reuters.com Fri March 7, 2003 10:44 AM ET

NEW YORK, March 7 (Reuters) - PepsiCo Inc. PEP.N , the maker of Frito-Lay snacks, Pepsi-Cola drinks and Quaker cereals, said on Friday it expects pension and retiree medical costs to jump this year and that foreign currency fluctuations could hurt its results in the future.

The company also said there was no assurance it would be able to pass price increases on items such as ingredients, packaging materials and fuel along to its customers in the future. PepsiCo, in its annual filing, added, however, that when it decided to pass along price increases in the past, it has done so successfully.

The company said operations outside of the United States generate 34 percent of its net sales, of which Mexico, Britain and Canada contribute 19 percent.

Last year, the impact of declines in the Mexican peso "were substantially offset by increases in the British pound and the euro," the company said in its filing.

"If future declines in the Mexican peso are not offset by increases in the British pound and the euro, our future results would be adversely impacted," PepsiCo said in the filing with the U.S. Securities and Exchange Commission.

PepsiCo, like many other companies, is facing increased benefit costs. The company said it estimated pension expense for 2003 will be about $160 million, up from $111 million in 2002. It forecast retiree medical expense at about $120 million in 2003, up from $88 million last year.

The Purchase, New York-based company, which bought Quaker Oats Co. in August 2001, also said it expects to incur additional costs of about $50 million in 2003 to complete the integration of the two companies.

PepsiCo said that in 2002 it recorded a net loss of $5 million on the sale of the Quaker Foods North America bagged cereal business and the Frito-Lay International food businesses in Colombia and Venezuela.

PepsiCo said its pension assets include about 5.5 million shares of PepsiCo common stock with a market value of $202 million in 2002. In 2001, it had 4.7 million shares with a market value of $227 million. The company said its investment policy limits the investment in PepsiCo stock to 10 percent of the fair value of plan assets.

Shares of PepsiCo fell 10 cents to $37.50 Friday morning on the New York Stock Exchange, after falling as low as $37.02 earlier in the session. The shares hit a 52-week low of $35.15 in July 2002.

sg.biz.yahoo.com Friday March 7, 10:37 PM

CARACAS -(Dow Jones)- A million Venezuelans, or about 10% of the workforce, will lose their jobs this year, said Manuel Cova, the secretary general of Venezuela's Fedecamaras labor group, according to a report Friday in local daily El Nacional.

Cova blamed the problem on political instability combined with plunging confidence in the country's judicial system - both of which deter investment necessary for job maintenance and creation, according to the report.

Cova couldn't be reached for further comment.

The comments come on the heels of the biggest industry chamber, Conindustria, saying unemployment will rise as high as 27% as more businesses cut production of goods subject to price controls the government recently introduced.

Unemployment currently stands at about 17%, according to the government, with the informal sector accounting for just over half the workforce.

Anything from street vendors to household servants and even small businesses with up to five employees make up the segment, which consists of unregistered workers who don't pay any form of taxes.

The government's unemployment figures are significantly lower than private estimates that put it as high 20%. Analysts have attributed the difference to polling methods.

El Nacional Web site: www.el-nacional.com

-By Jehan Senaratna, Dow Jones Newswires; 58212-564-1339; jehan.senaratna@dowjones.com

www.thetrucker.com

WASHINGTON -- Members of the truck stop and travel plaza industry said March 6 that they welcome any investigation into fuel price gouging but that no prior investigations have ever turned up "evidence of gouging or price-fixing."

The statement was in response to a letter sent by the American Trucking Associations to the attorneys general of all 50 states asking them to be alert to diesel price gouging in their respective states.

Natso, the organization of truck stop and travel plaza operators, said in a press release that attorneys general should "heed" the fact that "crude oil prices are hovering at two-year highs" and that a barrel of crude sells at $36, double what it was last year.

The Natso release also noted that winter weather this year "has been 30 percent colder than 2002" and that home heating oil and truck diesel come from the same source.

"We'll watch with bated breath for the trucking industry's mea culpa when the weather turns warmer and the war and political instability in Venezuela ends," the Natso statement concluded.

In his letter, ATA President and CEO Bill Graves warned of the impact the industry's "skyrocketing" fuel prices were having and asked the attorneys general "to be vigilant of potential diesel fuel price gouging .... This will be especially needed if and when there is a war with Iraq."

Graves said that the current fuel prices are bad enough without "opportunists making it worse."

-- The Trucker Staff March 7, 2003

www.commondreams.org Published on Thursday, March 6, 2003 by the Associated Press by H Joseph Hebert   WASHINGTON - President Bush's decision after the Sept. 11 terrorist attacks to aggressively boost the federal emergency oil stockpile contributed to a huge decline in commercial oil stocks and caused energy prices to soar, says a study by Senate Democrats.

The report released yesterday said that the diversion last year of 40 million barrels of crude into the Strategic Petroleum Reserve required refiners to dip into their commercial inventories at a time when markets already were tight and production by the Organization of the Petroleum Exporting Countries was being reduced.

"We're confident this had a significant impact on the price of oil in 2002," Sen. Carl Levin of Michigan, the ranking Democrat on the subcommittee and its chairman last year.

Energy Secretary Spencer Abraham rejected the notion that the government's decision significantly affected energy prices. He said the amount was too small to have an impact.

"The principal issue here is national security and we believe and continue to believe that enlarging the amount of emergency reserves we have in the strategic reserve is very important to America's energy and national security," said Abraham.

A department spokesman, Joe Davis, added that the reason inventories dropped was OPEC's decision to cut production in early 2002, a decline in Iraqi oil exports and losses of oil from Venezuela last December. As for oil that went to the SPR, "we're talking about a drop in the bucket," said Davis.

Some critics also have said taxpayers have lost million of dollars because of oil acquisitions for the reserve during periods of high prices. While the government does not technically buy oil, it accepts oil in lieu of royalty payments on oil pumped from federal land.

At 100,000 barrels a day, filling the reserve when crude was selling at $30 a barrel rather than $20 a barrel cost taxpayers $1 million a day in lost royalties, the Levin report said.

During 2002, when oil was diverted steadily into the strategic reserve, oil prices climbed steadily from the low $20s early in the year to over $30 a barrel by September. After easing a bit, prices soared again toward the end of 2002, remaining largely above $30 a barrel as crude inventories tightened. War jitters have caused prices to continue their climb this year, recently passing $37 a barrel before retreating modestly.

The department reversed course on filling the reserve last December, with Venezuelan oil production halted and commercial inventories extremely low, and suspended delivery of oil to the SPR from December through March. On Tuesday, it said April deliveries also would be deferred.

Levin said such a decision should have been made a year ago, arguing that the reserve already has plenty of oil to meet emergency needs. Currently there are 600 million barrels of crude - equivalent to four months of oil imports from the Middle East - stored in salt caverns on the Gulf Coast.

Before December, oil company requests for deferrals of deliveries to SPR were routinely denied, the report said.

Internal DOE documents indicated that career officials involved in the SPR program cautioned that private oil inventories could suffer, leading to higher prices.

"Commercial petroleum inventories are low, retail product prices are high and economic growth is slow," said one memo from a senior SPR official in late May of 2002. "The government should avoid acquiring oil for the reserve under these circumstance." Such purchases "would be difficult to defend," he continued.

A reduction in private oil inventories equal to amounts put into the SPR "could have a substantial price impact," said another memo, obtained by Levin's subcommittee.

John Shages, a director of policy for the SPR program, expressed his concern last June that filling the reserve could significancy impact private crude stocks and force up prices.

He characterized the SPR diversions as potentially "a powerful 30 million barrel reduction of private inventory over 10 months" if the oil is not replaced by OPEC or other producers. "Come December ... we will have higher prices, nervous traders, a more confident OPEC..."

Commercial crude inventories declined from 310 million barrels to 280 million barrels during 2002 and another 10 million barrels early this year. Energy economists have cited the low inventories as a key reason for the sharp price increases of crude as well as gasoline and heating oil.

In April 2002, a BP executive repeatedly sought to have a scheduled delivery to the SPR postponed, according to e-mails obtained by the Senate investigators.

"Oil prices keep rising," wrote James Dyer to Michael Waggoner at the SPR office. "As of this morning we calculate a year's deferral would be worth an extra 750,000 to you," Dyer wrote, referring to the premium in barrels that BP would agree to pay for later delivery.

But the department said no.

In October, Marathon Ashland Petroleum asked to defer its scheduled shipment to the SPR because a hurricane had kept oil from getting to its Louisiana refinery and it needed all the crude it could get. The refinery had "nearly depleted all its crude oil working inventory," wrote Marathon Ashland's Daniel Pears to Waggoner.

His request was also denied.

www.forbes.com Reuters, 03.07.03, 9:07 AM ET By Neil Chatterjee LONDON, March 7 (Reuters) - Diesel pump prices have started to go up in Europe with further hikes expected after the wholesale market traded at post-Gulf War highs this week, industry experts said on Friday. This means larger fuel bills for both motorists and hauliers, who are already suffering from higher costs as prices have been boosted in the past few months by fears of war in the oil-rich Middle East. "There's a genuine shortage and I think motorists are definitely going to be paying more starting from next week," said Ray Holloway of the UK Petrol Retailers Association. In Germany, Europe's largest consumer of motor fuels, oil major Shell <SHEL.L><RD.AS> lifted its diesel pump price by three euro cents on Thursday, to a minimum of 94.9 euro cents ($1.05) a litre, as a direct result of this week's wholesale jump. Dieter Gripp of the Hamburg-based European Oil Telegram said that although German retail competition and the strength of the euro currency could limit pump price hikes, businesses buying diesel wholesale would be hit by the extra costs. On Friday oil major TotalFinaElf <TOTF.PA> bought a standard diesel cargo at an all-time record premium of $105 a tonne over April IPE gas oil futures, giving a full price of $412 a tonne -- a jump of 54 percent from the start of the year. Total traders say they need to pay up at massive premiums in the face of European shortages of the motor fuel and of tankers to carry it.

STOCKING UP Meanwhile some dealers say refiners in Spain, Germany and Italy have been told to build up their compulsory diesel stocks ahead of a possible U.S.-led war with Iraq, the world's eighth biggest oil exporter. French diesel prices have not seen any fresh hikes linked to the latest price surge but have already gone up six euro cents this year to 88 euro cents a litre as underlying futures prices have surged on war speculation. War fears and a three-month old strike in Venezuela, the world's fifth biggest exporter, have also pushed European gasoline prices up since the start of the year, with further rises likely. In the UK, diesel prices have risen this year to an average of 79.5 pence ($1.28) a litre, with this week's wholesale surge and poor retailer margins meaning experts expect a hike of two pence a litre next week. "We're in a pincer movement, because of shortages in the Middle East and in the U.S.," said Holloway. He said military demand was soaking up supply from the Middle East, while in the U.S. inventories had dropped following the Venezuelan strike, a major programme of U.S. refinery maintenance and strong heating oil demand amid a cold spell. U.S. industry data this week showed a 3.5 million barrel drop in gas oil stocks last week, which includes heating oil, diesel and jet fuel, leaving them 34.6 million barrels or 26 percent below this time last year. The U.S. Energy Information Administration said on Thursday that commercial oil stocks were likely to remain near the lower end of a 5-year average through 2003.