www.accessatlanta.com www.nytimes.com By NEELA BANERJEE

Oil and gas tanks at the enormous Saudi installation at Ras Tanura, on the Persian Gulf. A Saudi official says that if Iraqi oil supplies are interrupted, tankers could be expected to divert and pick up additional supplies there.

Saudi Arabia has amassed a reserve of nearly 50 million barrels of oil that it plans to use to compensate for possible disruptions of Iraqi oil exports if war erupts, according to a senior Saudi official and industry experts who have been told about the supply buildup.

"We have about 50 million barrels, most of it in the country," said the Saudi official, who spoke on the condition of anonymity. "We can tap into it immediately once there is a shortfall."

The Saudi stockpile has been built up over the last three months as oil prices have climbed near their highest levels in years. Calls have increased from various political quarters for the Bush administration to release oil from the United States Strategic Petroleum Reserve, which holds 600 million barrels of oil. So far, the administration has said it will let the Organization of the Petroleum Exporting Countries try to make up for any disruptions before tapping the strategic reserve. OPEC is led in effect by Saudi Arabia, the only country with spare production capacity that can be called on in case of supply disruptions.

"We will make sure there is enough oil in the market," the Saudi oil minister, Ali al-Naimi, said in a statement. "We have plenty of spare capacity."

In New York yesterday, the price of crude oil for April delivery settled at $34.93 a barrel, down 45 cents, on profit taking by traders. During the day, oil traded from $34 to $36.95 a barrel.

Industry analysts said Saudi Arabia probably felt compelled to increase production to back up assertions it has long made that it can take care of problems that buffet oil markets.

"It is in the Saudis' interest to produce oil and store some of it away, and the cumulative effect of that is a substantial reserve," said Lawrence J, Goldstein, president of the Petroleum Industry Research Foundation. "The Saudis know that sustained high prices weaken economic activity, decrease demand and encourage non-OPEC production. They want to see a predictable, stable oil supply."

Iraq has been exporting about 1.5 million barrels a day. The cushion the Saudis have built into their system could make up for about a month's disruption of those exports, although Saudi Arabia does not plan to draw down all 50 million barrels, the Saudi official said.

"The United States consumes about one million barrels a day of Iraqi crude," said Yasser Elguindi, a managing director at Medley Global Advisers, a New York consulting firm. "So I don't think it's by accident that the Saudis have these numbers."

A representative of the Saudi oil ministry declined to comment on the reserve. The Saudi official said that he had told members of Congress about the oil pool and that "the U.S. government is certainly aware of this."

"Our oil people have been talking to the National Security Council," he added.

But he said that Saudi Arabia took this step on its own, without arm-twisting by the White House. "You look around and make plans based on different scenarios," he said. "What if there is a war? So you increase capacity. But how do you tap into reserves immediately? You want to make sure that if there are disruptions, the oil markets are covered. The administration didn't say, `Gee, guys, can you do this for us?' "

A White House spokesman declined to comment last night.

Saudi Arabia is producing about 9 million barrels a day, the official said, or about 1.5 million more than its OPEC quota. The Saudis have about 1.5 million barrels of additional production capacity that they can bring on in less than several weeks, if the need arises, he said. Independent experts have estimated that Saudi Arabia is producing 9.2 million to 9.5 million barrels a day, with an additional one million barrels that can be called upon.

The Saudis have stored nearly all their reserve within their borders, the official said, rather than in installations they have in the Caribbean, Europe and the Far East. Saudi Arabia increased production when a general strike in Venezuela reduced exports from there to a trickle. But prices for oil have climbed so high that foreign companies are buying only enough Saudi oil for their immediate refining needs, not to build supplies, Mr. Elguindi said.

Rather than reduce output, the Saudis have continued to increase and store what has not been bought. Oil that would be shipped from Iraq at this point would reach the United States in about 40 days, and any Saudi oil sent to make up for disruptions would take the same amount of time. "Rather than going to Mina al Bakr, more tankers will come to Ras Tanura," the Saudi official said, referring respectively to an Iraqi oil terminal and Saudi Arabia's largest oil port. "But we're not going to paint the barrels yellow and say, `This is part of the 50 million barrels.' "

The Saudi official warned that despite the reserve and the prospect of OPEC and others producing all out, such preparations would not be enough to fully protect world oil markets from volatility.

"You're not going to have any slack whatsoever in the system if there is a setback in Venezuela, or a strike in Nigeria or damage to Kuwaiti oil fields, or if Saddam blows up his fields," he said. "From the point of view of oil, the timing of this war is just horrible."

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seattle.bizjournals.com From the March 14, 2003 print edition Steve Wilhelm Staff Writer

As fuel prices climb, local transportation companies are trying with varying success to pass the increased costs on to customers.

Both fleet managers and independent operators such as taxi drivers say the increased fuel prices are compounding their problems from the slow economy. Their margins are being squeezed between higher costs and struggling customers who are unwilling to pay more.

"I don't know how much the customer is going to take," said Ed Vanderpol, who is president of Seattle-based trucking company Oak Harbor Freight Lines as well as president of the Washington Trucking Association. His company, with a fleet of 450 trucks, is tacking on to all bills a fuel surcharge of 7 percent, the highest he's ever charged.

"I think there are some carriers out there that are hurting," Vanderpol said. Coming on top of rising workers compensation and liability insurance payments, he said, the higher fuel prices are "killing us."

This week, statewide regular gasoline prices were up 57 percent from a year ago, to an average $1.85 a gallon, while diesel prices were up 54 percent to $2 a gallon, according to the American Automobile Association. The increase results from reduced production in Venezuela, anxiety about a war in Iraq, and stockpiling by oil companies to buttress low inventories. .

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Unlike unregulated cargo carriers such as Oak Harbor Freight, some transportation companies cannot pass on their costs to the customer. Many passenger-carrying companies must have their rates approved by regulators, and any increases are lagging behind the fast-rising fuel costs.

Seattle's 1,500 taxi drivers, who haven't seen a basic rate change since the early '90s, are perhaps the hardest hit. Now drivers are paying $5 to $10 a day extra for gasoline at a time when the recession has deeply slowed their business, they're struggling to make ends meet, and they want to add a fuel surcharge to the basic $1.80 per mile that passenger pay.

One downtown Seattle driver, who asked to be identified only as Hassan, said that some days he only gets four clients, instead of a dozen back when the dot-com economy was booming. He rents a taxi for $50 a day and now must spend another $25 for gas, so some days he only clears $20, or even loses money.

Driver Tom Stull, who drives "nearly every day," said he'd welcome a surcharge. "That would help pay for the gas, of course," he said.

Terry Davis, a driver who is also acting director of the Cab Drivers' Alliance of King County, said his organization will be asking the city to swiftly enact a per-trip surcharge of 50 cents to 60 cents.

"The drivers are hurting. We are independent contractors, and we just cannot raise rates like everybody else can," he said.

Airporter companies, which run vans to Seattle-Tacoma International Airport, are also struggling with the rapid gas-price increases.

John Rowley, vice president and general manager of Seattle-based Shuttle Express Inc., said the Washington Utilities and Transportation Commission on Feb. 25 granted his company a 50-cents-a-person surcharge starting March 1. But additional fuel price increases since then have forced his company to go back for an upward adjustment.

Shuttle Express operates a fleet of 100 Dodge vans and 20 Lincoln Town Cars, consuming 60,000 gallons of fuel a month, Rowley said. He estimated the increased fuel prices are costing his company $20,000 a month.

"We hope the UTC will agree we should be recouping all of that difference," he said.

Unregulated carriers, while free to adjust surcharges as they wish, are constrained by the intense competition for cost-conscious customers.

On March 3 Seattle-based Airborne Inc. added a 5.1 percent fuel surcharge to its express shipments, while Alaska Air Group Inc. has added a $10 per-passenger surcharge for flights not on sale.

Federal Way-based Totem Ocean Trailer Express Inc., which moves ocean cargo between Tacoma and Alaska, in early February filed to increase an existing fuel surcharge to 6 percent of the ocean freight rate, from 5 percent.

Totem's vice president of sales and operations Jeff Keck said he's carefully watching the prices being charged by competing barge and truck services.

Other carriers are being squeezed between opposing forces.

Harbor Freight Lines Inc. on March 1 enacted a 6 percent fuel surcharge to help cover the increased costs of the owner-operators who drive company trailers to Seattle's waterfront to pick up ocean containers. The problem, said operations manager Richard Hill, is that the ocean carriers aren't all willing to pay his company a surcharge to pass along the expense.

"Some steamship lines are offering 5.5 percent, some are offering 2 percent or nothing," Hill Said. The discrepancy is eroding Harbor Freight's margins, but Hill feels he must fully compensate his drivers or risk losing them.

"We do have a bunch of good guys," he said. "The margins are so small for them and for us anyway."

Clipper Navigation Inc. already has added a $1 fuel surcharge each way for the unregulated route between Seattle and Victoria, B.C., and general manager Darrell Bryan plans to double that March 15.

With the company's diesel-driven vessels burning 500 gallons of fuel an hour, and its turbine-driven Clipper IV burning 1,600 gallons an hour, Bryan estimated the increased fuel prices will boost expenses by $700,000 this year. He's already spent more than that on new government-required security-related equipment and infrastructure.

"With increased security costs, added onto increased fuel costs, that will add a lot of challenges for small boat operators," he said.

Reach Steve Wilhelm at 206-447-8505 ext. 113 or swilhelm@bizjournals.com.

news.moneycentral.msn.com March 17, 2003 1:52:00 PM ET By Tom Doggett

WASHINGTON (Reuters) - As a possible war on Iraq looms, the U.S. Energy Department is ready to release oil from the nation's emergency stockpile if needed to counter any disruption in crude supplies, the Republican head of the House Energy and Commerce Committee said on Monday.

A war with Baghdad would shut down Iraq's 1.7 million barrels a day in oil exports. However, there are market fears that military action could also disrupt oil shipments from neighboring Saudi Arabia and Kuwait.

Rep. Billy Tauzin, the Louisiana Republican who chairs the House energy panel, said the Strategic Petroleum Reserve (SPR) was ready to be used if needed.

``Our review with the Department of Energy has convinced me that the SPR is fully operational and capable of releasing crude oil within the parameters required to prevent interruptions in crude oil deliveries to the market,'' Tauzin said in a letter to fellow lawmakers.

``The SPR has, for some time now, transitioned from the 'fill' mode to the 'flow' mode and is prepared to flow upon orders from the president,'' Tauzin said.

Oil markets have been skittish in recent weeks due to the possible war, supply disruptions in Venezuela and skyrocketing prices. Tauzin made his comments in a letter to U.S. lawmakers urging their support to expand the reserve to 1 billion barrels from its current capacity of 700 million barrels.

Congress created the stockpile in 1975 after the Arab oil embargo. It now holds 599 million barrels of crude in underground salt caverns at four sites in Texas and Louisiana.

An Energy Department spokeswoman said she had not seen the Tauzin letter and could not comment on it directly.

'NOTHING NEW'

However, she said there was ``nothing new'' with the administration's position on when and if it will use the emergency reserve.

She repeated comments by U.S. Energy Secretary Spencer Abraham that the administration ``was prepared'' to tap the reserve if there was a severe oil supply disruption.

But at this point we have not made a decision to move on the Strategic Petroleum Reserve,'' the spokeswoman said. We are monitoring the situation very carefully.''

The price of U.S. oil traded at the New York Mercantile Exchange fell on Monday on talk that the United States was ready to release oil from its emergency reserves if war broke out with Iraq.

At 12:40 EST, crude oil for delivery in April was down 83 cents at $34.55 a barrel.

If the administration decided to release oil from the SPR, the reserve's crude could be moved into the market between 10 and 15 days after a drawdown order from President Bush.

A White House spokesman would not say if Bush would include an announcement regarding the oil reserve in his televised address to the American people Monday at 8 p.m. EST.

www.euobserver.com 18.03.2003 - 09:58 CET

DAVID HEATHCOAT-AMORY - "Public expenditure works best when it is carried out as near as possible to those who pay for it, in other words the taxpayer."

EUOBSERVER / SALT&PEPPER - This week the European Parliament will have to decide whether to approve the 2001 accounts. The financial record of the EU is one of waste, mismanagement and fraud.

The Court of Auditors has for eight years refused to sign off the expenditure as properly accounted for. If a public company behaved like this the directors would be sacked or imprisoned.

Yet the European Commission, which is the body responsible, is bidding for even more power in the emerging European Constitution.

Four years ago the whole Commission was forced to resign after an enquiry revealed widespread negligence, nepotism and unchallenged fraud. Little has changed. Employees who speak out are sidelined or sacked. The latest is Marta Andreasen, the EU's former chief accountant.

Last year Ms Andreasen refused to sign the 2001 accounts, "because they were not the right numbers." She demanded a complete overhaul of the accounting system and Neil Kinnock, the administration Commissioner, shunted her into a non-job in the personnel department before suspending her on full pay.

It has now been revealed that Jules Muis, the EU's internal audit chief, supported Ms Andreasen's view of the chaotic and rudimentary accounting system. Moreover Neil Kinnock knew this when he suspended her.

It is characteristic of a rotten system that it deals harshly with 'whistleblowers' who tell the truth, and not with the problem itself.

Unreformable Why is it that the EU budget - now almost €100 billion a year - is out of control? The answer is not just incompetence in the bureaucracy that handles it. This supranational spending machine is unreformable.

Public expenditure works best when it is carried out as near as possible to those who pay for it, in other words the taxpayer.

They can then be sure that they are getting value for money and can take action to correct abuses. The trouble with European expenditure is that it is entirely disconnected from the taxpayer - the chain between payment and results is just too long.

EU budget money exists in a world of its own, swirling around the system before coming back to be spent on various political projects.

Pay the bandits When I was UK Europe minister in 1994 I read an EU audit report which said that sheep premium payments in Greece could not be properly checked, 'because of bandit activity in two provinces.'

I wrote a tongue-in-cheek memo, the present system was inefficient: the public paid taxes to the EU Commission, who passed it to the Greek government, who paid it to the sheep farmers, who passed it to the bandits. Too many middlemen. Why not pay a small sum directly to the bandits and keep the rest?

Since fraud in the Common Agricultural Policy is still a major problem, perhaps my suggestion was not a joke after all.

The EU budget is flawed as a concept. Huge transnational subsidies, politically driven spending projects, remote control systems, and an inefficient multinational bureaucracy.

Enlargement of the EU will add to the problem. It is certain that an extension of these grants and subsidies to countries with generally weak administrative systems will bring more scandals in a few years' time.

If poorer member states are to be helped this should be done by adjustments to the revenue side of the budget, ie by relieving them of some contributions to the budget.

The EU budget needs radical pruning and recasting on an entirely new basis. This is receiving no attention at all in the Convention on the Future of Europe.

Join the debate!

DAVID HEATHCOAT-AMORY - is a member of the Convention on the Future of Europe. He is a former Minister for Europe and has been a UK Conservative MP since 1983.

Written by David Heathcoat-Amory Edited by Andrew Beatty

www.euobserver.com

The Commission warned that oil prices could rise as high as $70 a barrel if the war was to drag out for half a year - up 100% from their current levels. (Photo: Notat) EUOBSERVER / BRUSSELS - A surge in oil prices and diminished consumer confidence are the biggest economic dangers to the eurozone economy in the event of a war in Iraq according to the European Commission.

In an extension of its usual quarterly assessment of economic performance, the Commission, set out a number of scenarios, based on past crises, which could occur if military action takes place.

The Commission warned that oil prices could rise as high as $70 a barrel if the war was to drag out for half a year - up 100% from their current price.

Such a rise in oil prices would have a substantial knock-on effect across the economy.

On the basis of past oil shocks evidence suggests that an oil price increase "pushes up inflation, weighs on real income and profitability and depresses consumption" according to the report.

"Past experience shows that major geopolitical crises can weigh heavily on confidence, especially for households." Klaus Regling, Director General of Economic Affairs told journalists.

Household confidence is already low. "[It] has been falling significantly to levels not seen since 1996." Added Mr Regling.

"Stagnation or recession cannot be excluded."

Written by Andrew Beatty Edited by Honor Mahony