rhetoric and inept governance scared off investors, inciting economic decline and boosting unemployment and poverty. Now Chávez lacks majority backing even among the poor.

The opposition comprises most of Venezuela’s organised civil society, not only business, but also trade unions, professional associations, and NGOs. So Venezuela’s polarization does not pit “the poor” against “the oligarchy,” but a populist against civil society.

The opposition’s view — shared by rightists in the Bush administration — is equally unconvincing. Rather than initiating a revolution, Chávez merely spouts fiery rhetoric. While his democratic credentials are dubious, he has not acted in an openly authoritarian fashion. True, he has systematically concentrated power in his own hands and has undermined governmental checks and balances. But while harassing the opposition, he has not overturned the minimal principles of democracy. Indeed, he now invokes his formal democratic legitimacy to fend off demands for his resignation.

But Chávez’s insistence on the inviolability of the current constitution is hypocritical. Four years ago, Chávez deviated from the old constitution by using a plebiscite to engineer a new one, tailor-made for him. Now he invokes that charter to block calls for a plebiscite on his continuation in office.

The paradox here is that Chávez’s earlier example may provide the solution to today’s standoff. As Chávez used para-constitutional means to advance a desire for change in 1999, so the international community should not be confined by the present constitution in pressing to resolve a crisis that is ruining the country.

In fact, the Latin American members of the “group of friendly nations” trying to mediate this conflict can draw on interesting experiences to design such a solution. After all, confrontations like this are not unusual in Latin America’s rigid presidential systems. When chief executives with fixed terms of office lose political support, they cannot be removed through a no-confidence vote, as in parliamentary systems. Presidential systems therefore risk lengthy stand-offs that threaten democracy —as in Venezuela today.

But over the last decade, Latin American politicians have made presidential systems more flexible by finding innovative ways to remove unpopular presidents. One of Chávez’s discredited predecessors was impeached on flimsy charges of malfeasance; Ecuador’s Congress declared a disastrous chief executive “mentally incompetent”; in Peru, an autocratic president, after months of domestic and international pressure, was forced into exile.

While politicians interpreted the law with a good deal of creativity in these instances, they usually did so to ensure the survival of fragile democracies facing a crisis. As long as these manoeuvres do not proliferate and turn into easy ammunition for the opposition of the moment, they may provide a safety valve for presidential systems. International monitoring can also safeguard against frivolous use of such mechanisms.

It is to be hoped that the group of friendly nations can help design an innovative solution to Venezuela’s standoff. To be acceptable to both sides, such a solution must deviate from the favourite proposals of each. The opposition prefers an “up-or-down” vote on Chávez’s continuation in office, which it would most likely win — and which Chávez will never accept.

Chávez insists on the recall referendum mechanism included in his constitution, which the opposition cannot tolerate: removing the president in this way would require a larger absolute number of votes than Chávez garnered in the last election. But rising abstention makes this virtually impossible. Both proposals are thus politically unfeasible.

Only a democratic mechanism for conflict resolution that has an uncertain outcome has any chance of being adopted. That mechanism is an election, to be held as soon as possible (realistically, by this summer). Both sides will have to work hard if they want to win. The fractious opposition will need to go beyond rejection of Chávez, elaborate a programme for the country’s reconstruction, and unite behind an attractive candidate.

President Chávez will need to clarify the content and meaning of his “Bolivarian Revolution.” Since Chávez is a skilled campaigner and the opposition so far lacks unity, he will have a realistic chance of winning — which should make a new contest acceptable to him.

Pressure from the group of friendly nations may induce both sides to accept this last chance to avoid a political and economic meltdown. Elections can be made legitimate through a constitutional amendment shortening the presidential term, as proposed by Jimmy Carter in his recent mediation effort. Since this is designed to defuse an exceptional crisis, it would not become a precedent that encourages frivolous attacks on Latin America’s democratically elected governments. An election now in Venezuela will save, not undermine, democracy. —DT-PS Kurt Weyland is an Associate Professor of Government at the University of Texas. His book, “The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela” was published by Princeton University Press (2002)