Subject: Para contactos internacionales Date: Sat, 22 Feb 2003 22:31:01 -0400

Citgo for Sale Hugo Chavez is once more secretly trying to sell Citgo. However, he has two problems. 1) Citgo has great value to Venezuela, but not to another refiner, because Citgo without Venezuela's heavy crude supply has limited value. 2) There are no apparent foreign buyers with enough capital to buy Citgo. Only a very large corporation (e.g. Star Enterprises) would have the financial ability. However, without available crude supply for the Citgo refineries, a Company would only be interested if it was a fire sale deal. How desperate is Chavez for cash? is a matter of how long he will stay in power.

If Chavez were able to sell Citgo to a foreign competitor, he would not need to export crude or products to the United States, and then he could default on his foreign debt ($35 billion). Chavez would get the revenues he so desperately needs to stay in power from the Citgo sale, and Citgo would be out of reach when he defaults on Venezuela's foreign debt. Furthermore, Citgo would no longer be essential to the operations of the much smaller Petroleos de Chavez.

Reduced Oil Production Venezuelan oil production at this writing in mid-February 2003 is down from 3.1 million b/d (2.7 million b/d, plus 400,000 b/d from the Oil Belt) to a mere 1.3 million b/d. But an even more important problem for the Venezuelan oil industry, and for the U.S. market that has depended on Venezuelan oil imports for 74 years, is the following:

• Of the current 1.3 million b/d production, 500,000 b/d comes from the operating contracts (foreign companies.e.g Chevron and Boscan).

• The four Strategic Association projects in the Oil Belt are shut-in, for they need natural gas, which is not available because of the oil production strike.

• Worse, Petroleos de Chavez in trying to restore oil production, with production in the newer free flowing fields, and they are over producing, i.e., wells that are supposed to produce 1,000 b/d are forced to produce 2,000 b/d. This implies a higher rate of natural decline in these fields. Venezuela has an oil field natural decline rate of 25%/year, requiring large investments in maintenance, which Chavez cut back when he came in to office, in order to squeeze more revenues out of PDVSA.

• What they are producing is not coordinated with what they can export, therefore, millions of barrels are going into storage (e.g. Bonaire and Bahamas).

• Finally, there was a permanent loss of 400,000 b/d in production capacity, resulting from some of the shut-in wells (most of them in the Maracaibo Lake area).

Therefore, when you hear Chavez, or Ali Rodriguez, or Rafael Ramirez, Minister of Energy, inform the public how they have increased exports and oil production to 2 million b/d, or more, it simply is not true.

All of this is of little concern when you intend to create a Cuba style government. In 1998, Chavez campaigned against PDVSA and its president, Luis Giusti, as a "state within a state." He vowed to subordinate PDVSA to the Venezuelan state. His first action after becoming President in February 1999 was to further cut oil production and comply with OPEC quotas. Some 6,000 oil workers lost their jobs because of the production cuts, and many service companies went out of business. PDVSA was also forced to cutback maintenance on the shut-in wells, and they lost production capacity of 500,000 barrels/day. The one area Venezuela was increasing production was in the Orinoco Oil Belt, under the four big joint ventures with foreign oil companies.

Now, Chavez is satisfied that his revolution can be maintained with only 2.0 MMBPD, which his new and only goal. Chavez wants to destroy the economic system in place and built a new country over the ruins of the previous civilization "the old Pdvsa". (any similarity with Julius Caesar and Hitler is mere coincidence!).

www.star.niu.edu By Laura Grandt Staff Reporter

Commuters may have noticed a sharp increase in gas prices in recent months, a trend that is caused by several factors.

The average price of a regular gallon of gas in Illinois was $1.69 on Feb. 28. This is up 19 cents from last month, and 45 cents from a year ago, according to the AAA Web site.

Although the Web site did not offer statistics for DeKalb, it did state that the Rockford average was $1.61. This was up 15 cents from a month ago, and 51 cents from a year ago.

One of the major factors for the increased gas prices is the turbulence in Venezuela, said Ron Planting, manager of information and analysis at the American Petroleum Institute. Workers went from producing three million barrels a day to producing almost none during a recent strike. Although production has resumed in the past three months, the lost oil has not been replenished.

Weather also has been a factor in increased prices. This winter has been colder than normal, raising demand for crude oil, Planting said.

Speculation about war has caused a fluctuation in the price of crude oil as well, said Norma Cooper, manager of community affairs at AAA Chicago Motor Club. Prices often increase because of a fear of interruption in supplies.

A fire in the largest refinery in Indiana most likely helped raise gas prices on a local level as well, Cooper said.

The rises in oil prices don’t only affect motorists. An increase in gas prices has the potential to impact other aspects of the economy. It can raise unemployment and inflation rates, said Carl Campbell, associate professor of economics at NIU.

Increases in unemployment and inflation occurred during the oil price hikes in the late ’70s and early ’80s, and in the early ’90s. Although the increase is fairly recent, and such effects would take time, they are a possible consequence, Campbell said.

An end to the increased gas prices is impossible to predict, Planting said.

“There’s a lot that’s beyond anyone’s control,” Planting said.

Although prices have been uncharacteristically high during the winter months, an increase in price is normal during the shift to summer. This is because of increased demand for gasoline for seasonal vehicles, such as golf carts and for vacations, Cooper said.

www.star.niu.edu By Ken Moritsugu (KRT)

WASHINGTON - While uncertainty about a war against Iraq has contributed to a sudden spike in oil prices, those prices could remain high even if a U.S. invasion achieves quick victory.

And even if crude oil prices fall, gasoline prices likely would remain high at least into late spring, analysts say. It generally takes one to two months for oil price shifts to feed through to gasoline. Any postwar declines could be offset by upward pressure on pump prices as demand picks up with the start of the summer driving season.

The nationwide average price for unleaded regular is $1.67 a gallon, according to the American Automobile Association, 54 cents higher than a year ago.

Natural gas prices also have risen, pushing up heating and electricity costs for many homes and businesses. High energy prices slow economic growth and increase the chances of recession.

"Unless it reverses itself quickly, the energy shock is big enough to threaten the economy," said Richard Berner, the chief domestic economist at the Morgan Stanley investment bank in New York. He put the chance of recession at one in four in a report to clients on Friday. "While it's anyone's guess how long it will last, the fundamentals don't suggest quick relief," he added.

Global Insight Inc., an economic consulting firm in Lexington, Mass., doesn't expect gasoline prices to ease from today's level until July or August at the earliest.

Most analysts attribute part of the rise in oil prices to fears about potential war-related disruptions to oil production. The analysts conclude that a swift and successful war, with minimal damage to oil wells, would eliminate this "war premium" from the price.

Certainly, war rumors have created short-term havoc in oil markets, pushing the price of oil on the New York Mercantile Exchange up to $37.70 a barrel on Wednesday - the highest since the Iraqi invasion of Kuwait in 1990 - before dropping back to close at $36.60 on Friday. A barrel is 42 gallons.

"I call it March missile madness," said Phil Flynn, a futures trader at Alaron Trading in Chicago. He attributed the midweek run-up in oil prices to the market getting "a tad ahead of itself on war concerns."

Yet some economists argue that oil prices would be high today with or without the so-called war premium. They note several other factors, such as low inventories of crude oil, high demand for heating oil because of the cold winter and the disruption of production in Venezuela due to political unrest.

These factors alone are enough to account for much of the 45 percent rise in oil prices from $25 a barrel since November, said Dave Costello, an economist with the federal Energy Information Administration.

Phil Verleger, a California-based energy consultant, doesn't believe the war premium exists at all, so a quick end to a war won't bring down oil prices, he predicted, unless the United States also were to release oil from its Strategic Petroleum Reserve.

One problem: High oil prices, at least for a while, can be a self-sustaining proposition.

The refiners who make gasoline and other oil-based products don't want to stock up on oil while it's so expensive. Any company that buys oil at $37 a barrel would be at a competitive disadvantage if the price drops.

Traders expect prices to fall eventually. Futures contracts for oil for delivery in December closed at under $29 a barrel Friday.

If refiners only buy enough oil to keep going, inventories remain low, which in turn helps keep prices high.

"No one wants to bite the bullet and buy crude, because they're afraid of a price collapse," Verleger said.

If a war were to go badly, oil prices could shoot up instead.

Should the price of crude reach $50 a barrel and remain there for several months, the chances of recession would rise sharply.

© 2003, Knight Ridder/Tribune Information Services.

www.suntimes.com March 3, 2003 By Brad Foss

If history is any guide, consumers should brace for even higher gasoline prices, which are already above $2 a gallon in some places.

The wholesale price of gasoline has risen between March and May every year since 1985, according to an analysis by Cameron Hanover, an energy risk management firm based in New Canaan, Conn. Pump prices have tended to follow suit, statistics kept by the Energy Department show.

''We're expecting a further round of price increases at the retail level,'' said Jacob Bournazian, an analyst at the Energy Information Administration, the statistical arm of the Energy Department. ''It could be anywhere from 4 to 8 cents.''

The national average retail price for regular unleaded last week was $1.66 per gallon, 54 cents above year-ago levels. In the Chicago area, some pump prices, spurred by state and local sales taxes, topped $2.

The springtime pattern of rising gasoline prices coincides with the period when refiners shut down equipment, scrub it clean and switch from winter- to summer-grade fuel ahead of the peak driving season. That process, known in the industry as ''turnaround,'' causes supplies to temporarily shrink and prices to rise.

Whether the 18-year seasonal trend is extended--or ended--in 2003 depends on factors ranging from a possible war in Iraq to the supply of fuel from Venezuela, whose oil industry strike has resulted in sharply reduced exports to the United States.

If U.S.-led military action against Iraq proceeds quickly and without any disruption in the flow of Middle East oil, analysts believe, the price of crude, now close to $37 a barrel, could drop quickly, bringing today's high gasoline prices down, too.

''That could kill the (seasonal) trend,'' said Ed Silliere, an analyst at Energy Merchant LLC in New York. The ability of refiners in the United States, Europe and elsewhere to make up for the expected shortfall from Venezuela could also tip gasoline prices in one direction or the other, Silliere said.

Still, Silliere and other analysts said all signs point to the annual trend being magnified by geopolitics and the current supply-demand imbalance. Nationwide inventories of gasoline are nearly 3 percent below year-ago levels, and with Venezuela's refineries running far below capacity, analysts said the situation could get worse.

Peter Beutel, president of Cameron Hanover, said the confluence of outside factors makes it difficult to predict what will happen in gasoline markets this spring, but his advice to clients in a recent report was this: Don't make large bets prices will fall.

''We have to ask ourselves if we want to fight these kinds of odds,'' he said.

In 16 out of the last 18 years, June gasoline futures trading on the New York Mercantile Exchange rose between March 1 and May 15. In 1993 and 1998, the June contract rose between March 1 and May 1, before falling two weeks later. Gasoline for April delivery was up 2 cents to $1.04 a gallon Friday on the Nymex.

The monthly average for retail prices, excluding taxes, was higher in May than in March in 15 out of the last 18 years. Pump prices declined slightly over that period in 1986, 1997 and 2000.

news.ft.com By Kevin Morrison in London Published: March 3 2003 4:00 | Last Updated: March 3 2003 4:00

Last week's spike in US oil prices to post-Gulf war peaks of almost $40 a barrel could be repeated, analysts say - but it was only partly attributable to the build-up to a potential war in Iraq.

The strains in the US oil market are underlined by a 75 per cent rise in prices over the past 12 months. Paul Horsnell, oil economist at JP Morgan, said the combination of tensions over Iraq, and domestic oil market conditions, has created a potent mix that will result in further price spikes.

"It's not only speculation that is driving the oil price. You have unseasonally high demand for heating oil, a severe winter in the north-east, the disruption in oil supplies from Venezuela and a shortage of gas that is causing some users to switch to oil at a time when inventories are at 27-year low," Mr Horsnell said.

Evidence for the view that the spike is at least partly driven by domestic issues comes from the divergence between movement in the key European oil benchmark price - IPE Brent futures for April delivery - and its counterpart in the US, the Nymex WTI for April delivery.

The Brent price lagged about $6 behind its peer when Nymex crude peaked at $39.99 last Thursday, or four times the average price difference during the past 12 months.

The cold winter means a drop of more than 30 per cent in stocks of heating oil compared with a year ago. With more bad weather forecast this week, US heating oil futures hit a record high of $1.22 a gallon on Friday - double the price it was a year ago.

The supply disruptions from Venezuela and the severe winter have contributed to commercial US crude stockpiles falling below 270m barrels, 50m barrels down on a year ago and viewed as the minimum level required to keep the distribution system working smoothly.

Pressure on the market has been further intensified by gas shortages that could push some power stations and industrial users to switch to oil.

US gas futures prices have risen to more than $8 per million British thermal units, or more than four times the average gas price during most of the 1990s.

"The last time there was a shortage of this magnitude, which was in 2001, it saw demand switch to oil. This added another 600-700,000 barrels a day to oil consumption," said Mr Horsnell.

"This may not be big in relation to the size of the market, but when supplies are tight and stocks are down, this puts further strain on the system," he said.

Mr Horsnell said the shortage in natural gas was due to falling production in both the US and Canada, and the time lag before new pilelines from the Alaskan gas fields come on stream, not expected for another two to three years.

Jay Saunders, an oil strategist with Deutsche Bank in New York, said there were further worries about the low inventories because once the winter is over, the US driving season starts, a period when Americans spend more time driving their cars and guzzle more gasoline.