www.northjersey.com Wednesday, January 22, 2003

SEOUL, South Korea - The chief North Korean delegate to talks with South Korea hinted Tuesday he was unwilling to discuss an issue of vital concern to his hosts and their allies: North Korea's suspected nuclear weapons program.

The comments by Kim Ryong Song, the North Korean delegate, raised doubts about whether South Korea would make any headway during the four-day talks in urging the North to drop its nuclear programs.

"Let's not care about the situation surrounding us and concentrate on resolving internal issues," Kim said after arriving with his delegation.

North Korea has argued that the dispute about "the nuclear issue" is with the United States and does not involve South Korea or other nations.

NABLUS, West Bank - Israeli forces staged the biggest demolition in the West Bank in years on Tuesday, destroying 62 shops in a Palestinian village.

Also Tuesday, Israel's Supreme Court relaxed a ban on soldiers using Palestinians as "human shields" or ordering Palestinians to knock on doors of Islamic militants' houses. Human rights advocates denounced the decision.

In Gaza, Palestinians fired rockets at two Jewish settlements, damaging buildings but causing no casualties, settlers and the military said.

In the village of Nazlat Issa, next to the West Bank border with Israel, seven bulldozers guarded by 300 soldiers destroyed shops and market stalls.

In other developments, Israeli police discovered a car carrying a large amount of explosives in the Israeli Arab city of Um el-Fahm, near the line with the West Bank. Three people escaped from the car, which police blew up.

CARACAS, Venezuela - Nobel Peace Prize laureate Jimmy Carter proposed a plan Tuesday to lead Venezuela to elections and end a 51-day-old strike against President Hugo Chavez, which has dramatically cut production in the No. 5 oil-exporting country.

Carter's ideas were the first concrete proposals to emerge from more than two months of talks between the government and Venezuela's opposition, which called the strike to demand early elections or Chavez's resignation.

Both Chavez and opposition leaders reacted cautiously, saying they merited study.

Carter said the first plan would amend Venezuela's constitution to shorten presidential and legislative terms of office and stage early general elections.

It calls for Venezuela's opposition to end the strike and for the government, which has a congressional majority, to move quickly on changing the constitution.

Carter's second plan calls for both sides to prepare for a binding recall referendum on Chavez's presidency in August, the midpoint of Chavez's six-year term. Venezuela's constitution allows such a vote.

BERLIN - Chancellor Gerhard Schroeder failed to win a clean victory Tuesday in his legal fight to quash German media rumors that his marriage is on the rocks.

Schroeder's lawyer vowed to take the case to a trial after a mixed ruling by a Berlin court, which upheld a ban on a newspaper correspondent repeating the speculation but lifted a gag order on one of the newspapers he writes for.

The hearing was the latest development in the image-conscious chancellor's efforts to keep the press out of his private life, just as his popularity sags with the German economy.

After legal action last year to silence reports that he dyes his hair, Schroeder obtained injunctions against two regional newspapers not to repeat their reports in early December of rumored problems with his fourth wife, Doris Schroeder-Koepf.

• From news service reports

www.washingtonpost.com By Peter Behr Washington Post Staff Writer Saturday, February 22, 2003; Page E01

In the minutes after several million gallons of gasoline exploded over Staten Island yesterday, energy traders in Manhattan began hitting the "buy" button: Get gasoline now. It will cost even more later.

Traders, fuel dealers, importers, refiners and speculators swapped gasoline contracts back and forth yesterday, with a total of 2 billion gallons changing hands on the New York Mercantile Exchange. The wholesale price for delivery in March climbed nearly 5 percent, to $1.01 a gallon.

Yesterday's trading prices will begin showing up at East Coast gasoline pumps in a few weeks or even days, continuing a relentless upward march of prices rooted in both reality and emotion.

For gasoline, heating oil and natural gas, the story is the same: The nation has come to the verge of war in the Persian Gulf with crucial energy inventories at very low levels and traders reacting at hair-trigger speed to any supply disruption.

Around the Washington region, the cost of premium gasoline topped $2 a gallon at some service stations this week -- the highest it has gone in 20 months. Prices for regular gasoline reached a nationwide average of $1.66 a gallon, up 54 cents from a year ago, the Energy Information Administration reported.

At Mahesh Tanna's Exxon Mobil service station in Rosslyn, just outside the District, premium gasoline had been marked up to $2.08 a gallon yesterday and regular was going for $1.76.

Tanna has operated the station for a dozen years -- selling Gulf gasoline, then Chevron brands, now Exxon Mobil. As he sees it, the higher gasoline prices have tracked the rise in crude oil over the past half year, step for step.

"The price depends on the barrel price of the oil. The barrel price is up because of the war situation," Tanna said.

His higher pump prices, triggered by higher fuel costs from Exxon Mobil, haven't deterred many customers, he said. "People know the reason."

The simplest explanation for higher gasoline prices is the worldwide increase in crude oil prices, said John Felmy, policy director of the American Petroleum Institute, an industry lobbying organization. Over the past 10 weeks, oil prices have climbed about 30 cents a gallon. So have average gasoline prices.

Crude oil prices have risen because of concerns about the Iraq crisis and because of declining inventories of oil and fuel products around the world -- and particularly in the United States.

A siege of severe arctic weather has drained heating fuels in this country and Europe. A strike at Venezuelan oil fields that began in December deprived U.S. refiners of 10 percent of their supplies. Deliveries from Venezuela are just starting to recover.

These shocks have hit a cautious worldwide energy industry that has held back on expansion of refineries and drilling projects, particularly following the collapse of oil prices in 2001. With profits and stock prices depressed, most energy companies are reluctant to increase investments at a time of gyrating oil prices and rising exploration costs, analysts said.

It is getting harder and harder to find new oil reserves that can be lifted, refined into gasoline or heating oil and sold at a price that meets companies' profit targets, said Steven Pfeifer, global oil research coordinator at Merrill Lynch. Most companies aren't giving ground on their profit goals.

The result is that oil and fuel inventories -- both in the United States and other major industrial nations -- are at the bottom of normal ranges for the past five years, the EIA reports. "We don't see inventories getting back to normal levels until 2004," Pfeifer said.

"It is a very tightly stretched system," said Doug MacIntyre, a senior market analyst with the federal Energy Information Administration. "It doesn't take too many problems to cause a ripple effect."

When gasoline inventories are full, competition takes over. That is what happened a year ago, and the U.S. price for regular gasoline averaged just $1.13 a gallon from December 2001 to February 2002.

But when inventories are stretched very thin, as they are now, the day-to-day energy prices vibrate according to the strategies and hunches of traders, companies, investors and speculators.

Some industry critics, such as Sen. Carl M. Levin (D-Mich.), think that Congress should consider requiring oil companies to maintain minimum inventory levels, to prevent shortage conditions that lead to price spikes on gasoline and fuel oil. But that proposal is not gathering support.

Some market observers say that energy companies could show more restraint.

"Right now, it's a very speculative market," said Mantill Williams, spokesman for the national AAA organization. Current gasoline prices are the highest for any February on record. "Motorists are paying for that speculation. We've been asking companies to show some restraint in pricing their products and take the consumer into account," he said.

But EIA's MacIntyre replies that for now and the foreseeable future, consumers are stuck with a market where demand is running ahead of supply. "Gasoline stations are going to charge what the market will bear. If another gasoline station in the neighborhood raises prices, they can too," MacIntyre said.

Within two miles of Tanna's Rosslyn station, other stations' prices for regular gasoline fluctuated from $1.59 a gallon to $1.70 depending on location. But all were much higher than a year ago.

The balance won't go the other way until the Iraq crisis is resolved and inventories of oil and fuels are rebuilt, MacIntyre said. When that will happen is just another of the unanswered questions hanging over energy markets and consumers.

www.washingtonpost.com By John M. Berry Washington Post Staff Writer Saturday, February 22, 2003; Page E01

Consumer prices rose 0.3 percent last month, led by the higher costs of gasoline and home heating oil, but the average price of other goods and services that U.S. households buy increased only 0.1 percent, the Labor Department reported yesterday.

Analysts said petroleum-based energy costs probably will continue to rise until the U.S. dispute with Iraq is resolved. But they predicted that those increases would not trigger a broad increase in inflation, particularly with the economy still not recovered from the 2001 recession.

A number of the analysts expressed more concern that the need to pay more to travel by car and to heat homes might cause people to cut back on other purchases, keeping economic growth low.

"Experience tells us that oil-price spikes like this are usually soon reversed, and so we should view them as transitory rather than a permanent feature of the inflation statistics," said economist Stephen G. Cecchetti of Ohio State University. "That means that it is extremely important to look at so-called core measures designed to smooth over these 'noisy' episodes.

"Here the picture is much as it has been for some time. The consumer price index excluding food and energy -- the traditional core measure -- . . . is up 1.9 percent for the past 12 months," Cecchetti said. "My reading is that inflation continues its modest retreat."

Inflation was 2.4 percent last year and has not been higher than 3.4 percent since 1990.

Peter Hooper, chief economist at Deutsche Bank in New York, took the same tack.

"Oil prices are up more than $10 per barrel since early December reflecting war worries, cold weather and Venezuela's [political] problems. But the core CPI inflation remains comfortably near 2 percent, and the Federal Reserve is not likely to be concerned about either inflation or deflation at this juncture," Hooper said.

Many Fed officials, including Chairman Alan Greenspan, have said they are determined to prevent either inflation or deflation. During deflation, the general level of prices falls, such as has been happening in Japan in recent years. Borrowers find it harder to repay debts and employers may find it hard to control labor costs even if they do not grant pay increases.

In the past, Fed officials have often drawn a distinction between temporary bursts of inflation because of specific conditions that are likely to be temporary -- such as an oil price spike -- and more fundamental increases in inflationary pressures. That might include a period in which employers' costs for wages and benefits rise well above offsetting gains in productivity.

With unemployment close to 6 percent in recent months, increases in average hourly earnings have been smaller. Last month, average hourly earnings were unchanged from December and up 2.7 percent from January 2002. Over the previous 12 months they had increased 3.8 percent.

In yesterday's consumer price report, Labor said food and beverage prices fell 0.2 percent and apparel prices declined 0.9 percent. It was fifth consecutive monthly drop in the price of clothing.

Gasoline prices were up 6.6 percent after two months of small declines. Home heating-oil prices rose 8.6 percent.

The cost of shelter, which includes rents and the cost of home operations, rose 0.3 percent. Education and communication costs increased 0.5 percent, partly because of a 2 percent increase in prices for college textbooks. After many months of much larger increases, medical care costs increased only 0.1 percent last month.

Over the past 12 months, the CPI rose 2.6 percent, but over the November-January period it increased at a 2.2 percent annual rate. In November through January, the core CPI rose at a 1.5 percent annual rate.

www.washingtonpost.com By Colum Lynch Washington Post Staff Writer Saturday, February 22, 2003; Page E01

UNITED NATIONS, Feb. 21 -- American oil refineries have dramatically increased their reliance on Iraqi crude, even as the Bush administration steps up preparations for a military attack against Baghdad, to offset a shortfall in oil imports caused by a recent political crisis in Venezuela.

The United States has more than doubled its consumption of Iraqi crude over the past two months, buying more than $1.6 billion in Iraqi oil through foreign middlemen between Dec. 5 and Feb. 1, according to unpublished U.N. figures. The U.S. Department of Energy, whose Iraqi import figures typically lag behind -- by about 40 days -- those of the United Nations, also recorded a sudden surge of Iraqi oil imports into the United States last week to more than 1 million barrels a day, according to U.S. officials.

"We did have a large increase in Iraqi imports, but we don't know if that is sustained," said Doug MacIntyre, an international energy analyst at the Department of Energy who produces an unpublished weekly report on oil imports. MacIntyre declined to provide specific figures, citing concerns that the underlying data was too preliminary, but he said it was "a doubling over the averages we have seen over the last several weeks."

Iraqi exports to the U.S. market, which includes the Caribbean, averaged nearly 500,000 barrels a day during the first 11 months of 2002. U.S. firms purchased only 39 percent of Iraqi oil exports during the second half of last year. Between Dec. 5 and Feb. 1, U.S. buyers consumed about 1.1 million barrels per day, accounting for 62 percent of Iraq's exports during that period, according to U.N. figures.

The trend marks a significant reversal by U.S. oil companies, who drastically cut their dependence on Iraqi oil last summer because of rising illicit Iraqi surcharges and concerns that the Bush administration was preparing for a war.

Under the terms of the United Nations-supervised Iraqi oil-for-food deal, Iraq is permitted to sell oil to purchase food, medicines, fund the repair of the country's infrastructure and finance U.N. weapons inspections. Under the humanitarian program, established in December 1996, the U.N. sets the prices of Iraqi exports and monitors Baghdad's spending.

Although Iraq rarely sells oil directly to American oil companies, ExxonMobil Corp., ChevronTexaco Corp., Valero Energy Corp. and other U.S. firms have purchased more than half of Iraq's oil through foreign middlemen since the oil-for-food program came into existence. Spokesmen for ExxonMobil and Valero could not be reached for comment.

Some American oil giants, hit with rising surcharges and facing criticism that they may have indirectly paid illegal kickbacks to President Saddam Hussein, began scaling back their imports of Iraqi crude last summer. U.N. officials claimed that Iraq was imposing surcharges of 20 to 50 cents on each barrel last year, amounting to hundreds of millions of dollars in illicit profits for the Iraqi regime.

But oil analysts say that Iraq's decision to stop demanding a surcharge in September, and a sudden stoppage of Venezuelan exports following a national strike, has renewed American interest in the Iraqi oil market. "The loss of Venezuelan oil complicated everybody's life," said Lawrence J. Goldstein, president of the New York-based Petroleum Industry Research Foundation. "Iraqi oil is close to the Venezuelan type oil, and it turned out to be the only large-volume alternative available" over the past two months.

He suggested that American dependence on Iraqi oil is likely to diminish in the coming months as Venezuelan exports "creep back" up to traditional levels and the recent commitment by Saudi Arabia to increase production bears fruit.

Other analysts believe that Venezuela's oil exports will continue to be plagued by political uncertainty. They note that while Venezuela's oil strike has ended, the country is exporting only about half of the 3 million barrels it traditionally exports daily.

"I think that as the surcharge has faded, the concern that kept some people away from Iraqi oil has also faded," said George Beranek, the manager of market analysis at Washington, D.C.-based PFC Energy. "It's a good large-volume source of oil. The risk of a decline [in potential Iraqi exports] was nothing compared with the fact of a loss of Venezuelan barrels. A bird in the hand is worth two in the bush."

U.S. officials and analysts said that the American oil refiners should be able to withstand the sudden loss of Iraqi crude if a U.S.-led war leads to a shutdown on Iraqi exports. "People have gotten pretty used to the instability," said Lowell Feld, another energy analyst at the Department of Energy. "Iraqi crude has fluctuated pretty wildly" for some time.

But he said that a total collapse of Iraq's daily oil production, which is estimated to average 2.3 million barrels a day this month, could strain global oil production capacity.

santafenewmexican.com By JAMES ANDERSON | Associated Press 02/21/2003 Venezuelan President Hugo Chavez address a speech during a meeting with ambassadors at the Foreign ministry building in Caracas, Venezuela, Thursday, Feb. 20, 2003. - FRANCISCO BATISTA | AP / Milaflores ARACAS, Venezuela - Police searched for the leader of Venezuela's largest labor group Friday after President Hugo Chavez authorized his arrest for helping to organize a two-month general strike that devastated the economy and the nation's oil industry. Carlos Ortega, president of the Venezuelan Workers Confederation, remained in hiding after strike co-leader Carlos Fernandez, the leader of the nation's largest business group, was arrested. Both are charged with treason and other crimes for the strike, which cost more than US$4 billion. Fernandez was arrested by secret police Wednesday and hauled into court Friday. "These oligarchs believed that they were untouchable. There are no untouchables in Venezuela. A criminal is a criminal," Chavez thundered during a ceremony handing land titles to peasants in Trujillo state. He demanded a 20-year term for Fernandez, president of Fedecamaras, and for Ortega, of the Venezuelan Workers Confederation, for allegedly sabotaging the oil industry, inciting civil disobedience "and trampling the human rights of the Venezuelan people." The treason charge carries a 20- to 26-year prison term. Oil is Venezuela's strategic industry, and its exports were the fifth-largest in the world before the strike began Dec. 2. The strike ended Feb. 4, but Chavez's government is battling a continuing walkout in the oil industry to increase exports. Citing nationwide hardship caused by gasoline shortages, Chavez condemned Fernandez and Ortega as "terrorists" who failed to topple his government - both during a brief April coup and this winter. The tempestuous president also had a message for foreign critics of Fernandez's arrest. The United States, Organization of American States and other entities voiced concern that Venezuela's crisis is escalating. "I want to remind all the governments of the world that Venezuela is a sovereign country! We are nobody's colony!" Chavez shouted. Fernandez's arrest fueled speculation Chavez has begun a crackdown on his opponents, including the news media and the private sector, both of which championed the two-month drive to oust him. Chavez won't allow strikers access to U.S. dollars under a new foreign exchange system, and he has threatened to shut down broadcast media for inciting rebellion. He also has warned he will seize private businesses and property to deliver gasoline, food and other basics. Ruling party leader Willian Lara told the state Venpres news agency that the hundreds of strike organizers should be prosecuted "for crimes against the republic." An opposition protest set for Caracas on Friday was canceled because organizers didn't have police permits. The labor confederation, meanwhile, said it wasn't planning another strike to protest Fernandez's arrest. The OAS, the United Nations and the Carter Center, run by former President Jimmy Carter, have sponsored three months of talks to seek an electoral solution to Venezuela's crisis. The future of those talks was in doubt after Fernandez's arrest. Venezuela's opposition wants early elections and collected more than 4 million signatures to back up its demand. The government dismisses the petition drive; Venezuela's elections authority is in shambles. Chavez is a former paratrooper who was elected in 1998 and re-elected in 2000 to a six-year term. He vows his revolution will distribute Venezuela's oil riches to the poor. Critics accuse him of imposing an authoritarian state and driving the economy into the ground.