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.

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."