www.usatoday.com Posted 3/3/2003 11:16 PM By Barbara Hagenbaugh, USA TODAY

WASHINGTON — As gasoline prices soar, service station owners say they are seeing an increase in the number of drivers who are skipping out on the bill.

Last week, a Shell gas station clerk in New Port Richey, Fla., was injured after he grabbed onto a car door to stop a motorist who was running out on a $16 bill. Karam Zaki, 34, was dragged 450 feet while being kicked by the driver before swinging off the car. The driver has not been caught. (Related story: Gas goes above $2 a gallon in Calif.)

Case Marshall, owner of 16 Pit Stop Convenience Stores in upstate New York, says he has seen a rise in "drive offs," but the increase has been nowhere near as steep as it was in 2001, when gas prices were also elevated. That's perhaps in part because of steps he's taken to thwart thieves, including requiring cashiers to turn on the pump every time a new driver shows up. Recent numbers are not available, but pump-and-runs cost owners more than $1,000 per station in 2001, according to the National Association of Convenience Stores — costing the industry more than $100 million.

Station owners say they always see an increase in gas theft when prices are high. While some drivers may be squeezed so tight they can't afford the higher gas costs, owners say others, thinking gas sellers are jacking up prices unfairly, may be taking it out on them. Some elected officials and AAA have questioned if there is price gouging going on, a claim station owners angrily reject.

"Everybody wants to blame us," says Bill Douglass, who owns 10 Lone Star convenience stores in Texas.

"There's a perception out there that when the price of gasoline goes up, we're just making that much more money," says Jim Tudor, president of the Georgia Association of Convenience Stores. "That's nowhere near the truth."

Retailers say they have not raised prices as quickly as their gas costs have increased. Prices have gained over the past several months as the cost of crude oil, which accounts for half of the cost of gasoline, has skyrocketed because of worries about a war with Iraq, a strike in oil-producer Venezuela and low supplies. Station owners say after paying for gas, taxes, staff and other costs, they are hardly making money.

To deter theft, some station owners require customers to pay before pumping, and others have installed security cameras. Some states and localities have enacted laws in recent years to increase fines for driving away without paying or allow law enforcement officials to take away drivers' licenses.

www.startribune.com Bob von Sternberg, Star Tribune Published Mar. 4, 2003 OIL04    As the United States draws ever closer to another war against Iraq, the role of oil in that struggle has come under increased scrutiny.

While antiwar activists boil their argument down to a chant of "no war for oil," the more hawkish advocates of war have gone so far as to say Iraq's vast oil wealth could be used to pay the costs of occupying the country.

Depending on the course of the fighting, its effect on U.S. consumers and the world's economy could be anything from trifling to catastrophic.

Start with the immediate economic effects when the bombs start dropping: If the experience of the 1991 Gulf War and the assessment of most oil industry analysts are any guide, the fallout should be relatively modest.

Iraq's invasion of Kuwait and the subsequent war spawned widespread fear that the world would plunge into an energy crisis. It never happened.

Demonstration of oil well firefighting techniques

Sue Ogrocki Associated Press

Immediately after Iraqi troops stormed into Kuwait, the price of oil shot up to about $40 a barrel. As soon as it was obvious that the war would be short and decisive, the price fell back below $20 a barrel. Other oil-producing nations had stepped into the breach.

This time around, jitters about war and the recent political chaos in oil-rich Venezuela have kept oil prices relatively high. Last week, prices reached their highest levels since the '91 Gulf War, briefly approaching $40 a barrel.

'Short-lived'

Although Iraq's oil reserves are second only to Saudi Arabia's, the effect of a war on the world's oil markets is likely to be even less than the the first Gulf War. Pumping only about 2 million barrels a day, its production represents a mere 2 percent of worldwide production.

"If the issue were simply the likely loss of Iraqi exports, most experts would agree that the market impact of military action would be manageable and short-lived," concluded a recent report by the Petroleum Industry Research Foundation in New York.

However, the report warned: "It should be kept in mind that while the U.S. may decide the timing of military action, the consequences for the region, and the ultimate impact on oil, remain unknown."

The impact depends on how quickly a war ends and whether Saddam Hussein's forces torch their oil fields as they did Kuwait's 12 years ago.

On Feb. 7, Iraq's ambassador to Russia, Abbas Khalaf, said his countrymen "will not blow up the oil fields in the event of strikes on its territory." Khalaf also told the ITAR-TASS news agency: "Oil is our national wealth."

Even so, Pentagon planners have spent long hours on a strategy for protecting the oil fields. The options reportedly range from dispatching special operations forces into Iraq's oil fields during the early fighting to using electronic jamming equipment to hinder a coordinated destruction of wells.

The Center for Strategic and International Studies recently analyzed likely scenarios.

If war is avoided, oil prices will quickly collapse worldwide, reaching a low of $16 a barrel late next year, the center predicted. A war that ends within weeks, with few casualties and no damage to Iraq's oil industry would cause a brief spike in prices into the $30 range, tailing off to about $20 a barrel at the end of 2004. In the worst case -- a protracted war in which weapons of mass destruction are employed -- the price would skyrocket to $80 shortly after the fighting begins, remaining above $60 throughout 2003 and falling only to $40 a barrel in 2004.

Such price increases could ripple catastrophically through the world's economy. The International Monetary Fund has a rule of thumb that for each $5-per-barrel annual increase in the price of oil, the world's gross domestic product drops 0.25 percent. A sustained oil price of $60 would knock a full 1.5 percent off the world GDP.

Unlike in 1990, when Iraq's invasion of Kuwait caught the oil industry by surprise, the Bush administration has given the industry ample time to prepare. The International Energy Agency has announced that its 26 member countries are holding 4 billion barrels of oil in reserve, equal to 114 days' worth of imports by the United States and other importing countries.

Agency officials say this war will not be a repeat of 1990, when months passed before it released stocks. This time, they have promised to act within hours of the start of fighting.

The United States has its own ace in the hole -- oil stored in the Strategic Petroleum Reserve, located in the Mississippi Gulf Coast's underground salt domes. Oil has been released from the reserve only once, when the first President Bush ordered the release the day the bombing started in 1991. His son has pledged to do the same.

The reserve holds about 550 million barrels, enough to supply the entire U.S. market for less than 29 days.

Perhaps the most vexing question about Iraq's oil is how it will be controlled once the war is over.

A U.S. task force is conferring with energy experts, industry executives and Iraqi opposition leaders on how to revive and expand Iraq's multibillion-dollar oil empire once Saddam is toppled. Bush administration officials consider revenue from oil exports essential to rebuilding the country once the fighting stops.

Those officials also are loath to say much publicly about Iraq's oil, lest they stoke criticism that a war with Saddam is as much about oil as it is about terrorism.

After reports surfaced in January that some administration officials were pushing for de facto U.S. control of Iraq's oil industry, Secretary of State Colin Powell was quick to quash the notion.

"The oil of Iraq belongs to the Iraqi people," Powell said during a Jan. 21 press conference. "It will not be exploited for the United States' own purpose."

Edward Djerejian, director of the James A. Baker Institute for Public Policy at Rice University, co-authored a recent report with the Council on Foreign Relations that analyzed a post-Saddam Iraq. The report urged that the Iraqis be allowed to retain control of their oil.

"One of the most important issues to address is the widely held view that the campaign against Iraq is driven by an American wish to 'steal' or at least control Iraqi oil," the report concluded. "U.S. statements and behavior must refute this."

Massive investment

Robert Ebel, one of the authors of the report by the Center for Strategic and International Studies, said it's impossible to predict Iraq's future oil production because "we don't know what kind of Iraq we're going to have in the morning after."

It is certain, though, that "there will be a massive investment program to get the Iraqi oil industry first back on its feet and then to top it off with expansion," he said.

The ultimate cost could reach $40 billion, according to Djerejian's report. Energy service companies such as Halliburton and Bechtel, which oversaw the repair of Kuwait's oil fields, could earn billions of dollars in deals to upgrade wells, pipes, pumping stations and export terminals in Iraq.

And the world's oil giants -- such as Exxon Mobil Corp., ChevronTexaco and Russia's Lukoil -- are looking for a chance to negotiate lucrative development deals with Iraq.

The fact that many of these companies have close ties to top Bush administration officials -- including Vice President Dick Cheney, who once ran Halliburton, and the president himself -- has fueled speculation among some critics that an attack on Iraq is mostly about oil. The administration strongly denies any such intent.

Also unanswered is how a cash-starved Iraq, under pressure to pump as much oil as possible, will deal with OPEC's strategy of limiting production to keep prices steady. The Saudis and other members of the Organization of Petroleum Exporting Countries (OPEC) are unlikely to allow Iraq to overproduce, which would drive down world oil prices.

The Middle East Economic Survey, a weekly oil newsletter published in Cyprus, recently reported that OPEC members are considering the prospect of a U.S. occupation of Iraq that would lead to the United States, in effect, sitting in as a temporary member of the cartel.

"If it is clearly in Iraq's interest to remain in OPEC, then the intriguing prospect must arise of the U.S. representing it during the occupation period," the newsletter said.

The Associated Press contributed to this report.-- Bob von Sternberg is at vonste@startribune.com.

www.modbee.com Posted: March 3, 2003 @ 07:28:00 PM PST Scripps Howard News Service

(SH) - Are you as mad as I am about the economy? I'm wondering why the American public seems to be as blithely tolerant of an economy that has been almost purposefully tipped away from the brink of recovery and toward (if not over) the brink of recession for more than a year now.

First, allow me to ask you a couple of questions. Are you better off financially than you were three years ago? Is your investment portfolio (if you're lucky enough to have one) worth anywhere near what it was in 2000? If you don't have investments, how's your pension fund doing? If you don't have any form of retirement other than Social Security, are you still employed at this point and are most of your friends and family members still employed?

If your answer to most of these questions is no, then why aren't you mad as heck and why aren't you doing something about it? I agree we have major security risks in today's world. I agree Saddam Hussein is a bad (to wit, evil) man who needs to be dealt with accordingly. I don't agree that we need to tank our economy in the process. But that is precisely what the Bush Administration is doing.

Have you noticed the price of gas recently? It has climbed to $2.00/gallon and more in many major American cities. A barrel of oil, now teetering on the brink of $40.00, was a mere $16.00 when President Clinton left office.

It even dropped to around $13.00 per barrel shortly after President Bush took office. But his ceaseless war talk for the last year plus has driven oil prices to hysterical levels. Higher oil prices reverberate endlessly throughout the economy.

President Bush's war strategy is directly responsible for higher gas prices, higher oil and natural gas prices to heat our homes, increased airline ticket prices, higher food prices (which must be shipped and trucked into grocery stores,) higher UPS and Fed Ex shipping costs (both companies have instituted fuel surcharges to ship packages) and more for, well, just about everything we eat, drink, drive to, and need to live.

The White House, of course, is dodging blame for its economic capriciousness. Presidential Spokesman Ari Fleischer, that master manipulator and spin-meister extraordinaire, told reporters on Friday the White House is "concerned" about high oil prices. (If that isn't the epitome of a day late and a dollar short, what is?) He blamed higher prices on "a confluence" of factors including a "cold winter" and "short supplies."

Give me a break. If I listen to one more newscast lead by the phrase, "The stock market dropped and oil prices spiked today on threats of war" I'm going to scream. Yes, Venezuela's instability is contributing to higher oil prices. So much so, Venezuela may account for $2-3.00 of the recent $25.00 run up. And yes, supplies are scarce. The reason is business-savvy suppliers are refusing to purchase oil at $40.00 a barrel.

They're waiting for "the war to be over" so they can stock up on cheaper supplies. And a cold winter? On the East Coast, sure. In the Midwest, it's been positively balmy by comparison to normal winter weather.

This oil-savvy White House is hoping for a quick war, and a return by summer to cheap gas (just in time to make the President look good for his 2004 race.) But hope and reality are frequently two different things.

According to the Atlanta Journal Constitution, "... it may be that the Energy Crisis of 2003 has already begun. Certainly money has already been snatched from American pockets and shipped overseas, threatening an already fragile economic recovery." And hope for a quick war is ludicrous on its face.

Even if the war itself is short, Americans will be paying hundreds of billions of dollars to repair Iraqi oil fields and subsidize a replacement Iraqi government for years if not decades to come.

So let me ask you. Why aren't you as mad about it as I am?

Bonnie Erbe, host of the PBS program "To the Contrary," writes this column for Scripps Howard News Service. E-mail her at bonnieerbe@CompuServe.com.

www.nytimes.com By DAVID GONZALEZ

MARACAIBO, Venezuela, Feb. 28 — In this sun-drenched city built on oil and agriculture, government workers complain of missed paydays and stalled projects. Beyond the high-rises and office towers, impoverished families live in dank, crumbling shanties along bumpy dirt streets.

These scenes in the western state of Zulia make the billboard outside the government-run oil company seem like a cruel taunt, particularly given that Venezuela's journey to becoming the world's fifth-largest oil exporter began here in 1914.

"Social Investment Fund," the sign proclaims. "Improving the Life of All Zulianos."

Complaints that the central government has exported not just oil from the region, but increasingly its attendant profits as well, have turned many residents against President Hugo Chávez, whom they have accused of withholding $500 million from their state budget over the years.

Only one of the state's 21 mayors supports Mr. Chávez, while the governor, Manuel Rosales, has easily rallied tens of thousands of people against him.

In Mr. Chávez's struggle to overcome the devastating effects of a two-month nationwide opposition strike, Zulia, the country's most populous state with 3.2 million residents, is a crucial battleground. Mr. Chávez must not only boost oil production, but also his support in this state whose people tend to vote as a bloc.

Two weeks ago, with the strike faltering, he set his sights on removing Mr. Rosales, urging people to demand the kind of recall referendum that his own critics have sought unsuccessfully against him.

Yet even among the poor, the very group that Mr. Chávez says benefits most from his Bolivarian Revolution, disenchantment has grown.

"The economy is fatal, and since Chávez came to power it has gotten worse, because there is no work," said Addis Atencia, who shares a compound of five shanties with nearly three dozen adults and children. "In a country that produces petroleum, how can you live like this?"

Zulianos consider themselves a breed apart, which is evident in their accent, culture and temperament. The differences are a result of having been cut off from the capital, Caracas, for years, and of frequent contact with foreigners through the port here. For years before the bridge spanning Lake Maracaibo was built in the 1960's, residents intent on going to Caracas had to get a visa, since the ferry stopped first on the Dutch island of Curaçao.

When Mr. Chavez introduced reforms, including one allowing squatters to occupy fallow farmland, Zulianos reacted with a strike in September 2001. For many the reforms were another insult after years of seeing no returns on the revenue Zulia produced for the country.

"Zulia paralyzed the state and lit the fuse that led to a national strike," said Tomás Guanipa Villalobos, the local leader of the Primero Justicia political party. "Zulia has suffered the most under Chávez. The money which was generated by oil was not invested into making Venezuela truly productive."

Roads on the outskirts of Maracaibo are potholed, while signs heralding a commuter rail station rise above empty lots where work has stopped. The public hospital in the Veritas neighborhood looks rundown, paint flaking from its walls and weeds blocking one entrance even as patients stream into the building. A state medical supply store is shuttered.

Mr. Guanipa said that rather than tackle problems like those, Mr. Chávez devoted most of a brief visit here last month to lambasting the governor and the opposition as coup plotters.

"He said nothing about any program of investment to elevate Zulia," Mr. Guanipa said. "He spent hours urging people to eliminate the enemy. It was the politics of revenge, and that is very dangerous. It will get worse unless we get out of this fast."

The government insists that production has improved among the oil rigs on Lake Maracaibo, where soldiers patrol the lake and shores to prevent sabotage. It estimates that production nationwide is now back up to 2.1 million barrels daily after being paralyzed by the strike. Venezuela produced 3.1 million barrels a day before the strike.

Alexis Arellano, the coordinator of the oil company's Tía Juana district, said he was now able to pump almost 800,000 barrels daily, despite having dismissed 60 percent of his work force during the strike.

Combined with joint ventures that were not affected by the strike, he said regional production hovered at a little more than one million barrels daily.

"They said it was impossible to increase production," he said. "The people who stayed with us see it as a personal challenge to keep on operating and make the company grow."

But former executives dispute the government's figures and insist that actual production is half of that claimed.

"If they are producing a million barrels a day with so many less people, then they should have fired us," joked Tarciso Guerrero, who used to manage the gas facilities. "They are only saying they reached a million to show the country that everything is normal."

Outside the oil company's Miranda Building, lines of job applicants file past a ragtag group of "Commando Reservists," Chávez supporters who have guarded the area since December, a battered bus their headquarters and dormitory.

The mood has been tense, especially after two people were injured this week when unknown assailants tossed a grenade and fired a dozen shots while the Chávez supporters slept by the sidewalk.

"We are defending these trenches because this institution is ours," said one of the group, Leonardo Sencial. "Without this we are nothing. If they try to take it away, we will take to the streets as the president said."

www.accessatlanta.com [ The Atlanta Journal-Constitution: 3/4/03 ] By SCOTT LEITH Atlanta Journal-Constitution Staff Writer

Sales are sluggish, prices in stores are falling, and bottlers are making less and less money.

That's the current business landscape for Coca-Cola in Japan, for years held high as one of the company's star markets.

While Japan remains a model of innovation for Coke and the source of more profits for the company than anywhere but North America, Japan also has become what many observers see as Coke's single-biggest trouble spot worldwide.

Coke's challenges in Japan can get overlooked, given the noisier problems elsewhere: boycotts in the Middle East, for example, and sales disruptions in volatile Venezuela.

But those are little markets in comparison. Japan accounts for about $1 out of every $5 that Coca-Cola makes in profits. Even though Coke's Japanese business is stable, several analysts are concerned about future growth.

"It's important for Coke to have a better-than-stable outlook for Japan," said Andrew Conway of Credit Suisse First Boston.

Coke's Japanese situation has been getting an increasing amount of buzz from analysts and even the media. A Japanese business publication, Toyo Keizai, recently detailed what it called the "melancholy" in Coke's Japanese bottling network.

"If Coca-Cola continues this way, its entire system will sink," the publication said, as translated from Japanese.

That judgment might be over the top, but the article was noteworthy in merely highlighting the worries of Coke bottlers. In Japan's business culture, such public airings can be unusual.

Bottlers are critical because they actually make and distribute most products. Coke itself earns much of its money by selling syrup to bottlers.

Coke has recently talked of improving bottler profitability in general as a way to ultimately help the company itself. Coke and its biggest bottler, Atlanta-based Coca-Cola Enterprises, have both noted a much-improved relationship in recent times.

In Japan, however, bottlers have experienced "significant declines" in profits, said J.P. Morgan analyst John Faucher, while Coke is "posting impressive profit growth."

"The deterioration in the Japanese bottling system's operating profit situation is not a short-term trend, either," Faucher said in a report. "Over the past few years, we have seen precipitous declines."

While Coke Japan's profits have grown, statistics compiled from five publicly traded Japanese Coca-Cola bottlers show a collective decline of about 15 percent in operating profit in 2002, according to J.P. Morgan. On the bright side, the bottlers have remained profitable.

To be sure, the hurdles in Japan are complex. Coke and its bottlers are dealing with a wobbly economy, including prices that are on a deflationary slide. Political reforms are slow in coming.

The Japanese marketplace is changing too, and not to the advantage of the Coca-Cola system. In Japan, about 42 percent of Coke's sales volume comes from vending machines. Coke has 1 million of them, and they yield hefty profit margins.

Increasingly, however, Japanese consumers are buying more beverages in supermarkets. These stores provide good sales volume but slimmer profit margins.

Mary Minnick, who runs Coke's Asia division, is a former president of Coca-Cola Japan. She knows the region well.

In an interview, Minnick said plans are percolating to improve sales in Japan, and she downplayed the problems.

"None of this is really new," she said, adding that there are many reasons for the declines. Coke bottlers, she said, are "very profitable" by average Japanese standards.

But Coke's sales growth has been slim in Japan. In 2002, volume increased 2 percent for the whole year, while it dropped 1 percent in the fourth quarter.

Soft sales are a big issue for Coke, even though the company remains a powerful force in the Japanese beverage market. The company's top-selling products are Coca-Cola and Georgia Coffee.

According to Credit Suisse First Boston, Japan accounts for about 22 percent of Coke's worldwide profits, even though it generates just 5 percent of Coke's sales volume. That makes each case sold more profitable than anywhere else, including the United States, where volume is far greater.

In Japan, however, Coke finds itself "at a crossroads" with its bottlers, said Bill Pecoriello of Morgan Stanley. "The bottlers are trying to focus on their profits," he said, while Coke believes bottlers can cut costs as one way to improve results.

That tactic is being pursued through joint buying of many goods needed to produce soft drinks, Minnick said. Coke itself has cut costs, too, including a 40 percent staff reduction in 2000.

There are other changes in the works. Japan has 15 different Coke bottlers. They produce most, but not all, of the beverages they sell. In one move that could appease them, Coke is negotiating to give bottlers part ownership in a Coke-owned unit that makes tea drinks.

At the moment, bottlers handle distribution of the popular products but don't make as much money because they aren't the manufacturers.

On the other hand, Minnick said, she'd also like to increase joint manufacturing as a way to cut costs. "It involves some hard choices," she said. Cuts would be likely. Even with those kinds of changes in mind, Coke is "perfectly comfortable" with having so many bottlers, Minnick said, so forced consolidation is not on the table.

Hisashi Nakai, an analyst who follows the beverage industry in Japan, said he believes Coke and its bottlers can solve their problems but "only when Japan's national economic problems will be solved."

As for other changes in the marketplace, the reality is that Japan always has been an evolving place. Consumers there are well-known for constantly shifting to new products.

What Coke faces is a "Herculean task," Faucher said, that doesn't offer easy solutions. "We think that over the next several years, system profitability will continue to come under significant pressure."