Business - Saturday, February 8, 2003 Fuel around town costs $1.59 a gallon www.coloradoan.com By Coloradoan staff and news services

NEW YORK -- The retail price of gasoline went up about 6 cents Thursday and Friday, fueled by high oil costs and fears of war with Iraq.

"Traders are afraid that the next barrel they buy will be more expensive than the one they bought today," said Tom Kloza, director of the Oil Price Information Service, a Lakewood, N.J., publisher of industry data.

That fear is contributing to the aggressive buying, he said.

The retail price of gasoline is up 8 percent since the start of the year.

At the pump, the average price of regular unleaded gasoline is $1.53 per gallon, up 11 cents since the year began and 43 cents higher than a year ago.

In Fort Collins, those prices average about $1.59 a gallon for regular unleaded, though a handful of stations are still selling gas for $1.50.9 and $1.51.9.

The price of crude has been above the magic mark of $30 a barrel since mid-December and closed Friday at $34.16 on the New York Mercantile Exchange.

The $30 benchmark goes back to the 1970s when prices crept above that and the country faced massive recession, said Sanjay Ramchander, associate professor of finance and real estate at Colorado State University.

"It's a threshold that spells disaster for the economy," Ramchander said.

"If you look at the long run, prices are about $16 to $17 a barrel. When you're talking $30, that's an 80 percent jump."

Analysts said the main drivers on wholesale markets earlier this week were the latest government supply data and the case made against Iraq by Secretary of State Colin Powell.

Prices rose sharply after weekly Energy Department statistics showed thinning U.S. inventories of gasoline and distillates, which include diesel and heating oil.

Later, prices retreated somewhat as traders determined Powell's presentation had done little to sway key members of the U.N. Security Council that immediate military action in Iraq was needed.

Representatives of China, Russia and France said the U.N. weapons inspectors' work should continue.

Ramchander predicted the price of crude oil would not fall until some of the uncertainty is resolved.

Though war appears imminent, the biggest uncertainty is what the future holds in Iraq, Ramchander said.

"A quick war will actually be better than a prolonged conflict," he said.

If war does break out, neighboring Kuwait could increase the supply, which would help, Ramchander said.

"It all depends on when war begins," he said. "If it begins in March, the question is how long will it be. And once the war is over, what's going to happen in Iraq."

Aside from the threat of war in Iraq, the lengthy political and economic crises in Venezuela also have propped up world oil prices for months.

Venezuelan exports of crude oil and refined products have increased in recent weeks, but not enough to calm U.S. energy markets, analysts said.

Nationwide supplies of gasoline have dwindled by 3.4 million barrels to 209.6 million barrels, or 5 percent below year-ago levels, according to the Energy Information Administration, the Energy Department's statistical arm. That slight shortfall does not fully explain why retail gasoline prices are 40 percent higher than last year, analysts said.

"We've got a market here being driven by psychological influences," said Peter Beutel of Cameron Hanover in New Canaan, Conn.

Analysts said some refiners have reduced output in recent weeks in preparation for the shift from winter- to summer-grade fuel. The annual switch to cleaner-burning gas before the busy driving season requires shutting down equipment, scrubbing it clean and starting all over again -- a process that causes supplies to contract and prices to move higher even under the best conditions.

This year, the impact of these so-called turnarounds is being magnified by the possibility of a U.S.-led invasion of Iraq, analysts said.

"We're probably going to start the summer driving season at higher levels than we have in a long time," said Phil Flynn, an analyst at Alaron Trading in Chicago. "There's a lot of bad news in those inventory reports."

The biggest wildcard is still the Iraq situation, Flynn said. "The general consensus is the sooner we get rid of Saddam Hussein, the sooner oil prices will come down."

Originally published Saturday, February 8, 2003

www.sltrib.com

CARACAS -- Venezuelan motorists waited for hours to fill up at gasoline stations Friday -- a sign life has been slow to return to normal after a two-month strike that failed to oust President Hugo Chavez and left the economy in shambles. 
Thousands of employees at the state oil monopoly, Petroleos de Venezuela S.A., are still on strike or have been fired by Chavez. The government has raised crude oil production to about a third of normal, but refineries are largely idle. 
Energy and Mines Minister Rafael Ramirez said Friday that gasoline production was 150,000 barrels a day, compared to 250,000 before the strike. He said Venezuela would import 12 million barrels of gasoline this month to make up for shortages. 
Venezuela -- the world's fifth-largest oil exporter -- has spent more than $500 million a day on fuel imports since the strike began Dec. 2. 
Hundreds of drivers joined lines stretching for several miles at Caracas service stations, most of which were dry and waiting for deliveries. Earlier this week, it took 20 minutes at most to fill up in Caracas, though huge lines had persisted in the rest of the country.

www.nationalpost.com Tony Seskus Financial Post, with files from wire services Saturday, February 08, 2003

CALGARY - More sabre-rattling by George W. Bush, the U.S. President, drove oil prices to two-year highs yesterday, stoking fears in the Canadian manufacturing sector rising energy prices could bring an economic slowdown.

Mr. Bush said the United Nations Security Council must enforce its resolution on disarming Iraq, adding the council would be weakened if it allowed Saddam Hussein "to deny and deceive" the UN, whose inspectors are searching Iraq for chemical and biological weapons. Adding to the global tension was Washington's decision to increase its terrorism alert status to orange from yellow, citing an intelligence warning of a "high risk" of terrorist attack.

Prices also rose as low U.S. inventories of heating oil and gasoline sent prices of those products soaring.

U.S. crude rose US$1.09 to hit US$35.25 a barrel -- the highest level since November, 2000 -- extending a 20% price surge this week before dipping to close at US$35.12, up US$96¢. London crude oil hit US$32.50 a barrel, also a two-year high, and last traded at US$32.34, up US90¢.

Oil prices in New York have climbed 79% in the past year, from a low of US$19.64 last February, on Middle East tensions and a long-running strike in Venezuela that has crippled its oil production and tightened global supplies.

The news added to fears energy prices could knock back the U.S. economy. And concerns are growing over how high fuel prices will affect Canadian firms.

"Looking back a couple of years ago, high energy costs were one of the big factors in weakening the manufacturing sector in the U.S.," said Jayson Myers, chief economist of the Canadian Manufacturers & Exporters.

"And if that happens again this time, I think Canadian companies could be faced with a situation where their cost of doing business is going up and their market is actually weakening because of the impact on U.S. industry."

Mr. Myers said companies reliant on oil face a considerable increase in energy costs that will force them to cut spending in other ways to maintain profit margins. "It's going to put further pressure on the bottom line" he said.

"Probably some companies will be looking at downsizing their labour force in some way or having to become much more efficient in what they're doing in order to overcome some of those higher costs."

The U.S. government also said it expected crude oil will stay above US$30 a barrel, on average, throughout 2003 and gasoline prices will rise to near-record highs this spring due to tight crude oil supplies and dwindling inventories.

Judith Dwarkin, chief economist at Ross Smith Energy Group in Calgary, said Canadian oil and gas companies are benefiting from sustained high commodity prices, but added they are also slowing the economy as a whole.

"In macro terms, it's supplying some brakes to our economy," she said. "The cost of transporting goods, the cost of flying, all those things are higher than they would otherwise be, so it's not good from the economic point of view overall."

She said high oil prices will prove a particular challenge to the United States. "The U.S. economy is already driving into an economic headwind," she said.

tseskus@nationalpost.com

www.syracuse.com February 08, 2003 By Frank Brieaddy Staff writer

The two 18-year-old Central New York exchange students that Rotary International recalled a month ago from Venezuela because of political unrest are headed Monday for Argentina.

The pair, Jessica Ruhlman, of Skaneateles, and Julie Wynkoop, of Cato, were reluctant to come home and had hoped the situation in Venezuela would settle down quickly enough for them to return.

But Scott Wisner, who runs the exchange program for Rotary District 7150 in Central New York, said, "Things didn't seem to be moving anywhere positively."

He said the local Rotary already had a strong relationship with some families in Argentina.

Travel and visa arrangements were expedited to get the two students back to South America.

All students for this year's exchange have to return home by August.

Ruhlman said she was disappointed that she wouldn't be returning to her "family" in Venezuela.

"It became apparent that it would have just taken too long," she said.

Even though she's going to Argentina instead of Venezuela, Wynkoop said she'll have contact with the extended family of those who originally housed her.

They're from Argentina and have relatives there who are eager to meet Wynkoop.

Wynkoop said she also isn't ruling out a flight to Venezuela to visit friends.

www.guardian.co.uk Saturday February 8, 2003 9:30 AM

CARACAS, Venezuela (AP) - President Hugo Chavez warned nations endorsing early elections not to be misguided by opposition allegations that he is leading a dictatorial regime.

Chavez urged the so-called Group of Friends,'' a forum of six nations backing negotiations mediated by the Organization of American States, to understand the truth about Venezuela.''

In Venezuela, there is a legitimate government, a democratic government,'' Chavez said during a speech to foreign diplomats. It's necessary to recognize that reality.''

Opposition leaders claim Chavez, a former paratrooper who was elected in 1998 and re-elected in 2000, is riding roughshod over the nation's democratic institutions.

Meanwhile, a melee between opposition sympathizers and municipal police under the command of a ruling party mayor erupted outside a building in Caracas where a petition backing early elections is stored. No injuries were reported.

Dozens of opposition supporters pledged to secure the building through the night and accused police of attempting a raid.

``We are going to stay here all night to safeguard the signatures,'' said Geraldo Blyde, a member of the Justice First opposition party.

Although a two-month strike that failed to oust Chavez has ended in all sectors except the all-important oil industry, Venezuelans still must cope with gasoline shortages and an economy in shambles.

Despite increases in oil production and government expenditures of more than $500 million on fuel imports, motorists waited for hours to fill up their tanks at service stations.

The strike is over but we are still going through a critical moment,'' said Wilmer Acevedo, 30, a tow truck driver waiting at one gas station. If I don't get gasoline, I can't work.''

Some restaurants, stores and factories were having trouble opening because of the gasoline shortage, causing serious delays in deliveries of other goods.

The government has raised oil production to more than 1 million barrels compared to pre-strike levels of 3.2 million barrels per day. Still, refineries remain largely idle.

Energy and Mines Minister Rafael Ramirez said Venezuela would import 12 million barrels of gasoline this month to make up for shortages.

It will take a couple of months to bring refining capacity back up to a normal operating rate,'' said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York. Part of the problem is they have fired a lot of the key people that used to run these things. You can't replace these people that easily.''

Thousands of employees are still on strike at the state oil monopoly, Petroleos de Venezuela S.A. More than 9,000 of the company's 40,000 employees have been fired for joining the work stoppage.

The fate of the fired workers is a sticking point in negotiations between the government and opposition. Chavez vowed Friday not to rescind the firings. ``Not even if I were crazy,'' he said.

Shortages could worsen as the government implements exchange controls to protect its foreign reserves and the bolivar, which lost a quarter of its value during the strike. Dollar requests could take as long as 45 days to process under the new rules, which could delay imports. Venezuela depends on imports for 60 percent of raw materials.

The government fixed the bolivar at 1,598 bolivars per dollar. The bolivar is trading at roughly 2,500 bolivars to the dollar on the black market.