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."

www.newsday.com By Tom Incantalupo STAFF WRITER February 27, 2003

Home heating oil prices are the highest in three years on Long Island and in New York City - and they might go still higher, experts say, before this dreadful winter is over.

The New York State Energy Research and Development Authority said the average price for home heating oil as of Tuesday was $1.952 per gallon in Nassau and Suffolk counties and $1.987 in the city. The state surveys full-service oil retailers; cash-on-delivery prices usually are lower.

In January and early February of 2000, prices had soared to about $2.20 a gallon during a cold snap, but quickly fell as the weather moderated.

This winter has been consistently colder than normal - not just in the Northeast but in other regions and other countries where oil is consumed for heat. Meanwhile, the flow of crude and refined products from Venezuela, the fourth-largest supplier to this country, still is about 30 percent below normal because of a two-month strike by oil workers. Fears of supply interruptions from a war with Iraq also are pushing up petroleum prices. In this area, last week's oil barge explosion near Staten Island further tightened supplies of petroleum products.

"This is going to be from start to finish one expensive heating season," said Joe Roy, Long Island coordinator for the New York Public Interest Research Group's fuel buyers cooperative.

Natural gas prices also have soared to near record levels, said Phil Flynn, senior market analyst at the energy trading firm Alaron Trading Corp. in Chicago. Spokesman Andrea Staub of KeySpan Energy Delivery said homeowners who heat and cook with natural gas will pay about 30 percent more this heating season than last, or about $1,155 per household, in part because of the price increase but, mostly, she said, because of additional usage.

Kevin Rooney, executive director of the Oil Heat Institute of Long Island, estimates that the average bill for this season will be about 40 percent higher than last year, or about $1,224. About 80 percent of a typical home's annual oil use is burned during the heating season.

Flynn says heating oil prices could rise further if the weather stays colder than normal in coming weeks. "If this winter hangs around past St. Patrick's day," he said, "it's going to be the spending of the green."

www.daily.umn.edu February 27, 2003 EDITORIAL

For the first time in Colombia’s bloody civil war, the country’s largest rebel group, the FARC, has captured U.S. government workers and deemed them “prisoners of war.” In Venezuela, the world’s fifth-largest oil supplier, violent political struggle between President Hugo Chavez and his opponents has caused serious international implications. And in poverty-stricken Bolivia, the government’s austerity plans recommended by the International Monetary Fund were met with deadly protests and unrest that, if continued, could erase the free-market gains made by that country over the last 20 years.

Even as the world’s attention turns to Iraq and the Korean peninsula, these events showcase the need for the United States to engage Latin America and carefully apply a combination of measures to address the unique problems of each of these countries.

Colombia’s situation is particularly grim. In 1997, the United States began supplying Colombia with funds and military assistance for the purpose of squashing drug production and fighting leftist rebels who — while leading an insurgency against the Colombian government for the past 39 years — became intimately involved in the country’s drug trade. Since then, the original purpose of the U.S. mission — known as Plan Colombia — has changed. The first shift occurred after Sept. 11, 2001, when the United States designated Colombia’s two leftist guerrilla groups and right-wing paramilitary army as terrorists. This placed the intractable problems of drugs and Colombia’s civil war within the George W. Bush administration’s “war on terrorism.” The next shift came after FARC rebels kidnapped three federal workers contracted by the Defense Department. Coming off the heels of military buildups in the Persian Gulf and the Philippines, the Bush administration is now planning to send close to 150 troops to Colombia to aid in the rescue of the kidnapped Americans.

In attempting a rescue, the United States must be careful not to go beyond the scope of the legislation permitting U.S. troops in Colombia. Congress voiced this sentiment in 2001 due to concerns the United States might end up in a protracted conflict similar to Vietnam. Therefore, restrictions were put in place on the number of military personnel in Colombia at any given time. In the most recent report delivered by Bush to Congress for the period ending in mid-January, there were 208 military personnel and 279 contract workers in Colombia. The saving grace in all this is a restrictive clause in the legislation allowing the president to “carry out emergency evacuation of U.S. citizens or any search-and-rescue operation for U.S. military personnel or U.S. citizens.”

Meanwhile, in Venezuela bombs recently ripped through the Spanish and Colombian diplomatic missions. The attacks followed a series of often-violent protests in Venezuela, as well as a two-month-long strike that failed to oust Chavez. In Bolivia, President Gonzalo Sanchez de Lozada’s Cabinet resigned en masse Tuesday after violent protests of economic policies left 29 people dead.

Although the United States used the Monroe Doctrine of 1823 to stake out its claim to the countries of Latin America, it was not until the late 19th century that it had the economic and military might to pursue its interests there wholesale. The United States must not lose sight of South America — its strategic and economic importance, as well as the plight of its people — as it pursues its agenda elsewhere.

seattletimes.nwsource.com Thursday, February 27, 2003 - 12:00 a.m. Pacific By Luke Timmerman Seattle Times business reporter

Why have gas prices jumped so quickly? Part of it is the threat of war in an oil producer like Iraq, a general strike in oil-rich Venezuela, and the East Coast's harsh winter, which is burning up heating oil.

But another part of the story is the way the gas business is dominated by a few big oil companies. In Washington, a series of mergers has left just four oil giants largely in control of refining, transportation and retail sale of gasoline.

Those companies control gas prices through large numbers of corporate-owned stations with secret neighborhood-by-neighborhood pricing formulas. Prices can be dramatically different from one location to another largely because the owners have decided they can charge more.

Nevertheless, as Puget Sound and the nation begin to see $2-a-gallon gas, the underlying cause is a nationwide shortage of crude oil.

The Energy Department yesterday announced that U.S. oil inventories have fallen to 271.9 million barrels — 50 million barrels, or about 16 percent, less than a year ago. That sent crude-oil prices, which were $19 a barrel a year ago, to nearly $38, a 12-year high.

In Venezuela, a long strike by the state-owned oil producer has just ended, but it will take months for production to return to normal. Meanwhile, the East Coast cold wave has consumed more heating oil, leaving less refinery capacity and crude oil to make gasoline.

It could get worse — a lot worse.

"The supply situation in the U.S. and parts of Asia is very, very dangerous," said Tetsu Emori, a commodity strategist at Mitsui Bussan Futures Ltd. "It's easy for crude-oil prices to reach $45 to $50" per barrel if a war starts in Iraq.

Ron Planting, an analyst with the American Petroleum Institute, an oil-industry trade group, said gas prices historically tend to rise rapidly following a rise in crude prices, even though today's gas was made from yesterday's less-expensive crude oil.

"Uncertain supplies from Iraq's neighbors in the future make current supplies more valuable," Planting said.

Ironically, when prices go up, local gas-station operators often get squeezed worse than consumers.

Tim Hamilton, executive director of AUTO, a trade group of 500 gas-station dealers in Washington, said the big oil companies set wholesale prices that usually leave margins of 8 cents to 11 cents per gallon for local operators to pay labor costs, taxes, utilities and other expenses, and keep whatever is left for profit.

But when pump prices shoot up, consumers tend to shop around more aggressively for cheaper prices. That forces stations to make sure their prices aren't the first to go up, which squeezes their margins down to 7 cents or 8 cents per gallon, Hamilton said.

For a typical station operator, that can mean $2,500 per month less to pay the bills, raising the pressure to make money on Twinkies or other convenience items, he said.

That situation arises at a time when station operators are already frustrated by the oil companies' zone pricing system, in which stations are charged different wholesale prices through a secret formula that appears to factor in location, affluence, proximity of competitors and customers' willingness to pay.

It's the system that explains why gas can cost so much more on Seattle's Queen Anne Hill than in Issaquah. Court challenges have allowed the practice to stand, as long as oil companies don't collude to set zone prices.

Hamilton said his members are worried that the stars are aligned for gas prices to possibly go as high as $2.50 a gallon or more this summer. This latest round of short supplies comes on the verge of springtime, when people traditionally get out of the house and drive more, boosting demand for gas.

In addition, with California's prices averaging 20 cents higher than here, oil companies might ship gasoline south to fetch the higher price — which could drive up our cost, Hamilton said.

Plus, when refineries try to catch up and replenish supplies in the spring, they often run at full speed, sometimes leading to accidents such as fires or explosions. That's just another factor that could constrain supplies and further drive up prices.

Luke Timmerman: ltimmerman@seattletimes.com or 206-515-5644. Bloomberg News contributed to this report.