newstribune.com Thursday, March 20, 2003

CARACAS, Venezuela (AP) -- Venezuela insists it will be a reliable wartime supplier of oil to the United States despite sometimes testy relations and a slow recovery from a two-month oil industry strike.

"We are and will continue to be the most secure supplier of oil to the United States," Vice President Jose Vicente Rangel said this week.

His pledge came despite Washington's recent criticism of President Hugo Chavez for arresting strike leaders and obstructing efforts to hold early elections. Chavez told Washington to keep out of Venezuelan affairs.

Others question how soon Chavez's government can stabilize exports after firing nearly half of the state-owned oil monopoly's 40,000 people.

Some customers complain they've had trouble contracting tanker shipments with new personnel. The government isn't releasing export figures. Pre-strike exports averaged 2.5 million barrels a day -- including 1.5 million barrels a day to the United States.

"For the first time in our history, shipping crude to the United States in time of war isn't guaranteed because of Venezuela's internal crisis," said Alberto Quiros Corradi, a former president of Shell de Venezuela.

U.S. Energy Secretary Spencer Abraham has said it could take at least two months before Venezuelan exports stabilize. While its crude quality is lower than many Middle Eastern grades, Venezuela can ship quickly to the United States compared to 40-day tanker shipments from the Middle East.

Market analysts disagree whether war in Iraq will increase or depress prices, disrupt Middle East production or affect low U.S. inventories. Venezuela traditionally has banked on price rises to boost its oil-dependent economy.

Venezuela's opposition, including nearly all oil workers, went on strike Dec. 4 to protest Chavez's handling of the economy and alleged rights abuses and to demand early elections.

Chavez, a former army officer who led a failed coup bid in 1992, was elected president in 1998 and re-elected in 2000 to a six-year term.

The strike failed. Chavez's government claims it has already surpassed its OPEC production quota of 2.8 million barrels a day and can push it to 4 million barrels by April if a protracted war increases prices.

Fired oil executives say production is closer to 2.4 million barrels. Some analysts, meanwhile, said at an OPEC meeting last week they doubted Venezuela's production had recovered so quickly after a low of 150,000 barrels during the strike.

Roger Diwan, managing director of markets at Washington-based PFC Energy, estimates Venezuela is exporting 1.8 million barrels a day and producing 2.4 million barrels a day.

"They've done a good job. They've surprised a lot of people," Diwan said Wednesday. "I never thought they would get up to this level."

Venezuela's ties with Washington have centered on oil since 1914, when the first rig tapped what proved to be the largest reserves outside the Middle East.

Developed in large part with American capital, the oil industry met U.S. needs in both World Wars, the 1973 Arab oil embargo and the 1991 Persian Gulf War. It sided with U.S. interests despite being a founding member of the Organization of Petroleum Exporting Countries and nationalizing the oil industry in 1976.

Chavez, for his part, has been uncharacteristically quiet about the Iraqi crisis. He has concentrated on consolidating control after the nationwide strike, which cost Venezuela at least $6 billion.

Oil is key to Chavez's presidency, generating 80 percent of Venezuela's export earnings and a third of its $100 billion gross domestic product. Venezuela's economy is seen contracting by at least 15 percent in 2003, and a wartime spike in oil prices could provide relief.

www.vheadline.com Posted: Thursday, March 20, 2003 By: Oscar Heck

VHeadline.com commentarist Oscar Heck writes: I do not want to sound alarmist … but I find the need to “get something off my chest”.

As I have mentioned in previous articles, I have no interest in writing about the USA itself. I do however have interest in writing about the USA when I notice that the USA is sticking its nose into Venezuelan affairs.

So, here it goes.

I am in Canada at the moment. A few days ago, Jean Chretien, Canada’s Prime Minister, finally revealed Canada’s stance on Iraq. It was clear. Canada does not support the USA in its declaration of war on Iraq without UN approval. Chretien also mentioned that Canada will not send troops to assist the USA. (Surprise?). A poll was carried out shortly thereafter reflecting that 80% of Canadians are in agreement with Chretien.

Since this declaration, there appears to have sprouted much anti-Canadian sentiment in the USA. This morning’s news mentioned that a radio station in Florida (that has a large Canadian “winter” audience) cancelled the portion of its daily regular programming that is produced in Toronto (Canada). The radio station apparently canceled the show because it is produced by Canadians ... emphasizing that they don’t need Canadian material as part of their programming.

The news also reported that the Canadian defense systems manufacturers (who are physically located within Canada), have been asked by their USA customers, to relocate their manufacturing installations within the USA ... the reason being to minimize transportation delays at border crossings. (Yeah, sure!)

The reporter who reported this news is also a commentarist … and he had the same reaction.

Note: I have done extensive work in the USA setting up manufacturing operations in Vermont, Texas and New York. If a Canadian company sets up operations in the USA, the vast majority of its employees must, by law, be American (versus, for example, Canadians working there with a work permit). In other words, reduce the USA unemployment rate and increase Canada’s.

Is this a threat by the USA? A type of economic embargo … as they have subtly done with Canadian softwood? … with Cuba … with Iraq… now … punish anyone that does not back the USA 100%?

As I write, Rumsfeld is talking about “Operation Iraqi Freedom” and the intent of the USA being to “liberate” the Iraqi people from Saddam’s “oppressive regime”. On the other hand, I also heard on the news, that the Turkey refused a $-multi billion deal allowing the USA to use their territory for military operations … and, that the USA is still trying to negotiate with them, now adding some Iraqi petroleum operations to the offer (once the USA has taken over Iraq).

So, some of my questions are: Who gave the USA permission to steal someone else’s land?

Who gave the USA the right to “judge” the Iraqi situation enough to state that they are there to “free” the Iraqi people from oppression, from a dictator, from a non-democratic leader… and this, while killing-off a few Iraqis (collateral damage?) and while pre-negotiating with their land?

In the previous paragraph I mention: “ to “free” the Iraqi people from oppression, from a dictator, from a non-democratic leader…”

Doesn’t this sound familiar? These are exactly the same type of words that the anti-Chavez opposition has been using for months!

Isn’t it also true that Condoleezza Rice almost applauded Carmona Estanga and gang for having, in a way, “liberated” Venezuela from an oppressive anti-democratic dictator such as Chavez?

Later she had to retract a little and apparently called for Chavez to "respect constitutional processes." No mention of Carmona and gang? As far as I have seen, the USA never condemned Carmona and gang for being dictatorial or anti-democratic. My conclusion?

I believe that by attacking Iraq, the USA is setting precedent for itself for future invasions. In other words, it is OK to invade another country if it is to “free” the people from oppressive anti-democratic dictators.

This really scares me!

The opposition to Chavez has been spreading all sorts of lies: Chavez is involved in terrorism with Saddam and company, the Chavez government is involved in chemical weapons manufacturing, Chavez is a dictator, he is anti-democratic, he is a communist, the Chavez government is oppressive, etc.

Doesn’t that now give the USA the “right” to militarily invade Venezuela? … to “liberate” the Venezuelan people from an oppressive anti-democratic, terrorist, communist dictator? Why does the USA not “liberate” the Sudanese people? No oil perhaps? No easily accessible riches such as precious stones or gold? I do not know the answers to these questions … but I suspect this rhetoric is not far from the truth.

To come back to Venezuela ... Venezuela has a beautiful rich culture which I hope will not be lost to the “invaders.” I hope the “invaders” will never come.

The word "invaders" can be broken up into two words:

Raven: (verb): 1) to seize forcibly; 2) to plunder; 3) to devour greedily; 4) to have a voracious appetite.

Dis: (noun): 1) the god of the underworld, Pluto; 2) the underworld, Hades

I hope that the opposition to Chavez will think deeply about the repercussions of their actions and lies.

Oscar Heck oscarheck111@hotmail.com

www.forbes.com Reuters, 03.20.03, 4:49 PM ET By Meredith Grossman Dubner

CHICAGO (Reuters) - U.S. airlines will likely wait to lock in costs on future jet fuel purchases to see if oil prices -- already at three-month lows at the start of an Iraq war -- fall even further, analysts said Thursday.

Jet fuel, which makes up about 15 percent of airlines' operating costs, is the industry's second-largest expense after labor and is also one of the toughest to manage. Airlines try to control fuel costs by hedging, which helps them protect against higher prices down the road.

Airlines consume 18 billion gallons of jet fuel a year, and each penny increase in jet fuel means an additional $180 million in costs for the industry, according to the Air Transport Association, the airlines' main trade group.

Jet fuel, which peaked near $1.20 a gallon last month, will cost the industry about $16 billion this year if it remains near 90 cents per gallon.

Jet fuel prices are closely tied to heating oil and crude oil. Nearby heating oil futures have slipped more than a third in the last week to 83 cents a gallon, down from an all-time high of $1.31 a gallon four weeks ago.

Nearby crude oil futures in the last week have plunged about 27 percent to $29 a barrel from just four weeks ago, when they hit a 12-year high of $40 -- their highest level since the 1991 Gulf War.

"To the extent that (crude oil) gets back down into the low $20s, maybe (airlines) do start layering on more hedges. But I don't think you're likely to see that until we get down to that level," said William Warlick, airline analyst at Fitch Ratings.

FIGHTING TO OFFSET LOSSES

Airlines can hedge fuel costs with futures and options on heating oil and crude oil, or through forward contracts with the oil companies themselves, among other strategies.

"The reason you hedge is to reduce the volatility of your earnings. The war introduces a whole new component into volatility of earnings," said David Swierenga, chief economist at the Air Transport Association.

Many airlines, expecting that an Iraq war and the strike in Venezuela could prompt a spike in oil prices, put on hedges late last year when crude was more than $30. Others, though, were hesitant to commit to hedges at those prices, fearing they would lock themselves into fuel prices that would be too high once a war passed, said Ray Neidl, analyst at Blaylock & Partners.

UAL Corp.'s United Airlines, which filed the largest bankruptcy in aviation history in December, has said it has no hedges for its 2003 fuel purchases. US Airways Group , also in bankruptcy, may have a small amount of hedges, if any, analysts said.

Low-cost carrier Southwest Airlines and No. 4 U.S. airline Northwest Airlines have both said they are fully hedged for first-quarter fuel purchases. Southwest is also roughly 87 percent hedged for the second quarter at $23 a barrel.

Other airlines are currently hedged between 40 percent and 60 percent for fuel costs at prices between $20 and $30 a barrel, Neidl said.

"In contrast to the early 1990s where many, if not most, U.S. airlines were unhedged, the U.S. airlines have become more proactive and are more hedged with respect to fuel price exposure," Deutsche Bank analyst Susan Donofrio said in a recent research note.

The biggest eight U.S. airlines posted losses of more than $11 billion for 2002. Airlines have tried to offset rising fuel costs by tacking on ticket surcharges, but travelers have not been receptive in an environment where demand for air travel is already weak.

"The war premium seems to be disappearing because people ... are assuming that this war will be quick," said Aaron Brady, senior analyst at Energy Security Analysis near Boston. "(But) if there are dramatic developments like Saddam blowing up all his oil fields, you can bet that prices will reverse rather quickly."

www.voanews.com Melanie Sully Vienna 20 Mar 2003, 20:14 UTC

The Organization of the Petroleum Exporting Countries, OPEC, says it can make up any oil shortage caused by the Iraq war.

The general secretary of OPEC, Alvaro Silva Calderon, told reporters the cartel would offset any shortfall in oil production because of the war in Iraq. "The member countries have pledged to use spare capacity if it is necessary," he said. "It does not mean that we are eliminating the quota system. We are facing an emergency."

Mr. Silva Calderon said that, at the present time, there is enough oil on the market to meet world demand.

Saudi Arabia has said it will increase crude oil production to help stabilize world markets. Another plus is that oil production in Venezuela, which had been reduced because of a long strike, is beginning to return to normal.

But analysts say that if the war lasts for months, rather than weeks, shortages could occur.

abclocal.go.com

March 20, 2003 — Gasoline prices in Illinois have leveled off after rising sharply over the winter on fears of a U.S. attack on Iraq, according to AAA Chicago Motor Club. War has come, and despite the high prices, motorists continued to fill up Thursday, with some saying they will not stop using their cars no matter how high gasoline prices rise.

"Like food, you have to pay for it," said CPA Russ Cook as he pumped gasoline at a Loop service station where regular unleaded gasoline cost $1.94 a gallon. "No matter how high gasoline prices go, it won't stop (my) driving."

Statewide, the price of regular unleaded gasoline averaged $1.74 a gallon, about 48 cents higher than last March, said Steve Nolan, spokesman for the AAA-Chicago Motor Club. The average nationwide is $1.71 a gallon.

Gasoline prices across Illinois varied widely, with regular unleaded averaging $1.78 a gallon in Chicago, $1.59 a gallon in East St. Louis, and $1.62 a gallon in Springfield, according to a survey by AAA-Chicago.

Prices in Illinois have been high all winter due to fears of war and because of the cutoff of crude oil production in Venezuela.

On Wednesday, U.S. and British forces began bombing Iraqi positions ahead of the movement of ground forces into Iraq.

"There is no sign of panic buying by consumers or panic selling by dealers," Nolan said.

The AAA and the petroleum industry issued a joint statement Thursday saying the nation's oil and natural gas industry is working hard to ensure supplies of fuel will continue uninterrupted. The statement said gasoline and diesel fuel inventories are adequate to meet normal demand and refinery production remains strong.

"Hopefully, the statement would put people at ease," said Nolan.

The Organization of Petroleum Exporting Countries sought to calm oil markets by announcing its members will maximize output to make up for any disruption in crude exports from Iraq.

Eugene Frimpong, a pharmacy student from Ghana, and a taxi driver for five years, says current gasoline prices are hurting his bottom line.

Frimpong also said due to the economic slowdown, he has to work real hard to find customers in the Loop, and a decline in travel has slowed business at Chicago's O'Hare International Airport.