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(Columbia) Feb. 19, 2003 - When you own a Hummer, you can expect to spend a lot of time and money at the gas station. The Hummer belongs to his brother so Jack Freeman doesn't always have to pay to fill it up, "Fill it up two times and it'd be roughly about a hundred dollars."

Even drivers of efficient vehicles are forking over much more for fuel and many don't know why from, "I guess it's supply and demand with the situation in Iraq, I guess," to, "I think it's a possibility we're just being asked to pay more, because it's a cause and we don't really know what's going on."

Why are gas prices going up so fast? The marketing arm for most of the state's service stations says it's not so much about Iraq, but about the cost of crude oil. A higher price per barrel, a short domestic supply [the shortest in 30 years], a harsh winter weather which has caused a run on heating oil, and disruptions in supplies from countries like Venezuela.

Prices at your favorite station might be shooting up every few days because retailers are seeing dramatic increases in their costs. Sims Floyd with the Petroleum Marketers Association says every time the tanker trucks stop in to refill the station's gas supply, "Typically in metro location you've got 16 to 20 thousand gallons underground. And in an urban setting you can turn that entire product in two to three days."

The marketers say dealer profits are razor thin. Seventy-eight cents goes for the cost of crude out of the amount you now pay for a gallon of gas in South Carolina. Thirty-five cents to to federal and state taxes. Thirty-nine cents for refining, distribution and marketing, which leaves about three cents profit for the dealer.

The petroleum marketers say some gas station owners make more money selling a cup of coffee than they do on a tank of gas. That's one reason they want customers to come into the store.   South Carolina's average gas price is a $1.55, the fourth lowest average in the nation. One reason is because the Palmetto State has lots of gas stations, several pipelines and terminals close by.

www.arabnews.com Reuters

DUBAI, 20 February 2003 — OPEC member Saudi Arabia will support a temporary suspension of the group’s oil output limits if an attack on Iraq halts exports from the world’s eighth largest exporter, a Gulf source said yesterday.

But even if the Organization of the Petroleum Exporting Countries does not formally suspend its output ceiling, a senior OPEC delegate said exporters with spare capacity would “de facto” pump at will.

“In case there is a war and it seems there will be a shortage of oil to the market, OPEC will carry out its pledged policy of not allowing a shortage to take place and will supply the market with enough oil,” the Gulf source told Reuters.

“If deemed necessary in this situation, the OPEC quotas and ceiling will be temporarily suspended. Such a decision is likely to be supported by the majority, if not all OPEC members, including Saudi Arabia.”

In practice, the burden of shouldering any disruption in Iraqi export flows of some two million barrels per day (bpd) would fall on Saudi Arabia, which holds the majority of the world’s spare crude production capacity.

OPEC, due to hold a policy meeting on March 11, has raised quotas twice this year to cover for an unexpected strike in Venezuela, and most members are now pushed to full capacity.

Saudi Oil Minister Ali Al-Naimi has said Riyadh can lift pumping rates to 10 million bpd within weeks so that major consuming countries need not tap their own emergency stockpiles.

And the senior OPEC delegate said volumes will be boosted in any case to keep world oil markets from suffering a supply shock.

www.forbes.com Reuters, 02.19.03, 4:59 PM ET

MONTERREY, Mexico (Reuters) - Mexico, despite being tightly stretched in its crude production capacity, could supply world markets with an extra 100,000 barrels per day (bpd) of oil in the event of a war against Iraq, Mexico's top energy official said on Wednesday. "If the world requires more oil Mexico could offer perhaps 100,000 barrels (a day) more," Energy Minister Ernesto Martens told reporters in Monterrey during a visit to inaugurate a power plant. Non-OPEC Mexico last month announced it would raise its export platform to 1.88 million bpd as of Feb. 1 as part of a deal with the OPEC cartel to cover the shortfall from a Venezuelan strike and in a bid to cool sizzling oil prices amid the threat of a U.S. attack on Iraq. For January, Mexico increased exports to 1.76 million bpd from the 1.66 million bpd ceiling maintained through most of last year. In December Mexico produced an average of 3.269 million bpd, of which it exported 1.690 million bpd on average. Officials at state oil monopoly Pemex have said Mexico is pretty much at its production and export capacity limit. Pemex is targeting average crude oil output of 3.5 million bpd by the end of 2003. Mexico is one of the top four suppliers to the United States, along with Saudi Arabia, Venezuela and Canada. Concerns over supply disruptions resulting from a war come as Venezuela struggles to return exports to normal after a crippling strike and Nigerian oil workers stage a walk-out although supplies have remained normal so far. On the domestic front, Martens played down fears of a natural gas crisis, fanned by comments from Pemex head Raul Munoz last week saying the nation faced a major shortage of the fuel. "There is no problem of gas supply," said Martens. "I have to say that unless an emergency crops up, which is as yet unknown, Mexico has its supply assured of fuel in its different forms that will be required in the next months." Munoz said Mexico would need to find an extra 100,000 cubic feet per day from somewhere, even if it almost doubled natural gas imports to 1.1 billion cubic feet per day, which he said was pushing the nation's import capacity to the maximum.

reuters.com Wed February 19, 2003 04:56 PM ET By Phil Stewart

CARACAS, Venezuela (Reuters) - Venezuela reeled on Wednesday from the shotgun-killings of three dissident soldiers and a protester opposed to President Hugo Chavez, as police and grieving relatives split over whether the quadruple homicide was political.

According to police investigations, about twelve unidentified armed men kidnapped the four victims on Saturday night as they were leaving a protest. They were bound, gagged, and some were tortured before the gunmen executed them.

The last two bodies, badly decomposed and showing signs of torture, were found on Tuesday on the outskirts of Caracas.

The case has fueled opposition fears that Chavez may be leading the country toward armed struggle by encouraging supporters to silence dissenting voices, more than 10 months after narrowly surviving a coup led by rebel officers.

Chavez has always called his self-styled "revolution" a peaceful one.

Police attempted to soothe frayed nerves on Wednesday, saying the motive for the killings appeared to be revenge, not politics. They cited an alleged scuffle on Saturday between the slain soldiers and a fellow protester, Edgar Leonardo Machado, who has become the lead suspect in the killings.

"We're investigating," said deputy police chief Raul Yepez. "But the clear, precise motive, the strongest ... is revenge."

Family members of the victims slammed the investigations as corrupt. They accused the police of trying to avert a scandal, and said the four dead were clearly killed for their protests against the populist president.

"They want to clear themselves politically, and they say it's about revenge. My brother had no enemies. The only enemy we have here is Hugo Chavez," said Miguel, whose 21-year-old brother, air force soldier Felix Pinto, was one of the dead.

He spoke from the Plaza Altamira in the wealthy eastern part of the capital, the center stage of Venezuela's opposition protests and the last place the four victims were seen alive.

BOLIVARIAN CIRCLES

Despite occasional violence in Venezuela's political standoff, there have been no confirmed selective killings of Chavez's allies or enemies. Still, street clashes have claimed at least seven lives and left scores injured since December.

Chavez has styled his government on Cuban socialist ideals and the nationalist fervor of Venezuela's 19th century revolutionary leader Simon Bolivar.

After gaining power in 1998, he set up community networks called "Circulos Bolivarianos," or "Bolivarian Circles," which were meant to spread the word of his revolution across the city's honeycomb of poor urban sprawls.

But the opposition says Chavez's supporters take his calls to defend the revolution literally. They brand the groups "Circles of Terror," and have started their own armed "self-defense" groups to guard against attack.

The political situation, marked by daily marches by supporters and opponents of the president, is growing more tense as Chavez refuses to bend to opposition calls to hold early elections.

His term in office ends in 2007, but Chavez jokes he will stay in power for two more decades.

Police say key to solving the mystery of the recent killings will be the testimony of a 14-year-old girl, who apparently was Pinto's underage lover and was abducted along with the four victims but survived the shooting.

The girl has been hospitalized in intensive care and was unable to give investigators a formal statement, police said.

The case is mired in controversy, especially since it appears to involve a deadly Dec. 6 shooting at the Plaza Altamira, which was witnessed by two of the victims.

Zaida Perozo, a female protester whose body was found on Monday, was wounded along with 20 others in the Plaza Altamira and had been considering testifying against an alleged gunman.

Relatives of the deceased said they feared more attacks would follow on opposition leaders.

"This is like a chess game," said Pinto's brother. "First they go after the pawns and then later for top leaders."

yellowtimes.org Printed on Wednesday, February 19, 2003 @ 15:07:08 EST   ( ) By Paul Harris YellowTimes.org Columnist (Canada)

(YellowTimes.org) – There are many reasons for George Bush's single-minded drive toward Baghdad. In other articles I have written for YellowTimes.org, I hinted that a not so obvious reason for the drive against Iraq is Bush's war against Europe. In fact, I have now come to believe that is the primary reason for his Iraqophenia.

Whenever a nation decides to go to war, there are plans made for who is going to win and who is going to lose; no one goes to war expecting to lose, but it isn't always the obvious target of the aggression that is the real thrust behind the war. Sometimes, it isn't a case of what you expect to win from a war, but rather a case of what you hope someone else loses; and it doesn't have to be your stated enemy who you hope will sustain the losses. In this case, Bush's hoped-for victim is the European economy. It is robust, and is likely to become much stronger in the easily foreseeable future. Britain's entry into the European Union is inevitable; Scandinavia will join sooner rather than later. Already, even without those countries, there will be 10 new member nations in May 2004, which will swell the GDP of the E.U. to about $9.6 trillion with 450 million people as against $10.5 trillion and 280 million people in the United States. This represents a formidable competing block for the United States but the situation is significantly more complex than what is revealed just by those numbers. And much of it hinges on the future of Iraq.

I have written before, as have many others, that this upcoming war is about oil. To be sure there are other reasons, but oil is the single most impelling force. Not in the way you might expect, however. It isn't so much that there are believed to be huge untapped oil reserves in Iraq, untapped only due to outdated technology; it isn't so much an American desire to get its grubby hands on that oil; it is much more a question of whose grubby hands the Americans want to keep it out of.

What precipitated all of this was not September 11, nor a sudden realization that Saddam was still a nasty guy, nor just the change in leadership in the United States. What precipitated it was Iraq's November 6, 2000 switch to the euro as the currency for its oil transactions. At the time of the switch, it might have seemed daft that Iraq was giving up such a lot of oil revenue to make a political statement. But that political statement has been made and the steady depreciation of the dollar against the euro since then means that Iraq has derived good profits from switching its reserve and transaction currencies. The euro has gained about 17 percent against the dollar since that time, which also applies to the $10 billion held in Iraq's United Nations "oil for food" reserve fund.

So the question arises, as it did for George Bush, what happens if OPEC makes a sudden switch to euros? In a nutshell, all hell breaks loose.

At the end of World War II, an agreement was reached at the Bretton Woods Conference which pegged the value of gold at $35 per ounce and that became the international standard against which currency was measured. But in 1971, Richard Nixon took the dollar off the gold standard and ever since, the dollar has been the most important global monetary instrument, and only the United States can produce them. The dollar, now a fiat currency, is at a 16-year trade-weighted high despite record U.S. current-account deficits and the status of the U.S. as the leading debtor nation. The U.S. national debt as of April 4, 2002 was $6.021 trillion against GDP of $9 trillion.

Trade between nations has become a cycle in which the U.S. produces dollars and the rest of the world produces things that dollars can buy. Nations no longer trade to capture comparative advantage but rather to capture needed dollars to service dollar-denominated foreign debts and to accumulate dollar reserves in order to sustain the exchange value of their domestic currencies. In an effort to prevent speculative and potentially harmful attacks on their currencies, those nations' central banks must acquire and hold dollar reserves in amounts corresponding to their own currencies in circulation. This creates a built-in support for a strong dollar that in turn forces the world's central banks to acquire and hold even more dollar reserves, making the dollar stronger still.

This phenomenon is known as "dollar hegemony," which is created by the geopolitically constructed peculiarity that critical commodities, most notably oil, are denominated in dollars. Everyone accepts dollars because dollars can buy oil.

The reality is that the strength of the dollar since 1945 rests on being the international reserve currency for global oil transactions (i.e., "petro-dollar"). The U.S. prints hundreds of billions of these fiat petro-dollars, which are then used by nation states to purchase oil and energy from OPEC producers (except presently Iraq and, to some degree, Venezuela). These petro-dollars are then re-cycled from OPEC back into the U.S. via Treasury Bills or other dollar-denominated assets such as U.S. stocks, real estate, etc. The recycling of petro-dollars is the price the U.S. has extracted since 1973 from oil-producing countries for U.S. tolerance of the oil-exporting cartel.

Dollar reserves must be invested in U.S. assets which produces a capital-accounts surplus for the U.S. economy. Despite poor market performance during the past year, U.S. stock valuation is still at a 25-year high and trading at a 56 percent premium compared with emerging markets. The U.S. capital-account surplus finances the U.S. trade deficit.

Since it is the U.S. that prints the petro-dollars, they control the flow of oil. Period. When oil is denominated in dollars through U.S. state action and the dollar is the only fiat currency for trading in oil, an argument can be made that the U.S. essentially owns the world's oil for free.

So what happens if OPEC as a group decides to follow Iraq's lead and suddenly begins trading oil on the euro standard? Economic meltdown. Oil-consuming nations would have to flush dollars out of their central bank reserves and replace them with euros. The dollar would crash in value and the consequences would be those one could expect from any currency collapse and massive inflation (think of Argentina for an easy example). Foreign funds would stream out of U.S. stock markets and dollar denominated assets; there would be a run on the banks much like the 1930s; the current account deficit would become unserviceable; the budget deficit would go into default; and so on.

And that's just in the United States. Japan would be particularly hard hit because of total dependence on foreign oil and incredible sensitivity to the U.S. dollar. If Japan's economy tumbles, so does that of many other countries, especially the United States in a crescendo of dominos.

Now, this is the potential effect of a "sudden" switch to euros. A more gradual shift might be manageable but even that would change the financial and political balance of the world. Given the size of the European market, its population, its need for oil (it actually imports more oil than the U.S.), it may be rapidly approaching that the euro will become the de facto monetary standard for the world.

There are some good reasons for OPEC as a group to follow Iraq and begin to value oil in euros. There seems little doubt that they would relish the opportunity to make a political statement after years of having to kowtow to the U.S., but there are solid economic reasons as well.

The mighty dollar has reigned supreme since 1945, and in the last few years has gained even more ground with the economic dominance of the United States. By the late 1990s, more than four-fifths of all foreign exchange transactions, and half of all world exports, were denominated in dollars. In addition, U.S. currency accounts for about two thirds of all official exchange reserves. The world's dependency on U.S. dollars to pay for trade has seen countries bound to dollar reserves, which are disproportionately higher than America's share of global output.

It is important to note that the euro is not at any disadvantage versus the dollar when one compares the relative sizes of the economies involved, especially given the E.U. enlargement plans. Moreover, the E.U. has a bigger share of global trade than the U.S. and while the U.S. has a huge current account deficit, the E.U. has a more balanced external accounts position. One of the more compelling arguments for keeping oil pricing and payments in dollars has been that the U.S. remains a large importer of oil, despite being a substantial producer itself. But the EU is an even larger importer of oil and petroleum products than the U.S., and represents for OPEC a more attractive market, closer and less domineering.

The point of Bush's war against Iraq, therefore, is to secure control of those oil fields and revert their valuation to dollars, then to increase production exponentially, forcing prices to drop. Finally, the point of Bush's war is to threaten significant action against any of the oil producers who would switch to the euro.

In the long run, then, it is not really Saddam who is the target; it is the euro and, therefore, Europe. There is no way the United States will sit by idly and let those upstart Europeans take charge of their own fate, let alone of the world's finances.

Of course, all of this depends on Bush's insane plan not becoming the trigger for a Third World War, as it so readily might.

[Paul Harris is self-employed as a consultant providing Canadian businesses with the tools and expertise to successfully reintegrate their sick or injured employees into the workplace. He has traveled extensively in what we arrogant North Americans refer to as "the Third World," and he believes that life is very much like a sewer: what you get out of it depends on what you put into it. Paul lives in Canada.]

Paul Harris encourages your comments: pharris@YellowTimes.org

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