ogj.pennnet.com Maureen Lorenzetti Washington Editor

WASHINGTON, DC, Feb. 27 -- Allegations of price-gouging in energy markets may be based on frustration, not facts, Senate Energy Chairman Pete Domenici (R-NM) said Wednesday.

Natural gas and crude oil prices have soared in the past few weeks, the lawmaker acknowledged, but the sudden increases likely are market-related, Domenici said.

"This week, wholesale natural gas prices jumped 38% in 1 day. The spot markets jumped even higher. Wholesale natural gas prices are at $7.15/MMbtu. Crude oil is trading at $37/bbl," he said. But, he added, "We've been down this road before. We were here 2 years ago. Prices were just as high, driven by rising demand and tight supply."

And this time around, it's a good bet that the same market forces are at work, Domenici said.

Congressional concerns Some legislators, particularly those from large energy-consuming states such as New York and California, voiced concerns that fuel suppliers may be taking advantage of a jittery market spooked by a series of seemingly daily geopolitical crises among the world's larger oil exporters: lingering strikes in Venezuela, growing unrest in Nigeria, and possible military action in Iraq.

Sen. Charles Schumer (D-NY), a vocal critic of the Bush administration's energy policies, wants the Federal Trade Commission to investigate whether consumers are being gouged for their purchases of heating fuel and gasoline. He also called on the White House to release oil from the Strategic Petroleum Reserve to help bring prices down.

"Having but not using the SPR is like having an ace in the hole and saying you're not going to play the card," Schumer said. "This is no longer a partisan issue. Republicans in Congress just joined me in the call to open the reserves. The Bush administration must take action now to reduce gas prices for consumers before the economy goes over the edge.''

Responding to Schumer and a growing chorus of East and West Coast lawmakers, Domenici urged "caution and careful consideration" before making such allegations. He added that federal regulators are monitoring the situation and so far have not found evidence to suggest manipulation. The New Mexico lawmakers also concurred with the White House that the SPR should be used only for sudden supply shocks (OGJ Online, Feb. 26, 2003).

"I understand the frustration and anxiety that prompts allegations of gouging and price-fixing. The natural gas market has been deregulated and is a free market," he said. "The Commodity Futures Trading Commission continues to monitor the market for manipulation. Meanwhile, the Federal Energy Regulatory Commission is taking action to ensure the integrity of gas price reporting to ensure consumers have accurate market information. These actions are responsible and prudent."

Domestic production needed One way to avoid future price spikes would be to produce more domestic energy, he suggested, echoing comments made by Sec. of Energy Spencer Abraham before the committee earlier in the week.

"Insufficient production is our core problem; allegations and rumors are just a temporary distraction. If we want to stabilize energy prices, we must produce more energy," he said.

The White House and Republican leaders say that to encourage domestic production, Congress should this year pass a comprehensive energy bill.

"If we don't, we will visit this scenario again and again. The use of natural gas in the production of electricity in this country is expected to double in the next several years. Virtually every power plant we're building relies on natural gas. That means these crises in supply and price will only get worse if we don't act swiftly and decisively.

"I am committed to passing a comprehensive energy bill that will provide affordable, reliable, and clean energy for all Americans. At the very least, we must give the president an energy bill that will increase our own domestic production," Domenici said.

www.heraldtribune.com The Associated Press

When weather forecasters call for ice and snow, Randy Hayes knows he will be busy. Hayes, a delivery driver for Quality Oil Co., Hayes crisscrossed southern Winston-Salem on Wednesday, topping off tanks with home heating oil. "We're just like the grocery store," he said. "Whenever there's going to be bad weather, we get a lot of business." As with other petroleum products, the price of heating oil has risen dramatically in recent months. According to the U.S. Department of Energy, the average price in North Carolina was $1.52 a gallon, a 49 percent jump from a year ago and a new high for the state. The increased cost for oil has strained household budgets, especially for those living on fixed incomes. "I just get Social Security," said Betty Robbins, who had her tank filled by Hayes. "I've spent a lot more on oil this winter because of the storms, and the price just keeps going up." Officials said that the increase is the result of higher demand for fuel oil during the unusually harsh winter, a prolonged strike in Venezuela and uncertainty about war in Iraq. The high cost of oil has drained the resources of agencies that help those who can't pay their heating bills. "We're helping as many people as we can," said Jim Campbell, the emergency-assistance coordinator for the Forsyth County Department of Social Services. "We're getting about twice as many calls as last year." Campbell said that during a cold week, his office has processed about 120 applications for heating assistance each day. Because of increased fuel costs, the department can only afford to pay for about 100 gallons of heating oil or kerosene for each family, roughly a one-month supply. Information from: Winston-Salem Journal

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