www.globeandmail.com By ROMA LUCIW Globe and Mail Update

Crude oil prices in New York shot up Thursday to touch levels not seen since the Persian Gulf war, fuelled by the prospect of a war in Iraq and a lingering winter cold snap boosting demand for gasoline and heating oil in North America.

With U.S. oil inventories sitting near a 28-year low and U.S. President George W. Bush pushing ahead with preparations to disarm Iraq — the Middle East's third-largest oil producer — by force, worries of a supply crunch sent prices sky-high, just shy of the $40 (U.S.) a barrel level.

Russell Sheldon, a senior economist with BMO Nesbitt Burns Inc. in Toronto, said that with oil inventories dangerously low, any disruption of oil supplies could send prices soaring further.

"There isn't [a scarcity] now but we are so close that people are beginning to hoard oil. The desire to get future supplies is extremely high," he told globeandmail.com.

Thursday's rally sent crude oil prices to a 12-year high. On the New York Mercantile Exchange, crude oil for April delivery jumped as high as $39.99 before profit-taking set in. It closed down 45 cents at $37.25 a barrel.

The $39.99 price is the highest since October, 1990, when Iraq's invasion of Kuwait sent crude oil price over the $41 level.

In London, Brent prices fell 2 cents to $33.05 a barrel, after setting a two-year high of $33.80. The larger spike in U.S. oil futures shows the effect of higher heating oil prices on underlying crude prices.

U.S. government data released Wednesday showed winter demand for distillates, including heating oil, have been running 20 per cent higher than in 2002, leaving stocks down 33 per cent on the year.

"The cold spell has helped generate the low inventories that make it so clear there is no buffer supply, leaving us vulnerable," Mr. Sheldon said.

On Thursday, the UN security council was busy debating a resolution that could trigger war on Iraq.

Despite news that Iraq may be willing to cooperate with some UN demands, the U.S. and the U.K. have insisted that military force is needed to disarm the country, which exports nearly two million barrels of oil a day.

Market watchers fear a war in the Middle East could also disrupt supplies from other oil-producing countries in the region.

"Nobody can assume that the war won't have a material effect on Middle Eastern supplies. Much more than just Iraq," Mr. Sheldon said, adding that the rising oil prices threaten the global economy.

"While it is not the only deciding factor, it is an urgent factor that will probably cause the U.S. and Britain not to want to wait long to start hostilities, if they are going to," he said.

A strike in Venezuela, a major oil supplier to the U.S., has also disrupted supplies.

Meanwhile, OPEC said Thursday it was confident it could cover any shortfalls of Iraqi oil during the situation of a war without consumer countries needing to dip into emergency reserves.

www.canada.com DEIRDRE MCMURDY Freelance Thursday, February 27, 2003

TORONTO - There was jubilation in Whistler, B.C., on Sept. 30, 2002. While the rest of Canada was still easing gently from summer into autumn, the resort town two hours north of Vancouver embraced the first snowstorm of the season - and the eight centimetres of powder it deposited in the surrounding mountains.

For local residents, that premature blast of winter ensured a strong start to a seasonal tourism industry that represents millions of dollars in annual revenue for multinational corporations like resort-owner Intrawest and Fairmont Hotels - as well as the thousands of people they employ and scores of small, independent businesses that serve the market.

Weather has become much more than the subject for stilted small talk in awkward social encounters. In an intensely competitive global economy, it's a variable that affects the performance of almost $3 trillion U.S. in North American economic activity.

In fact, it's now considered such an important determinant of business success or failure that Environment Canada's quarterly seasonal outlook is carefully guarded until its release. At the annual meeting of the American Meteorological Society earlier this month, some experts argued that the federal government must start treating its weather data like insider information.

"Details about the weather can move commodity prices - especially when it comes to trading futures contracts," explained David Phillips, senior climatologist with Environment Canada. "We treat that seriously."

Weather is now taken so seriously, that even the Central Intelligence Agency has started tracking weather patterns based on the rationale that they directly affect economic conditions, which in turn influence political trends.

"Weather is no longer seen as a random act of fate. It's very much part of the long-term decision-making process for business now," Phillips said.

Last year's mild winter in the United States is credited with staving off a full-blown recession by some economists. They claimed that lower heating costs, reduced snow removal bills, higher construction income, reduced transportation costs, fewer insurance losses and stronger retail sales combined to generate about $21 billion U.S. in economic activity - all because of the balmy temperatures. Housing starts, for example, jumped 6.3 per cent in January 2002, the highest level in two years.

That's not about to happen this year, however. Record cold spells - along with geopolitical turbulence in the Middle East and Venezuela - have created an imbalance in the supply and demand for heating fuel and gasoline. Normally at this time of year, refiners begin to build their inventories of gasoline in anticipation of increased driving volumes in the spring. This year, they're still struggling to meet the demand for heating-grade fuel - which could create a gasoline supply shortage later this year.

Natural gas prices have spiked by as much as 40 per cent - again, a function of robust demand outstripping easily-available supply.

Many electric power utilities have also faced a crunch, especially in light of their recent deregulation. Previously, when they encountered sharp increases in demand and soaring costs, regulators would allow them to pass along expenses directly to consumers. Now that they must compete in an open market, it has become tougher to pass along the costs to consumers.

Technology has played a critical role in the business sector's effort to get a grip on variables like weather. Intricate computer models fed by satellite data can now map out where high pressure ridges and storm systems will form weeks in advance. As a result, a three-day forecast is now about as accurate as a 24-hour forecast was 20 years ago.

This technology has also allowed weather to morph into a sophisticated financial product that has even begun trading on the Chicago Mercantile Exchange. The weather derivative market emerged around 1997, and less than three years later, it was valued at $8 billion U.S.

Weather derivatives let a corporation limit its weather-related losses by transferring a portion of the risk to an investor.

Given the heightened emphasis on forecasting weather and its economic effects, a growing number of companies are hiring in-house meteorologists. Transportation companies, oil and gas producers, utilities - even large brokerage firms now have them on staff to track conditions for futures traders and their clients.

Despite its formidable scientific and economic force, however, weather will never cede its place in our social interaction. After all, there's no subject quite as relevant anywhere in Canada: So is it cold enough for you?

Deirdre McMurdy is host of Moneywise, Monday to Friday at 12:30 p.m. on Global Television.

www.theage.com.au February 28 2003 By Rajat Bhattacharya Tokyo

Crude oil rose as much as 2.5 per cent to its highest price since Iraq occupied Kuwait in 1990, after the US Energy Department said the nation's inventories last week fell to their third-lowest level in at least 19 years.

Prices have jumped as much as 7.2 per cent in two days and 81 per cent in a year. US supplies are falling as it prepares for a possible attack against Iraq, saying the oil exporter still has not rid itself of weapons of mass destruction as it promised to do in the 1991 ceasefire that ended the Persian Gulf War. A strike in Venezuela also cut oil supplies.

"The supply situation in the US and parts of Asia is very, very dangerous," said Tetsu Emori, a commodity strategist at Mitsui Bussan Futures. "It's too easy for crude oil prices to reach $US45 ($A74) to $US50 per barrel once a war starts in Iraq."

Crude oil for April delivery rose as much as US94¢ to $US38.64 a barrel in after-hours electronic trading on the New York Mercantile Exchange yesterday - the highest intra-day price since October 1990. Yesterday in floor trading, oil rose 4.6 per cent, to $US37.70 - a 12-year closing high.

Venezuela and Iraq in November pumped about 7 per cent of the world's oil. US oil inventories fell one million barrels to 271.9 million barrels in the week ended February 21, down 14 per cent from a year earlier, the Energy Department said in a weekly report. The level is 0.8 per cent higher than the 269.8 million barrels on February 7, the lowest stockpile level since at least February 1984.

Supplies of distillate fuels, which include heating oil and diesel, dropped below 100 million barrels for the first time since May 2000, and gasoline stockpiles declined for the fourth time in five weeks.

Oil stocks in the Organisation for Economic Cooperation and Development region in December fell to 107 million barrels below the year-earlier level, the International Energy Agency reported earlier this month.

Bloomberg

www.click10.com Posted: 8:07 a.m. EST February 27, 2003

WASHINGTON -- Some State Department officials say Venezuela needs to rebuild its status and reliability as an oil supplier.

Top officials told a Venezuelan delegation in Washington that the South American nation's political disruptions have created serious doubts about its standing in the oil world.

They were told the way to restore the reputation was for the government and opposition to work out their differences.

The Venezuelan delegation passed on that word to officials in their nation.

Venezuela has been a leading source of U.S. oil imports. But a general strike in Venezuela paralyzed the oil industry for a time -- and many analysts chalk that up for part of the low supply of oil in the United States.

www.miami.com Posted on Wed, Feb. 26, 2003 By GORDON WITTENMYER Saint Paul Pioneer Press

FORT MYERS, Fla. - Gasoline was so scarce that Johan Santana once traded shifts with relatives for eight days waiting in line at a gas station that had no gas but told customers the tanker truck was due any day.

The fuel was so valuable that once he decided to buy some on the black market and paid 30 times the government rate, he sped home as quickly as possible with his 195 liters out of fear he would be robbed, or worse.

"Just carrying gas in your car is dangerous," the Minnesota Twins pitcher said. "I knew I was in danger the whole time. But you have no choice."

That kind of danger became a way of life this winter for the major leaguers and minor leaguers who make their year-round homes in their native Venezuela - the South American political hot spot, where anti-government protesters have been killed and a nearly 3-month-old general strike by business owners threatens to destroy the economy.

"It's scary," said Twins second baseman Luis Rivas, whose hometown of LaGuaira is just outside the Venezuelan capital, and epicenter of unrest, Caracas. He now lives several hours away but has friends and family near the capital.

"We couldn't do nothing," Rivas said. "You never know what's going to happen_something bad. You have to be in your home."

Santana, Rivas and pitcher Juan Rincon, who lives in the oil-rich region around Lake Maracaibo, spent much of their offseasons as virtual shut-ins, avoiding the streets except as necessary to make discreet purchases of gasoline or to drive to Caracas for visa applications or to get to the airport to fly to Florida for spring training.

"It's a nightmare," Rivas said.

The cause of the upheaval is strong-arm President Hugo Chavez, an ally of Cuba's Fidel Castro who is trying to take greater control of what has been a representative government. As anger among the private business powers grew in the tropical nation made prosperous by oil, nationwide business shutdowns began - a one-day strike in November and then another on Dec. 2 that has yet to be lifted.

JOBLESS AND DESPERATE

The strike has put people across the country out of work, resulted in countless protests, most visibly_and deadly_in Caracas, and filled the streets of Venezuela with growing numbers of people, many with growing desperation.

"Every time you step out of your home, you're in danger," Rincon said. "People aren't working. A lot of people were fired from the petroleum plants. The malls have been closed for almost a month.

"People in the streets might think you have money. I'm lucky in my hometown (of 4 million people); not too many people know me."

Many banks are open for only a few hours daily and no longer operate a currency exchange program because of the wildly fluctuating value of the Bolivar, Venezuela's currency. The players protect their U.S. wages and bonuses with base accounts in this country, transferring funds to Venezuelan accounts as needed.

Other businesses also operate within strictly limited hours and are starting to suffer supply shortages, Rincon said. Makers of soft drinks, beer and other products have shut down.

And with the gas shortage, police cars are becoming an increasingly rare sight, along with other emergency vehicles such as ambulances.

"We've never been through this before," Rincon said.

And the Twins thought contraction was tough to survive.

"There was a lot of concern," Minnesota manager Ron Gardenhire said. "You throw the baseball stuff out the window. It comes down to their lives. You have guys getting robbed for gas, people getting taken out of their cars and beaten."

As recently as 1991, economic reforms in Venezuela after oil prices dropped resulted in widespread protests, with hundreds killed. And the government endured two attempted coups in 1992.

But no political or economic crisis in the lifetimes of these early-20-something Twins has lasted this long or affected their lives so personally_and never has it canceled their winter baseball season.

BASEBALL SEASON CANCELED

With the start of the Dec. 2 strike came the end of the Venezuelan winter league. Santana was due to start pitching for his team Dec. 4. Rivas managed to play one game before the strike. And Rincon started early because he anticipated a possible strike but still got in only 11 innings before the shutdown.

Rincon, who had access to workout facilities and players to throw to near his home, has appeared strong in the early part of camp. Santana, who didn't throw all winter, brought a lingering hamstring pull from a late-December attempt at conditioning. Rivas didn't practice much and put on five to 10 pounds during the forced break.

"I'm glad I took some rest," Santana said. "But now I've got to start all over again."

Said Rivas: "You can tell the difference. It's going to be hard. But I got here early (by about a week) to start, and I don't think it's going to be a problem."

If anything, the biggest problem for the Venezuelan players, once Major League Baseball intervened to make special arrangements for teams to obtain their players' visas, also was the source of their biggest relief: Leaving behind their country_and their loved ones.

"I still worry," Santana said. "I'm glad I'm here, because I need to play. But I'm still worried because my family and friends are there. It's not easy to be here and think about friends there and the whole situation going on right now."

Rivas has a sister and grandmother living near Caracas.

"I wanted to leave, but sometimes I wanted to stay with my family," he said.

For whatever might have been lost in conditioning and practice time, the Twins were fortunate. None of their players from Venezuela, nor the handful of U.S. coaches and players sent there for winter league ball, was directly involved in any of the violence. No one was robbed or hurt.

And, so far, the harrowing offseason hasn't made them start house hunting in the United States.

"Still, I love my country," Santana said. "That's where I'm from. My family's all there. As long as I can, I'll stay there, and we'll see how it goes.

"Hopefully, everything will change, and it will get back to normal."