www.galvnews.com By Laura Elder The Daily News Published March 16, 2003

As gasoline prices resume their upward march, League City business owner James Barry has to make a tough decision: Cut into profits or pass fuel costs on to customers. “Our strategy at present is to hold the line,” said Barry, president and founder of League City-based Doctor Cool & Professor Heat, a heating, ventilation and air conditioning company with eight trucks that need constant fueling. “I’m a member of Air Conditioning Contractors of America, and we speak back and forth about costs. Some of them are adding a fuel charge but at present, we don’t expect to.” Absorbing the rising fuel cost has to hurt. The bill to fill up his fleet has risen 25 percent compared with last year, Barry said. In January last year the company paid $456 to gas up trucks. This year, for the same month, Doctor Cool paid $570. Climb And Dwindle While Barry isn’t increasing prices, other companies say they can’t afford to absorb fuel costs much longer if pump prices continue to rise. And that would mean a double whammy for consumers, who are watching their disposable income dwindle with every gas price uptick. This week, after a short period of relative stability, the price for a gallon of regular, unleaded gasoline jumped to $1.609 in the area, which is 2.1 cents higher than last week’s level. The Texas average is $1.608, which is 2.1 cents higher than last week’s prices, six cents above the price last month and 43 cents higher for the same period last year. “Consumer demand for gasoline remains high, and inventories of oil and gasoline are very low,” said Carol Thorp, spokeswoman for the American Automobile Association. “Unless consumer demand goes down, it’s likely we’ll see higher pump prices for the next few weeks.” Gas prices closely track oil prices, which have been pushed up sharply in recent months (up more than 50 percent since mid-November) by generally falling commercial crude oil inventories in the United States, a colder-than-normal winter in the U.S. Northeast, which spiked demand, and continued fears that a war with Iraq could disrupt Middle Eastern oil supplies, say officials with the Energy Information Administration, an agency of the U.S. Department of Energy. Global Cause, Local Effect Consumers and businesses are getting a hard lesson in how global politics can cut into the bottom line. Vivian Dollar, a Pasadena resident who commutes to her League City job in a Mercury Mountaineer, said that before gas prices climbed, she was spending about $22 to fill the tank of her SUV. Now it costs about $30. “There’s nothing to do except complain, and no one is listening,” Dollar said. “You can’t give up going to work. As long as war is hanging over our heads, nobody really knows what to do.” War And Strife Oil markets fear that a U.S. war with Iraq, while Venezuelan oil exports remain far below normal levels, could strain the world’s existing spare oil output capacity (estimated at 1.5 million to 2 million barrels a day) to its limit, say EIA officials. Nearly all the excess capacity is in OPEC member countries, particularly Saudi Arabia (800,000 to 1.3 million barrels a day), the United Arab Emirates (350,000 barrels a day) and Qatar (110,000 barrels a day), all of which are located in the Persian Gulf. The International Energy Agency, the watchdog for major consuming countries, has said that OPEC lacks enough capacity to compensate quickly should there be a loss of Iraqi and Kuwaiti oil. In its monthly report, the IEA stated that the global oil system was “running on empty” and that a further supply disruption would “tax a system running close to capacity.” But Saudi Oil Minister Ali al-Naimi has said repeatedly he was confident OPEC and Saudi Arabia would deliver more oil in case of war in Iraq, say EIA officials. The Venezuelan Factor So far, mediation efforts have failed to resolve a strike in Venezuela, now in its fourth month. A prolonged strike in that country was meant to topple President Hugo Chavez. More than one-third of workers at Petroleos de Venezuela, the state-run oil company, were fired since the beginning of the strike, and won’t be rehired, Chavez has said. Venezuela is the fourth-largest supplier of crude oil to the United States. Iraq is the world’s eighth largest oil exporter. Big Shipment Crude oil prices fell Friday on reports that Saudi Arabia’s state-run oil company, Saudi Aramco, had chartered supertankers to carry an exceptionally large shipment of crude — 28 million barrels — to the United States for delivery in May. April contracts of U.S. light sweet crude tumbled by more than $2 a barrel Friday in New York before rebounding somewhat to close at $35.38, down 63 cents from Thursday’s close. Thinking About Rethinking Sandra Strickland, a manager at League City’s Galey’s Florist & Gifts, said eight out of 10 orders include deliveries. Galey’s has one van, and gives the driver about $40 to fill the up the vehicle’s tank twice a week. But that fuel allowance doesn’t stretch too far these days, Strickland said. As it stands, the florist charges about $7 for local delivery. And like Barry, Strickland doesn’t want to pass on fuel costs to customers. Two years ago, when refinery outages around the nation caused tight gasoline supplies to push up pump prices, Galey’s did raise delivery fees. If gas prices go much higher, the floral shop may have to again seek relief. “Every morning it seems like the gas prices are a little higher,” Strickland said. “If it gets to $1.75 a gallon, we’d have to rethink.” Debbie Roberts, owner of Stafford-based Executive Mail Couriers, does a lot of business with The University of Texas Medical Branch and Shriners Burn Institute. The courier transfers skin tissues to the institute at least twice a week. Executive Mail Couriers subcontractors have to pay for their own gas. “They’re screaming,” Roberts said. Two weeks ago, the company increased prices by 20 percent to help the drivers, charging $76 for a Houston to Galveston delivery. Pain At The Pump With nine shuttle vans and five minibuses traveling to both Houston airports daily, Galveston Limousine Service is feeling the pain at the pumps. Dispatcher Pat Kitchell has instructed drivers not to leave a airport without passengers, and to fill the shuttle vans to capacity. Galveston Limousine hasn’t raised its prices, Kitchell said. “We try our best to stay competitive with other markets,” he said.

www.recordonline.com March 16, 2003    New York Times News Service    Washington – Alan Greenspan, the Federal Reserve chairman, has said for months that the biggest weakness in the economy is anxiety about "geopolitical risks" – namely the threat of war in Iraq. Once that is "resolved," he has said, confidence should rebound and growth should resume to more normal levels.    But as the Iraq debate has dragged on longer than expected and the economic news has become worse, Greenspan is coming under increased pressure to reduce interest rates when the Fed's monetary policy committee meets Tuesday.    The drumbeat of bad news – the economy lost 308,000 jobs in February, retail sales slumped more than expected and oil prices surged to nearly $40 a barrel before easing back – has heightened fears that the economy is suffering from more than just war jitters and has increased speculation among investors that the Fed may lower interest rates.    Most analysts say the Fed is much more likely to stand firm on Tuesday. Rather, they say, the central bank is likely to warn that the risks of a slowdown have increased and that it will "closely monitor" events.    That would be a signal of its readiness to pump money into the economy quickly, without waiting until the next scheduled meeting of the Federal Open Market Committee, if a potential war with Iraq went worse than expected or if confidence failed to bounce back afterward.    "I don't think there is much chance of a rate cut next week," said Diane Swonk, chief economist at Bank One in Chicago. "Greenspan has been pretty clear that he thinks Iraq is the major disturbance in the economy."    Thus far, neither Greenspan nor any other top Fed official has hinted at a willingness to cut rates immediately. Indeed, Greenspan went so far as to say at a congressional hearing last month that he saw no need for stimulating the economy through special tax cuts like those proposed by President Bush.    But if Greenspan does not push for lower interest rates on Tuesday, economists say, it will probably not be long before he does, perhaps before the next policy-setting meeting in May.    Richard B. Berner, an economist at Morgan Stanley, said the economy was suffering from more than just the paralysis caused by war anxiety.    "The big story is the energy situation," he said. Higher oil prices stem not only from concerns about the loss of Iraqi crude oil, Berner said, but also from drop-off in production from Venezuela after a national strike, low inventories in the United States and limited additional production in the major oil-producing countries.    Greenspan has long paid close attention to oil prices, and Fed officials are well aware that big surges in oil prices have been followed by recessions in the 1970s, 1980s and after the Persian Gulf War in 1991.    But some Fed officials have suggested that the current jump in oil prices may be less threatening than it seems. Ben S. Bernanke, a Fed governor, contended in a speech last month that previous recessions were driven less by high oil prices than by the Fed's reaction to them.    "My reading of the evidence suggests that the role the conventional wisdom has attributed to oil price increases in the stagflation of the 1970s has been overstated," Bernanke said. The real problems, he said, stemmed from deeply rooted inflationary expectations at the time and the Fed's decision to tighten monetary policy in response to the surge in oil prices.    Today, analysts say the Fed has much more latitude – and the markets know it. Inflation expectations are so low right now, sometimes bordering on worries about deflation, that most economists believe the Fed can cut rates without igniting inflationary fears.    At the same time, analysts think Greenspan has good reasons to be cautious. The biggest one is that the federal funds rate on overnight loans between banks is already at 1.25 percent, and monetary policy moves into uncharted territory if the rate drops to zero.    If the Fed were to lower rates next week, it would have less ammunition to stimulate the economy if a war with Iraq turned out to be more costly and protracted than expected. Greenspan has said the Fed can stimulate the economy even if overnight interest drops to zero, by buying Treasury securities. But the Fed has almost no experience with that approach.

pacific.bizjournals.com March 15, 2003  Howard Dicus   Pacific Business News

Oil prices are rising because of things that might happen, not because there isn't enough oil now. The Middle East Economy Survey reported Saturday that members of the Organization of Petroleum Exporting Countries produced 27.88 million barrels of oil per day last month.

The means OPEC output ballooned 8.6 percent despite the fact that one of its major members, Venezuela, still isn't back to 100 percent of its normal production as it recovers from a general strike in December. Venezuela did recover more of its production in February, however, while Saudi Arabia and Kuwait pumped a lot more.

Gulf states as a whole, not counting Iraq, boosted production last month by 10.1 percent. Iraqi production, which has been higher than usual in recent months, fell 0.95 million barrels per day in February because of an interruption in tanker truck shipments through Turkey. Saudi Arabia alone pumped enough extra oil to make up for 90 percent of the slippage in Iraqi production.

Gasoline prices are above $2 in most locales on Hawaii's neighbor islands, though self-serve regular remains at $1.90 or slightly below at many gas stations in Honolulu, where competition is greater.

washingtontimes.com

     CARACAS — Venezuelan President Hugo Chavez threw a magnificent wedding for his daughter yesterday, with a cake big enough to serve 1,000, including Cuban leader Fidel Castro, who is reported to have declined his invitation.      Venezuela's press has dubbed it the "revolutionary wedding," after the president's leftist politics.      Rosa Virginia Chavez, who appears at her father's side more often than the first lady, was married to the defense minister's nephew Pedro Manuel Prieto in a 19th-century chapel on the grounds of the Miraflores presidential palace in Caracas.      Rosa Virginia is the second of Mr. Chavez's four children from two marriages.

www.news-star.com Story last updated at 12:21 a.m. Sunday, March 16, 2003 By APRIL WILKERSON SNS Staff Writer

Logical thinking and education are the best tools investors can use in the face of a potential war, investment representatives say.

The Shawnee Edward Jones office offered a program Tuesday titled "War, Terrorism and Your Investments." Retired Army Gen. Barry McCaffrey was interviewed during a remote broadcast, followed by Alan Skrainka, chief market strategist for Edward Jones.

People worry about their investments when there is a crisis or threat of war, Skrainka said. But if history is a guide, confidence in the market will be restored if there is a war with Iraq, he said.

"Fear and uncertainty pushes the market down," he said. "The lesson is that it's almost always a mistake to panic sell."

Rather, people should stay focused on the things they can control: quality of investments, diversity of portfolio and their emotions. The market has endured war before, and it will bounce back again, he said. People should not make major changes in their portfolios.

Skrainka gave several recommendations for wise investing. Stocks that pay dividends are quality choices, he said. When the market fell 22 percent in recent years, stocks with dividends fell 11 percent, compared to a 30 percent drop for others, he said.

Investing in defense contractors and other companies in the business of war is not a good idea, Skrainka said.

"I don't think it's time to load up on defense stocks," he said. "Don't try to profit from short-term events."

Oil prices are at a 12-year high, but the cost can go down as quickly as it's gone up, Skrainka said. The strike in Venezuela, a cold winter and the threat of war have pushed up prices, he said, but the world is not running out of oil.

"People hear scenarios of what can go wrong, but it's a mistake to assume the worst-case scenario," he said. "We will get through it, and confidence will be restored."

McCaffrey was interviewed on the broadcast by Connie Silverstein, a member of the Edward Jones management committee. McCaffrey talked about the possible war, other countries' feelings about it, as well as security in America. McCaffrey commanded the 24th Infantry Division during the Gulf War, has served as the U.S. Drug Czar and teaches national security studies at West Point.

Iraq will be disarmed in the next 30 days, one way or another, McCaffrey said. A military effort would be quick, he said, and changes in weapon technology, such as night vision, will make a difference.

McCaffrey said troops are aware that support for a war is not universal. They will do their job regardless, he said, but it is the leadership who is more concerned about lack of support.

McCaffrey cited several countries, like Saudi Arabia and Turkey, who are providing "quiet support."

McCaffrey responded to questions about Homeland Security, saying progress has been made since Sept. 11, 2001.

"Five years from now, we will be immensely better off than a year ago," he said. "In the meantime, we have a big job. But we're starting to make serious inroads."

Increased border control, global cooperation for the war on terrorism, and public education are positive steps, McCaffrey said.

The nation's color-coded alert system gives the public more information on being prepared, which is good, he said, although he cited calls for duct tape and plastic as "alarmist nonsense."

McCaffrey said he doesn't believe a war with Iraq would trigger terrorism in the United States. Al-Quaida groups are on the run, he said, and strategies are being devised for each type of foreign threat.

Tuesday's program was part of the Edward Jones investor education series. Local investment representatives are Jim Smith, Jody Smith and Pam Richardson.

April Wilkerson may be reached at awlkrson@news-star.com or 214-3926.