seattletimes.nwsource.com Stephen Dunphy / Times staff columnist

Search web archiveHops growers are being challenged to cut production even further. For many, it is a tough decision after growing the key ingredient for beer for generations. Most hops in the country are grown in Washington state in the fertile ground of the Yakima Valley.

But the simple truth is there are more hops than the market can handle. Doug MacKinnon of the Hops Growers of America said at its annual meeting recently the industry needs to trim 10,000 acres from production and even that number may be conservative.

"The market has given every signal possible that it is so full of hops it is about to burst," MacKinnon told growers. "Breweries have purchased hops to satisfy 2003 and 2004 demand from the 2002 crop. Other breweries have said bluntly that at the current prices, they cannot afford not to buy hops even though they don't need them right now." The only way to go is with a firm contract, MacKinnon said. Anything else is a guess.

The first quarter after the holiday season is typically among the slowest periods for international cargo movement. But don't tell the Port of Tacoma.

Its North Intermodal Yard is starting 2003 like it closed 2002 — at a record-setting pace. The yard, which serves Evergreen Marine (Taiwan) and "K" Line (Japan), handled a record 7,312 intermodal lifts — transfers of containers between ship and rail — from Feb. 8-14. The previous one-week record was 6,825 lifts in October 2002, the first week after the West Coast labor lockout.

Compared with January 2002, Tacoma cargo volume was up 35 percent.

The Canadian border is less than 150 miles away, yet knowledge about U.S.-Canada trade is dismal. The U.S.-

Canada Partnership for Growth recently did a survey that revealed a lack of awareness about the importance of this trading relationship.

In a survey of 819 Americans, only 12 percent knew Canada was the largest buyer of U.S. goods and services. The top responses included Japan, China, the United Kingdom and Mexico.

Only 1 percent named Canada as the leading source of oil and natural gas for the U.S. market. Saudi Arabia, Iraq, Venezuela, Kuwait, Mexico and Iran received much higher percentages. Canada is the largest supplier of oil to the U.S. and provides most U.S. natural-gas imports.

The U.S. does more trade with Canada than with the entire European Union. Canada buys more U.S. goods and services than any other country, and 37 of the 50 states list Canada as their top foreign customer.

RBC Dain Rauscher economist Vince Boberski questions the emphasis investors and commentators are placing on the possible war with Iraq. It's too easy to blame potential conflict for the problems in the economy, he said.

The war plays a role, of course, but it is not the primary reason for high unemployment and a lack of business investment.

"It is a lack of pricing power for the makers and distributors of real goods," Boberski said. "It is, for manufacturers, a stubbornly strong dollar that has begun to move toward more reasonable only over the last 2-½ months. It is a reaction to overly zealous hiring during the boom. And it is a realization that computers and software can last, say, four years instead of three."

Sounds right to me. Basic business conditions have always been more important than speculation.

Stephen H. Dunphy's phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com. More columns at www.seattletimes.com/columnists

www.ctnow.com February 27, 2003 By STACY WONG, Courant Staff Writer Heating oil prices in Connecticut this week climbed to an average $1.79 a gallon - the second-highest ever, according to a weekly survey conducted by state officials. This week's survey of 27 dealers across the state recorded prices as high as $2.05 a gallon. This week's average is second only to the $1.98 recorded in a survey Feb. 7, 2000, when frigid weather pushed prices as high as $2.25 a gallon. During that period, some home oil tanks ran dry, and consumer protection officials launched an investigation into price gouging by the state's heating oil dealers. Conditions aren't quite as bad this time around, industry executives said, but this year marks the first time in three years that weather-driven demand for natural gas has been so high that large commercial or industrial gas customers have been asked to temporarily switch to heating oil. And this higher demand for oil, coupled with continuing war jitters and a tight supply, has pushed prices charged by some dealers past the $2 a gallon mark again, they said. The large amounts of oil needed by institutions such as colleges and hospitals create upward pressure on heating oil prices, they said. "It's not like we're talking about picking up a home heating oil customer who wants 175 gallons; it's large customers," said Chris Herb, associate director of the Independent Connecticut Petroleum Association, a trade group of some 350 heating oil dealers. And in fact, St. Francis Hospital and Medical Center in Hartford - which usually heats with natural gas - has spent 25 to 30 days this year burning 120,000 gallons of heating oil, a volume the hospital has not seen since the 1990s, said facilities Vice President Bob Falaguerra. St. Joseph College for Women and the University of Hartford also have switched from gas to oil to heat some of their buildings this winter. Gas distributors such as Yankee Gas and Connecticut Natural Gas have asked some "interruptible" customers to use oil during parts of January and February, including this week. Those customers get a discounted rate on gas in exchange for agreeing to switch. Yankee Gas spokeswoman Sandy St. Pierre said that when cold weather pushes up consumption, there is not enough capacity in the gas lines to insure an adequate supply to residential customers who don't have the ability to switch between fuels. Falaguerra said St. Francis Hospital locks in an oil-price contract so it won't be hurt if it has to switch from gas more often. The hospital also burns No. 6 oil, which is cheaper than the No. 2 heating oil most homes use. St. Joseph College, however, will usually call up Kasden Fuel in East Hartford and buy No. 2 heating oil at the daily price, with a volume discount, said associate vice president Mike Jednak. While it's too late to lock in a contract with most oil dealers, customers can still get lower prices by buying in bulk, securing senior citizen discounts, using coupons or paying in cash on delivery. Buying clubs such as the Citizen's Oil Co-op in West Hartford also sell oil for less, although customers have to sign up for regular deliveries and pay a $10 membership fee if they don't register online. On Wednesday, the Co-op was selling oil for $1.45 a gallon, and the phones were busy. "I've just been inundated today with phones calls, I'm trying to call everybody back," said Rosie Stanko, who runs the Co-op with her husband, Mark Hutson. People who joined the Co-op earlier this year are paying $1.09 a gallon for oil, but, Stanko said, "$1.45 is still a whole lot better than $1.79." Herb, of the oil dealers' group, said it was hard to tell if prices would remain stable until the end of winter several weeks away. Factors such as a war against Iraq and a strike in oil-exporting Venezuela can't be predicted, he said. "You see the price bounce like a ping pong because of things beyond the control of Connecticut (heating oil) retailers," he said. "Prices are not set on Main Street, Connecticut, they are set on Wall Street."

www.kansascity.com Posted on Thu, Feb. 27, 2003 By JUAN FORERO The New York Times

CARACAS, Venezuela - Tankers are once again setting sail from Venezuela, loaded with crude oil bound for the United States.

Meanwhile, government planners busily try to rebuild and reorganize state-owned Petroleos de Venezuela, pondering how to function with 40 percent fewer workers.

Oil, the lifeblood of Venezuela's economy, is flowing again after a paralyzing two-month national strike. Production is now topping 2 million barrels a day, say officials of the $46 billion-a-year company. They predict that Venezuela's oil industry, with a leaner government-run company leading the way, will soon be back to pre-strike production.

"We are getting close to normal," said Enrique Salazar, a loading master on the Caribbean coast, peering from a control room as a tanker, the Morichal, took on 25,000 barrels an hour.

But oil analysts and economists say the government's rosy picture hides a painful truth about a 27-year-old company that was born when Venezuela nationalized oil production.

Petroleos de Venezuela has lost $4 billion in exports and nearly 16,000 workers, fired by the government for taking part in a walkout aimed at debilitating President Hugo Chavez's left-leaning government. That financial blow, and the loss of workers with 17 years of experience on average, could permanently hobble the company, keeping it from assuming its role as a leading world oil provider, analysts here and abroad say.

"It will not be the company it once was," said Mazhar al-Shereidah, an oil economist in Caracas who helped write oil regulations for the Chavez government. "For a country that depends on petroleum, now more than ever, the challenges are too great. You have to pray for Venezuela."

The dire predictions, if true, would indeed be disastrous for this country of 24 million, which depends on oil for half of government revenues and 80 percent of exports. It would also leave the United States -- which has counted on Venezuelan oil for decades -- without one of its most reliable suppliers as war with oil-rich Iraq promises to batter energy markets.

The obstacles in the aftermath of the strike, which ended in early February, are daunting. A lack of maintenance has caused sand to build up in the gelatinous deposits and caused the pressure to drop, making some fields worthless and threatening to cut production capacity by 300,000 or more barrels a day.

And perhaps most troubling is that no one knows what Chavez's government has in store, though it has promised a wholesale revamping of what was once the world's second-largest oil company.

Reports from international analysts are blistering. UBS Warburg predicts that oil's contribution to gross domestic product will fall 22 percent this year, with Venezuela facing "a fiscal crisis of major proportions." Fitch Ratings said Venezuela's "image as a reliable crude oil supplier has been undermined" and will he hard to recover.

Analysts say the lack of technical expertise and the company's financial straits mean that Petroleos de Venezuela will be unable, in the short term, to reach pre-strike production levels, when Venezuela was a top 10 producer and the world's fifth-largest oil exporter. Most recent production has been in fields that were easiest to restart, leading independent analysts to predict that Venezuela will, at best, produce 2.3 million barrels daily by the end of this year.

"We believe the company's role in Venezuela society has been permanently altered," Deutsche Bank recently reported. Assuming average daily production of 1.7 million barrels for the year, the bank estimated that oil revenues will reach only $14.1 billion, down nearly 50 percent from 2001.

The government is already preparing for the worst. The 2003 budget for the oil company was cut by $2.7 billion, to about $6 billion, while the income the government draws from oil is forecast by UBS Warburg to fall from $11.5 billion in 2002 to as little as $5 billion this year. The sharp drop will make it especially difficult to raise the $5 billion the company would have spent to keep production steady.

Ali Rodriguez, the former leftist guerrilla who is now president of Petroleos de Venezuela, does not gloss over the obstacles. But in an interview, Rodriguez said the doomsday predictions originate with dissident executives who hoped to undermine international confidence in the oil company to weaken Chavez.

He predicted that through sharp budget and personnel cuts, the company will reach 3.1 million barrels a day. And "with its resources," he said, "it is perfectly possible that it will even surpass that level."

Oil analysts warn that the company will be debilitated for years from the loss of experienced workers. Those employees -- executives, office workers, engineers and highly trained technicians -- joined the walkout and, in some cases, damaged computers and software and stole files to hinder reactivation efforts.

Chavez, who has referred to the employees as traitors and fascists, has promised that they won't be rehired.

But already, oil analysts say, the shortage of experienced workers is being felt in every corner of the company. In the patents and technology department, which develops technology for exploration and refining, 800 were fired. The department that trains executives has lost hundreds, as has the department that contracts with oil purchasers.

"Even if you replace the bodies, you don't replace institutional memories," said Larry Goldstein, president of the Petroleum Industry Research Foundation, an industry-supported analysis group in New York. "It's a hidden loss. You can't touch it or taste it, but it's there."

www.news24.com 27/02/2003 09:39  - (SA)  

Singapore - Oil prices continued their upswing in Asian trading on Thursday on the strong likelihood of an Iraq war, blizzards and low inventories in the United States and tensions on the Korean peninsula.

New York light sweet crude for April delivery was trading around US$38.30 in after hours trade, US60c above its close.

"The day to day volatility is going to continue before any military action takes place between the United States and Iraq," said Victor Shum, senior partner of international energy consultants Purvin and Gertz Inc.

Shum said he believed it would be a short war after which the war price premium of $5 to $8 would disappear quickly and prices stabilise.

"But you never know what is going to happen on one day or another," he said, referring to outside factors such as North Korea testing missiles.

The blizzards and low inventories in the United States as well as strikes by oil workers in Venezuela and Nigeria were other factors hitting the market, he said.

Traders said Russian and West African oil producers were moving crude into Asia, especially Japan and South Korea, where inventories remained at comfortable levels.

Saudi Arabia was also seen chartering tankers for increased crude exports, according to SG Economic Research.

With more crude being made available on fears of supply disruption during the war, traders were already discounting a major price correction after a military conflict in the Middle East. - Sapa-AFP

www.casperstartribune.net By DUSTIN BLEIZEFFER Star-Tribune energy reporter Thursday, February 27, 2003

GILLETTE -- Natural gas producers are enjoying the high side of the ebb-and-tide pricing market now nearing the $4.50 per thousand cubic feet (mcf) of gas mark at Wyoming trading hubs, according to Enerfax Daily. Cold winter weather in the eastern portion of the U.S. has helped boost prices for all producing areas, including the Rockies -- an area that was slammed this past summer with prices that dipped to $1 per mcf and below. Such seasonal changes are expected in the natural gas pricing market. But in a telephone conference Monday about his company's pending merger with Ocean Energy, Inc., Devon Energy Corp. chairman, president and CEO Larry Nichols proclaimed natural gas prices could remain on the high side for a long time to come. "We have moved into a new era of gas prices," Nichols said. Speaking of natural gas pricing at Louisiana's Henry Hub, Nichols added, "The days of trading at $2 (per mcf) or less are gone forever. Because of the way storage is being depleted, we are going to see some of the highest gas prices in history." Stu Wagner, a natural gas market analyst with Petrie Parkman & Co. in Denver, said he agrees natural gas prices are not likely to dip to this past summer's lows, and there's many reasons to believe prices will remain strong for the rest of 2003. "We'd agree that the era of $2.50 gas is over. That is, at Henry Hub," Wagner said, noting that the Rockies still trails the rest of the nation's wholesale natural gas prices by about $2 per mcf. "We've had a very strong withdrawal from storage as a result of cold weather, and we've had a low rig count for the past 18 months, and we're not replacing production," Wagner said. Cold weather is depleting gas storage -- now nearly 43 percent below one year ago, according to the Energy Information Administration. However, there are other forces at play. Wagner said the price of crude oil has been pushed to the mid-$30 per barrel due to the possibility of war in Iraq and the oil strike in Venezuela. Natural gas pricing follows crude pricing, and both have been on the rise. "If there is war in Iraq and it's settled relatively quickly without a lot of interruption to crude oil supplies, we think you'll see crude oil drop down to the mid- to low $20s per barrel. And we'd expect some sympathy reaction from natural gas," Wagner said. Nichols said Devon Energy's North American operations are focused mostly on natural gas, and that focus will remain given the future pricing climate. "Prices will knock out some demand, but it can't knock out all the demand," Nichols said in the telephone conference. "This year is the first time since 1986 that Canadian imports actually fell. ... We think it's going to be robust for natural gas all year long."