www.boston.com By Peter J. Howe, Globe Staff, 2/27/2003

Massachusetts homeowners and businesses using natural gas for heating are likely to see rates jump 13 to 36 percent in March and April, as the effects of soaring global energy prices, plummeting inventories, and heavy winter demand trickle down to utility bills.

Gas utilities including KeySpan Energy Delivery, Bay State Gas, and NStar Gas are asking state regulators for permission to raise rates starting Saturday, ranging from a 12.7 percent cost-of-gas increase for former Boston Gas customers now with KeySpan to a 35.6 percent increase for Bay State's 270,000 customers.

The local gas hike requests, which are likely to be approved by the state Department of Telecommunications and Energy, come as US crude oil futures soared to their highest prices since Iraq invaded Kuwait in 1990, hitting $37.70 a barrel yesterday for April delivery on the New York Mercantile Exchange.

Besides fears that a war with Iraq could disrupt supplies and the effects of an oil workers strike in Venezuela could linger, futures prices jumped on reports from the Energy Department that domestic inventories of oil, gasoline, and other fuels have dropped. Oil inventories are down 14 percent from a year ago and supplies of so-called distillates, including diesel fuel and heating oil, dipped below 100 million barrels for the first time since May 2000.

At the same time, bitterly cold weather in the Northeast and Midwest has raised natural gas demand sharply, causing storage inventories to drop 43 percent below last year's levels and 27 percent below five-year averages, according to Bloomberg News surveys. The Energy Department is widely expected to report today that US gas inventories are at their lowest level since May 2001.

The demand-supply squeeze has caused gas prices to jump about 40 percent this year and has caused the more volatile futures market prices to triple in the last 12 months. Because gas is used to produce roughly half the electricity generated in New England, soaring gas rates could begin to drive higher electric rates this spring and summer as well.

Massachusetts gas utilities filing for rate increases cited the national and global market trends.

''Weather is probably the single biggest factor, because usage is up, and we can only charge the customer what we pay,'' said KeySpan Energy spokeswoman Carmen Fields.

KeySpan owns the former Boston Gas, Essex Gas, and Colonial Gas. The new rates would raise the cost per therm - a unit of gas - used by Boston Gas customers by 12.7 percent, to 86.15 cents for March and April.

Essex rates would jump 18.9 percent, to 76.6 cents. Rates in Colonial's Lowell-Merrimack Valley territory would climb 16.9 percent, to 88.6 cents. And rates in Colonial's Cape Cod territory would rise 17 percent, to 88.02 cents. Those figures are for the cost of gas only and do not include fixed delivery and service charges. The typical homeowner uses 100 to 200 therms of gas for heating in colder months.

Bay State, which serves 61 Massachusetts cities and towns, would increase energy rates from 73 cents per therm to 99 cents, a 35.6 percent increase, according to spokesman Charles Moran. That would produce a total rate of $1.17 per therm, including delivery and service fees.

NStar, which provides gas service to 246,000 customers in 51 cities and towns as well as electricity to 1.1 million customers, also plans to seek higher gas rates, as will several smaller utilities around Massachusetts.

NStar spokesman Michael Durand said last night it is seeking to raise the cost of gas per therm from 70.7 cents to 89.4 cents. For typical NStar customers using 144 therms of gas for heating, hot water, and cooking, the new rate would raise their monthly bill by about $27 to $186, Durand said. Direct comparisons, however, are difficult because most customers use less gas in March and April than in January and February.

Some economists fear the soaring retail energy prices could become one more drag on an already weak US economy. Steven Wieting, a Salomon Smith Barney Inc. economist, said the current annual rate of total US consumer spending on gasoline, heating oil, and natural gas is $50 billion higher than it was a year ago and totals about 0.7 percent of disposable personal income.

''It will affect the consumer's capacity to spend and will affect sentiment,'' Wieting said.

Dwindling supplies sent oil futures as high as $1.18 a gallon in New York trading yesterday, a 25-year record. Heating oil supplies on the East Coast, which accounts for about three quarters of US heating oil use, fell 16 percent last week to their lowest levels since May 2001.

Regulators at the Commodity Futures Trading Commission, which polices US energy futures markets, yesterday said they have increased ''floor surveillance'' at New York trading pits but found no evidence of market manipulation driving soaring futures prices.

''There was nothing in that [surveillance] that gave us any pause or gave us any feeling that there was any sort of manipulation taking place,'' Michael Gorham, director of the CFTC's market oversight division, told Reuters. Gorham said increases appear to be explanied by cold weather, lower inventories, and the threat of war with Iraq.

Peter J. Howe can be reached at howe@globe.com. Material from Globe wire services was used in this report.

This story ran on page C1 of the Boston Globe on 2/27/2003.

www.boston.com By Stephen Ixer, Associated Press, 2/27/2003

CARACAS - A march by thousands of antigovernment protesters forced the suspension yesterday of talks aimed at ending Venezuela's political turmoil, while the US Embassy beefed up security following ''credible'' threats.

Marching just days after the arrest of a leader of a crippling two-month strike, the demonstrators dared President Hugo Chavez's government to jail them, waving placards reading ''Chavez, your mask is off, dictator!'' and ''Put us all in prison!''

Talks between government and opposition delegates were scheduled to begin midafternoon yesterday, but the marchers' route passed by the negotiations venue, forcing their rescheduling until today.

Protest leader Carlos Fernandez has been ordered under house arrest to face rebellion and other charges for leading the 63-day general strike against Chavez. Police are searching for strike co-leader and labor boss Carlos Ortega.

The protesters marched past the Fedecamaras business chamber of which Fernandez is president and ended at the labor confederation headquarters where Ortega is president. There were no reports of violence.

Meanwhile, the US Embassy closed yesterday after receiving ''credible information of a threat to its security,'' a statement said. On Tuesday, two bombs ravaged Colombian and Spanish diplomatic missions, injuring four people and generating more fears.

At US request, Venezuelan officials said they sent more than a dozen federal agents, national guardsmen, and municipal police to boost security around the embassy.

This story ran on page A10 of the Boston Globe on 2/27/2003.

reuters.com Thu February 27, 2003 04:22 AM ET By Tanya Pang

SINGAPORE (Reuters) - Oil prices shot to a 12-year high Thursday as a severe bout of winter weather in the United States drained fuel stocks, leaving energy consumers dangerously exposed ahead of possible war in Iraq.

U.S. light crude in electronic trade hit $38.66 a barrel, the highest oil price since the 1990-1991 Gulf crisis when crude peaked at over $41 shortly after Iraq's invasion of Kuwait.

London Brent LCOc1 opened up 63 cents at $33.70 a barrel, a two-year high, and U.S. heating oil futures HOc1 bolted to $1.18 a gallon, matching this week's all-time highs.

"There remains a war premium of some $2 to $6 on any given day, but there is tightness in fundamentals at the moment and oil prices would certainly be higher than normal, even without Iraq in the picture," said Paul Ashby, analyst at ABN Amro in Sydney.

The U.S. government's Energy Information Administration (EIA), said Wednesday that the nation's distillate stocks, including winter heating oil, fell 4.5 million barrels in the week to February 21.

U.S. winter demand for distillates in the last four weeks has been more than 20 percent above last year and stocks are 33 percent below year-ago levels, the EIA said.

The fall in inventories has been driven by abnormally low temperatures in the U.S. Northeast, the world's biggest heating oil market, and by lower imports from Venezuela, where oil exports have been hit by a strike now in its 12th week.

Forecasts predict colder-than-normal temperatures continuing in the Northeast through to next week.

Record natural gas prices mean factories are expected to generate additional pressure on oil stocks as they switch to using distillates for fuel.

The EIA also reported a one-million-barrel fall in crude stocks to 272 million barrels, leaving inventories at their lowest since 1975, just above the 270-million mark considered a minimum to keep U.S. refineries in operation.

SATURDAY DEADLINE FOR IRAQ

U.S. Energy Secretary Spencer Abraham said earlier this week that Washington was ready to release crude from the 600-million-barrel national reserve if it judged a war in Iraq was causing severe supply disruption.

Iraq exports roughly two million barrels per day (bpd) of crude, making it the eighth-biggest exporter, but oil markets fear war would disrupt supply from other Middle East producers, which account for about 40 percent of globally traded crude.

U.S. officials said Wednesday that Saudi Arabia, the world's biggest exporter, had agreed to increase crude production by 1.5 million bpd if Iraqi exports were interrupted by war. The kingdom is already supplying extra crude to U.S. refiners to make up for the loss of Venezuela's exports.

With Iraq facing a U.N deadline Saturday to begin destroying its al-Samoud 2 missiles, chief U.N weapons inspector Hans Blix said Wednesday that Baghdad was still not fully cooperating on disarmament despite the recent handover of new documents.

Blix is preparing a written report to the U.N. Security Council assessing progress in the search for Iraq's alleged biological, chemical and nuclear weapons. Iraq denies it possess such arms.

President Bush continued to press his case for an invasion of Iraq, saying an end to Iraq's government would create an opportunity for peace in the Middle East.

He also said the United States would protect Iraq's oil from sabotage by the country's "dying regime." Iraqi President Saddam Hussein has accused the United States of pursuing war to gain control of his country's oil, a charge denied by Washington.

www.canoe.ca Thursday, February 27, 2003 By MARYANNA LEWYCKYJ, TORONTO SUN

Despite the recent deep freeze, the most wicked days of winter may lay ahead for homeowners using natural gas. That's because homeowners who deal with regulated utilities such as Enbridge and Union Gas are now paying artificially low prices for their fuel. But experts warn that it's only a matter of time before homeowners get whacked with huge increases to cover fuel that has been sold below its actual cost. Scotiabank reported yesterday that the commodity price for natural gas has quadrupled since this time last year and is approaching all-time highs set in During the winter of 2000-2001, Enbridge hiked rates twice -- by a whopping 45% on Oct. 1 and another 17% on Jan. 1. Regulated utilities estimate the cost of fuel when setting prices. If there's a shortfall between the estimate and the actual price, utilities can recover the difference. "Utility rates are very low right now," says John Kiemele, an analyst with En-Pro International Inc. He says customers at Enbridge and Union are paying about 21 cents per cubic metre, while today's spot prices are closer to 40 cents per cubic metre. "There's added costs for the consumer coming," says Kiemele. "They shouldn't look at their gas bill this past winter and assume that's all there is to come." Lisa McCarney, a spokesman for Enbridge Gas Distribution, said the utility reviews its rates every three months. Enbridge does not make a profit on gas supply charges. "At this point, we have not done the final analysis, but we would anticipate an increase in the gas supply price," said McCarney. The gas supply charge, which accounts for 54% of a total bill, could rise by 25%. The hike would take effect April 1. Customers with fixed-rate contracts with gas marketers such as Direct Energy would not be affected. The gas supply charge rose to 21.254 cents per cubic metre on Jan. 1, up from 19.095 cents. Natural gas prices were pulled up prior to winter as war worries and a strike in Venezuela caused crude oil prices to rise. A prolonged cold snap has sucked inventories 40% below last year, causing natural gas prices to hit a two-year high this week. "While the current 'war premium' in oil prices will likely fade over the next six to 12 months, a fundamentally tight North American supply-demand picture is expected to keep natural gas prices strong for some time," says Patricia Mohr, a Scotia Economics commodities specialist. Ironically, if Toronto is hit with an early heat wave this summer, homeowners will continue to suffer from high bills since natural gas is used to fire electricity plants.

www.courier-journal.com

By BILL WOLFE bwolfe@courier-journal.com The Courier-Journal

UPDATE Last we knew: The last big surge in gasoline costs came in December, when some stations pumped up their prices by 10 cents to $1.50 a gallon and more for regular. In the following weeks, prices would edge up to about $1.60 to $1.65 per gallon.

The latest: After a week that saw prices drop by about a dime a gallon in Louisville, prices again spiked Tuesday night, with some stations raising prices by 20 to 25 cents. Now prices range from around $1.55 per gallon in Southern Indiana to more than $1.80 a gallon in parts of Louisville.

Why it's news: Gasoline prices reflect short supplies of crude oil and worries about possible war in the Middle East. Some experts expect oil prices to move still higher.

For more info:

• AAA Daily Fuel Gauge Report If you filled your car's gas tank Tuesday, it's OK to feel smug today: You probably saved a few bucks. Prices in most of the Louisville area shot up by 10 cents to 25 cents a gallon yesterday, topping $1.80 a gallon for regular and $1.95 for premium at some stations.

If your fuel gauge is headed toward "E" today, don't despair. There are still bargains around, especially if you can fill up in Southern Indiana, where some stations were still pumping regular for about $1.55 a gallon yesterday.

Why prices shot up so far and so fast is a mystery, said AAA Kentucky spokesman Roger Boyd. "I am as filled with questions as the motorists are right now. Other markets don't seem to be going through this."

Prices had been creeping up across much of the nation, even as Louisville gasoline costs were headed down. "We came down a dime over the past week, but now were are back up as much as 25 or 30 cents for a net 15-cent increase," Boyd said.

In the past, such large overnight increases had only been seen in times of wars or embargos, Boyd said.

The Kentucky attorney general's office was getting complaints about the price increases yesterday, but price changes are "a national issue," said spokeswoman Jennifer Deans. "It's the market reacting to a whole lot of different forces."

Nate Potter pumped $20 worth of gasoline at the Chevron station at Eighth Street and Muhammad Ali Boulevard. He said he just goes with the flow. He spends more than $100 a week on gasoline and said worrying doesn't help. PHOTOS BY PAT McDONOGH, THE COURIER-JOURNAL Still, if consumers notice one station charging prices much higher than other stations in the same area, they can notify the attorney general's Consumer Protection Division at www.law.state.ky.us/cp/forms/consumer.htm or by calling (888) 432-9257, she said.

Linda Casey, spokeswoman for Speedway gasoline stations, said the higher prices reflect increased costs for oil, which climbed about 5 percent to $37.93 a barrel before closing at $37.70 on the New York Mercantile Exchange yesterday. That's close to the previous post-Gulf War high of $37.80 on Sept. 20, 2000.

The U.S. Department of Energy reported yesterday that crude oil inventories fell by 1 million barrels last week and are more than 16 percent below their levels one year ago. The Organization of Petroleum Exporting Countries has been pumping more oil, but it may not get here until next month, analysts said.

Speedway had raised prices about a dime a gallon since Tuesday, Casey said. In Findlay, Ohio, home of parent Marathon Ashland Petroleum, Speedway gasoline was $1.74 a gallon for regular, she said. In Michigan, a gallon cost about $1.79. Louisville and Covington, Ky., were at $1.74, and gasoline in Indiana was about a penny less, she said. "Prices are fairly consistent."

She said an oil-supply crunch stemming from an oil strike and economic turmoil in Venezuela, coupled with concerns about a war with Iraq, helped push crude oil prices sky high. Some station managers and owners said they were puzzled — and disappointed — by the price rise. When wholesale prices go up rapidly, gasoline stations have to pass on the increase, even if it costs sales, said Dave Jones, who owns a BP station on Fern Valley Road.

A BP station on Fern Valley Road was charging $1.81 cents a gallon yesterday for regular unleaded. "When gas was going up 2 or 3 cents, it wasn't bad. But when it goes up 10 cents, that's your whole profit" unless the increases are passed along, said Jones, whose pumps were set at $1.81 a gallon for regular.

The Chevron station at Muhammad Ali Boulevard and Eighth Street sold regular gasoline yesterday for $1.69 a gallon, up 4 cents from the day before, said Bob Arnold, a partner in the station.

Arnold said he saw several other stations raise prices 25 cents a gallon, but he tries to avoid such price spikes. "I think it makes you look really bad," he said.

Business was a little slow yesterday, he said, even though gasoline cost less at his station than at many competitors. "Prices will hurt business. It always does," he said. "A lot of people just park their car."

Not Nate Potter, who pumped $20 worth of gasoline into his Chevy van at the station, said it was either that or "park it and take TARC" buses.

Potter, who spends $100 to $120 a week for gasoline, said worrying about prices doesn't help. "Just go with the flow," he said. "If you need it, you need it."

But Ray Stump of Hillview said he would like to fight high gasoline prices — if there were way. 

"I don't know what we can do about it," Stump said as he filled his tank at a Court Avenue BP station in Jeffersonville. "If the American people really got together, maybe we can change things."

Mike Parada of Rensselaer, Ind., about 220 miles north of Louisville, said drivers in the Louisville area are getting a good deal compared with prices he's seen recently in Chicago and California.

At the Court Avenue BP station, regular gasoline was $1.55 per gallon. "Gas is reasonable here," Parada said. "I'm grateful."