www.cw.ua.edu By Heather Henderson Senior staff reporter March 12, 2003

In self-serve gas stations across Tuscaloosa, signs advertising prices of $1.59 and up for regular unleaded gasoline demonstrate a nationwide trend.

According to a Lundberg Survey, the past two weeks have seen gasoline prices throughout the country rise an average five cents per gallon, with some areas, such as Los Angeles and San Francisco Bay exceeding $2 per gallon.

At the Pit Stop gas station on University Boulevard, regular unleaded gasoline prices rose from $1.54 at the beginning of March to $1.59 last week.

Factors contributing to the price inflation include a continuing workers' strike in Venezuela combined with talks of war with Iraq, said Dr. Peter Clark, associate professor of chemical engineering.

The Office of Petroleum Exporting Countries March quota for Venezuela is at almost 3 million barrels per day, the third largest OPEC quota.

"If the oil market in Venezuela would go back to normal, we'd be in good shape anyway," Clark said. "Until Venezuela started having their problems, we only got a small percentage of our oil from the Middle East."

However, the United States and Europe now rely heavily on Middle Eastern oil fields.

According to OPEC statistics, Saudi Arabia exports almost 8 million barrels per day, Iran is second with about 3.5 million barrels per day and Kuwait exports nearly 2 million barrels per day. Iraq, due to sanctions, produces about 2.3 million barrels per day, according to a CNN report.

The current rise in gasoline and oil prices, in all markets and levels of trading, has been influenced not only by a change in supply and demand, but also by fears of war, Clark said.

"Prices will rise during periods of uncertainty," Clark said.

No single person or company sets the price of oil. Instead, prices are controlled by supply and demand and to some degree by the oil futures price set by auction in trading markets like the New York Mercantile Exchange, he said.

If the majority of suppliers and buyers feel there may soon be an oil shortage, suppliers will ask for more and buyers will pay more for the product. As a result, when the president started talking about war with the Middle East, prices rose even more, Clark said.

If war becomes a reality, Clark said gasoline prices will depend on how much collateral damage Saddam manages to cause.

"If nothing goes wrong, and we manage to pull off the war without damages. The price of gas should drift down a little bit," Clark said.

Clark stressed the importance of protecting not only the oil fields in Iraq, but also in Saudi Arabia and Kuwait.

"If there is damage to the oil fields in Iraq ... there will be a little damage to the market, but not huge," Clark said. "If Saudi Arabia and Kuwait oil fields are damaged, we'll have a serious problem."

Clark also acknowledged the possibility that countries opposed to war could use their oil supplies as an international bargaining chip, but said the move might prove to be a disadvantage to them.

"While cutting off the U.S. oil supply by might seem like a good way to oppose U.S. policy, the problem that the countries could have in using this as a weapon is that their economy is so tied to the oil revenue that they would hurt themselves as much or more than they hurt us," Clark said.

Next week, OPEC ministers will meet to discuss raising output quotas to meet potential supply problems if war erupts.

"The thing that worries me, there's only a couple of ways this [the war] can go right and many ways this can go wrong," Clark said. "All the wrong ways will end up costing us a lot of money."

www.gomemphis.com By Jane Roberts robertsj@gomemphis.com March 12, 2003

An airline industry trade group predicts "chaotic industry bankruptcies" if war in Iraq cannot be avoided.

In a report designed to encourage Washington to grant as much as $9 billion in tax relief and other financial aid, Air Transport Association president James C. May said that even though airlines have slashed costs since 2001, a war will hurt them further.

"The prospect of a forced nationalization of the industry is not unrealistic," May said. "It would be a last-ditch effort, but it is not impossible."

Under a "most likely Iraqi war scenario," May outlined a host of grim assessments, including that the workforce - already down 100,000 workers since 2001 - would be cut another 70,000.

He predicted that flights would drop by 9.5 percent - or 2,200 a day - and that in a war that lasted 90 days, passenger load for the year would drop by 52 million people - more than in the 1991 Gulf War.

Fuel costs will only rise, May said, due to a low inventory heightened by the strike in Venezuela. During a war, supplies from the Middle East would be disrupted.

Darryl Jenkins, head of George Washington University's Aviation Institute, said those forecasts are reasonable but that Congress is unlikely to help any distressed industry twice.

Shortly after Sept. 11, 2001, the government reimbursed the airlines $5 billion for revenue lost when the airspace was closed immediately following the attack. It also set $10 billion aside in loan guarantees.

But the requirements were so stringent that very few airlines were eligible beyond those in bankruptcy, said Larry Cox, president of the Memphis-Shelby County Airport Authority. Less than $1 billion was used.

Steve Hansen, spokesman for House Transportation Committee chairman Don Young (R-Alaska), said the size of Congress's previous industry bailout dampened lawmakers' appetite for giving the airlines the tax cuts they say they now need. "It's not to downplay the problems the aviation industry is having, but at what point do you set a limit to how much you can give to one industry?" he said.

ATA represents most major passenger and cargo carriers.

Asked about May's nationalization scenario, ATA spokesman Michael Was com said, "We hope it never comes to that. But in these tough times, we risk the industry ceasing to exist as we know it today without some intervention."

Cox said that nationalizing aviation "will be like the post office running the airlines. I don't believe that is in the best interest of the United States.

"I certainly have to agree that the future in aviation, even without war, looks bleak," Cox said. "Obviously, there are going to be some major impacts. It's hard to gauge how deep and how long they would last, but it certainly is not good."

Cox and Wascom said the government could start helping the airlines by reducing their tax load.

"The airlines are the most taxed industry in the United States. They are taxed more than cigarettes, more than alcohol," Cox said.

One option would be a tax holiday - from the start of the war to one year after it ends - from six taxes airlines pay into a trust fund. The taxes include user fees on cargo and passengers, a $2.50-per-passenger security surcharge and a 4.3-cent-a-gallon jet fuel tax. That would save the airlines about $9 billion.

Cox and Wascom also cited security and other regulatory costs the airlines have had to absorb since Sept. 11, 2001 - about $4 billion worth. "For an industry that supposedly was deregulated in 1978, it isthe most regulated deregulated industry in the nation. They certainly need to remove the unfunded mandates,"Cox said.

Security measures alone cost Northwest Airlines, the major carrier at Memphis, $40 million to $60 million a year, Cox said. Screening the catering services costs NWA $11 million, he added.

Plus, Cox said, Northwest and other airlines are being penalized because they cannot carry U.S. mail under the heightened security, but they must offer federal air marshals room in first class.

Wascom suggested that the government take over passenger and property screening, and intervene with insurance coverage, perhaps by extending permanently a policy it offers now through the FAA.

Jenkins, Aviation Institute director, said the industry needs long-term restructuring. "I'd rather see that happen than government get involved" by nationalizing the airlines.

• Jane Roberts: 529-2512

sg.biz.yahoo.com Wednesday March 12, 8:33 PM (This article was published earlier Wednesday.) By David Bird Of DOW JONES NEWSWIRES

VIENNA (Dow Jones)--"Iraq" and "war" are the words on everyone's lips at the OPEC meeting here, but they aren't found in the group's official communique.

Dancing around the elephant in combat boots in the middle of the room, ministers instead referred to "prevailing geopolitical tensions" in their deal to keep current production policy in place as war approaches.

As with the flowery language employed by the Organization of Petroleum Exporting Countries in its press statement, the group's action itself masks an extremely difficult time for producers, who admit they're powerless to exert much influence over fear-fueled oil prices.

OPEC took the only decision politically acceptable to all its members, officially keeping its 24.5 million b/d output ceiling in place, while pumping as much as they dare amid the current turbulence.

OPEC's President Abdullah bin Hamad al-Attiyah recently acknowledged in his own unique way that ministers don't turn a blind eye to quota violations, but instead watch members' output levels with "one eye open and one eye closed."

In reality, minister have one eye on the rancorous debate at the United Nations Security Council and the other on the massive military buildup in the world's biggest oil patch.

Too Much Or Too Little?

As a quarter-million U.S. troops aim their gun barrels at Iraqi President Saddam Hussein, OPEC can find itself in the blink of an eye supplying far too few or far too many oil barrels to the market.

Ministers shot down a proposal from Saudi Arabia, the only producer with significant spare production capacity, to essentially abandon output restraints amid the war fervor.

Iran led the opposition, on public concerns that OPEC could be seen as giving the green light for a U.S.-led attack on Iraq, by acting in advance to cover exports that could be lost in a war.

But the position of Iran and its allies spoke as much about bad memories of painful efforts to cap runaway production in the past.

"We don't want a one-way ticket to Jakarta," a senior delegate said, referring to the price crash sparked in the Indonesian capital in late 1997 when OPEC misread the market and caused a glut.

OPEC is adding to market anxiety by keeping its capacity figures private, estimating them at a total of 2 million to 4 million b/d. But some independent assessments put them at just 1.5 million b/d, excluding Iraq.

Despite stunted output from Venezuela, still recovering from an oil-workers' strike, OPEC estimates first-quarter output will average 26.4 million b/d, or 1 million b/d over expected demand.

March output - including Iraq - looks to be close to 28 million b/d, compared with demand of less than 23 million b/d. Even if Iraq's 2.4 million b/d is lost and some 700,000 b/d of Kuwaiti supplies are temporarily cut, the flow could be about 2 million b/d over demand.

No Additional Oil From The Saudis?

That's a key reason why Saudi Arabia, while claiming production capacity of 10.5 million b/d, isn't expected to pump beyond current levels of 9.2 million to 9.5 million b/d, even if the war occurs.

Many in OPEC believe that Iraq's oil flows could be interrupted for as little as two weeks in a war, with the U.S. avoiding damage to facilities and the current U.N. oil-for-food plan providing the administrative structure for continued oil sales.

The Saudis won't divulge their production plans, but Saudi officials have told Western officials they don't want to push output to the long-term capacity peak because they don't believe there will be the need to do so, and because a short-term surge followed by shutting-in of wells could lead to future problems.

OPEC delegates say technical experts believe that such action could damage Saudi reservoirs, by causing pressure losses, resulting in lost production capability of two barrels of crude for every barrel produced.

Still, current high OPEC output may be needed to refill global oil stocks, with commercial crude inventories in the U.S. - the world's largest oil market - at their lowest level in a generation.

But many OPEC delegates believe that only a move by consumer countries in the International Energy Agency to open their emergency stockpiles will cool off prices soon.

In what was billed as a coincidental overlap of business meetings, U.S. Energy Secretary Spencer Abraham was in Vienna Tuesday, where he met Saudi Oil Minister Ali Naimi.

Unprecedented Producer-Consumer Talks

Following that meeting, Abraham praised OPEC for covering supply shortages so far by raising output and was thankful for assurances that the Saudis would do more, if needed.

Abraham said the U.S. won't use its 600-million-barrel Strategic Petroleum Reserve to bring down prices, but wouldn't hesitate to use it quickly as a last resort to avoid a shortage.

The unprecedented high-profile talk of top oil representatives from the world's biggest producer and the world's biggest consumer, on the sidelines of an OPEC policy meeting, speaks volumes about the shared concerns over the precarious market situation.

Both Naimi and Abraham believe a sharp drop in oil prices is in both their countries' best interests.

"High prices definitely have a negative impact on demand," Naimi said, while in the U.S. retail gasoline prices are just pennies from a record high and diesel fuel at the pumps have set consecutive all-time high prices in the last several weeks.

OPEC set its next meeting for June 11 in Doha, Qatar

www.falkland-malvinas.com

Experts from Mercosur and other South American countries agreed that without a joint effort and common objectives it will be hard to eradicate foot and mouth from the continent, a cattle disease that causes terrible losses to beef exporting countries of the region. During a meeting in Santiago de Chile sponsored by the Chilean Agriculture and Livestock Service, participants from Argentina, Brazil, Bolivia, Colombia, Ecuador, Guyana, Paraguay, Peru, Uruguay, Venezuela and the host country agreed that “eradicating FAM was urgent and top priority. The disease is alive and latent and its impact can generate terrible blows to the local economies”. Chilean delegate Carlos Parra revealed that Argentina and Chile are considering the possibility of satellite surveillance along the border to impede cattle smuggling. An operation that if successful would then be extended to other sensitive areas. Uruguayan delegate Recaredo Ugarte indicated that unless targets and objectives are not clearly defined, and simultaneously, “we will be leaving open gaps that will not ensure a successful end to the FAM eradication battle”. The meeting was held in the framework of the annual assembly of the South American FAM Office that depends from FAO.

washingtontimes.com March 12, 2003 James Morrison

     A former prime minister of Lebanon, who called his country the "first victim of terrorism," believes the only way to stop terrorists is to crush regimes that "teach people to hate and kill."

     Michel Aoun, on a recent visit to Washington, called terrorism a "safety valve" for the dictatorial regimes that support such activity to divert attention from the failure of their own policies.

     "If we are to effectively fight terrorism, we have to understand that it is inseparable from the regimes that harbor it," he told a forum of the Foundation for the Defense of Democracies.

     "Terrorism is a internal safety valve for these regimes and a key instrument of their foreign policy applied as blackmail to others. Therefore, the eradication of terrorism must by necessity begin with the toppling of non-democratic regimes that teach people to hate and kill and that push people to acts of suicide," he said.

     Only democratic governments can bring freedom and respect for human rights, said Mr. Aoun, a Christian Lebanese who was forced from power by Syrian occupation forces in 1990 and now lives in Paris. He, however, noted the "magnitude of the difficulties" involved in promoting democracy in countries that have never known freedom.

     "That ... seems to me to be much harder to achieve than victory on the battlefield, the outcome of which can be sealed in days or weeks," he said.

     "Indeed, democracy is not an infrastructure that one builds in a few months. ... And it cannot be achieved through a simple voting exercise. It is first and foremost an education of concepts.

     "That is why any regime change must be accompanied by a fundamental change in the system of education to facilitate the learning of new concepts and applying them to public life."

      Mr. Aoun also said economic assistance must follow regime change.

     "If democracy is the key to liberate the individual from fear, economic development is key to liberate the individual from need," he said.

     Mr. Aoun blamed Lebanon's problems on Syria, a "regime that is the antithesis of democracy." The State Department classifies Syria as a state sponsor of terrorism.

     He also paid "genuine homage" to the Americans killed trying to bring peace to Lebanon in the 1980s, when terrorists killed 63 persons in an attack on the U.S. Embassy in Beirut and 241 American troops in a strike on U.S. military barracks.

     "They came to Lebanon for peace, and real peace must be achieved," he said. "God bless their souls."      

     Venezuela seeks proof

     Caracas is calling on the United States to provide evidence of terrorist finance networks in Venezuela in response to recent comments from the U.S. ambassador there and a top U.S. general.

     "Whoever has evidence of situations like those described must first give them to corresponding authorities," Foreign Minister Roy Chaderton told the Union Radio station in the capital, Caracas, on Monday.

     "That evidence ... could lead to the opening of an investigation. A simple denunciation isn't enough."

     Ambassador Charles Shapiro told reporters last week of his concerns that terrorists have established bases throughout South America. His comments followed similar remarks by Gen. James T. Hill, head of the U.S. Southern Command.      

     U.S. won't punish Israel

     The U.S. ambassador to Israel is denying news reports that Washington is outraged by Israeli security leaks about a planned date for an invasion of Iraq.

     "I don't know where those press reports came from, but they are without foundation," Ambassador Daniel Kurtzer told reporters Monday, after meeting with Israeli Foreign Minister Silvan Shalom.

     The Israeli daily newspaper Ma'ariv, for example, reported that the Bush administration was so angry with Israel that it would withhold information about the actual date of the start of military action.      "The cooperation between our two countries is unbelievably good, and it is unparalleled in the history of our relations," Mr. Kurtzer said. "There's no way we are going to surprise our ally."

     Mr. Shalom on Sunday had a long phone conversation with National Security Adviser Condoleezza Rice, United Press International reported.

To contact James Morrison, call 202/636-3297, fax 202/832-7278 or e-mail jmorrison@washingtontimes.com.