Iraqi War Affecting US Gas Prices
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VIDEO: Gas Prices at Record Highs
Posted: March 26, 2003 at 9:10 p.m.
SAN FRANCISCO (KRON) -- Since the war in Iraq began, the price for a barrel of oil has fluctuated, but for the most part this last week it's gone down.
Even so, you won't see that reflected at the gas pump anytime soon.
Gas prices haven't budged: they're still high in the Bay Area, more than $2 a gallon, some places upwards of $2.50.
But if you look at what happened in the first Gulf War 12 years ago, they will be coming down.
Severin Borenstein, director of the U.C. Energy Institute, sees oil price similarities in both wars. Earlier this month, a barrel of oil cost a high of $39.90. After the president's war speech, the price dropped to $35. As strikes began, it was $32.50 a barrel.
"The drop reflected a change in beliefs in how quickly the war would be over and oil flowing again," Borenstein says.
The first full day of war it dropped to $29.88 and on Wednesday, a price for a barrel of oil closed at $28.63.
A $10 decrease in a barrel of oil usually means 25 cents less for a gallon of gas, but oil is bought now for the future so price change takes some time.
If it seems the price of gas rises quicker than it falls: it is true. Borenstein says it takes just two to four weeks to see price increase, but it takes six to eight weeks to see the price drop.
Borenstein says companies try to hold higher onto those prices.
A shorter, successful war should mean prices will keep dropping. Borensteiin doesn't believe fires in Iraqi oil fields will change that, but he is concerned about political unrest in another part of the world, Venezuela, a major oil exporter.
More beer, less bread: wheat board
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Web Posted | Mar 27 2003 07:30 AM MST
WINNIPEG - A worldwide increase in beer consumption is good news for Canadian barley growers, according to the Canadian Wheat Board's long-range grain trade forecast, released Wednesday.
The wheat board predicts Canadian malt barley exports will grow by 60 per cent over the next eight years. Most of the increased sales will be exported to China.
"Just kind of as we're speaking, China has just overtaken the U.S. as the world's largest beer producer," says wheat board analyst Peter Watts, adding that there's still room for growth in the country. "Remember, China has four times the people as the U.S. does, so on a per-capita basis, we're still only forecasting China to consume just over 21 litres of beer per head."
He says while beer drinkers in China quaff more brews, Canadians continue to tip back even more: "In North America, we're somewhere around 75 litres per head on an annual basis, which is remarkable when you think about [it]. If you exclude all the people under 15 and 16, the rest of us drink a hell of a lot of beer."
While beer drinking is on the rise, bread eating is not. The wheat board says world wheat consumption is going down; Watts says that's partly because rising incomes are resulting in people eating more meat. Canadian wheat sales are expected to remain flat over the next several years.
• Forecasts not very accurate •
Brian White, vice-president of the wheat board, admits the eight-year forecasts are not very accurate, but he argues they are useful.
"The accuracy has not been within 10 per cent or 20 per cent, but that is not necessarily where the payoff is. The issue is more in the micro, the nitty-gritty, like projecting the direction of specific markets. For instance, are they going to eat more pasta in Venezuela?"
White said the impact of the war in Iraq was not factored in to the long-range grain forecast. However, he says that in the short term, Iraq will need to import more grain.
Venezuela Gives Labor Leader Safe Conduct
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The Associated Press
March 26, 2003
Venezuela will grant safe conduct to anti-government labor leader Carlos Ortega when he goes into exile in Costa Rica, officials said Wednesday.
Ortega, president of the million-member Venezuelan Workers Confederation, took refuge in the Central American nation's embassy to avoid arrest on treason and rebellion charges stemming his role in leading a crippling nationwide strike.
"Safe conduct has been granted, which will facilitate Mr. Ortega exit: first from our embassy, and secondly, from Venezuela to our country," said Costa Rican Ambassador Ricardo Lizano.
It wasn't immediately clear when Ortega would leave Venezuela.
The general strike was aimed at forcing the resignation of President Hugo Chavez and early elections.
Chavez has demanded 20-year prison sentences for Ortega and co-strike leader Carlos Fernandez, saying that they must be punished because the work stoppage cost Venezuela an estimated $6 billion, caused fuel and food shortages and suffering among the nation's poor majority.
Ortega slipped into the Costa Rican embassy on March 14, and that nation granted him asylum after he expressed fears that his life could be in danger.
Last week, an appeals court ordered the release of Fernandez, who escaped charges of rebellion. Fernandez was previously held under house arrest.
Investors jittery after Chávez remarks
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By Vincent Boland in New York
Published: March 27 2003 1:11 | Last Updated: March 27 2003 1:11
President Hugo Chávez of Venezuela sent a ripple of uncertainty through capital markets on Wednesday with an announcement that he wanted to restructure the country's domestic and foreign debt.
The comment, which was broadcast on television but was not detailed, was initially interpreted by investors to mean that Venezuela could be about to pursue the forced debt swap imposed on investors by Argentina.
Mr Chávez's remark sent Venezuela's debt prices briefly into a slump in New York trading, mainly because of a lack of detail about what he had said. He told an audience of business people that the cost of servicing Venezuela's debt was too heavy for a country with its budgetary and fiscal problems and that the government would take steps to have it restructured.
Debt servicing costs, including repayments, on the debt are estimated at more than $5bn this year. Mr Chávez said this was "too much money for our beaten down budget and our beaten up situation".
Tobias Nobrega, finance minister, later told Reuters that a moratorium on repayments or a forced restructuring were not being considered, but that swap proposals would be put to investors in the next few months. Venezuela would also continue to comply with its debt obligations.
Analysts who watch Venezuela closely said the country's problem and the chief difference with Argentina's situation was not the size of its debt burden, which includes $22.4bn in foreign debt and more than $7bn of domestic debt, but a crisis of government revenue.
"The general perception is that Venezuela has a liquidity problem [rather than a debt burden problem]," said Benito Berber, a Venezuela specialist at IDEAglobal, an economics consultancy in New York. "That's where it differs from Argentina."
Venezuela is struggling in the aftermath of a bitter and prolonged strike aimed at removing the country's populist president from office. The strike shut down oil production, Venezuela's chief export earner. Although production is now back to pre-strike levels, PDVSA, the state oil company, is unable to recover nearly $2bn in receivables.
This has deprived the government of badly needed revenues at a time when it should be able to take advantage of relatively high oil prices and worries over supplies because of the war in Iraq.
Venezuela's creditworthiness rating, while extremely low, is still several notches above default levels, at Caa1 from Moody's Investors Service and CCC+ from Standard & Poor's.
Hopes Fading for Bolivia Pipeline Project
By JUAN FORERO
LA PAZ, Bolivia, March 21 — Ed Miller had high hopes in the late 1990's when, as manager for British Gas in this landlocked country, he and another geologist came up with a sure-fire plan to develop and market Bolivia's immense reserves of natural gas.
With an eye on California and its insatiable appetite for energy, three multinationals, including British Gas, soon formed a consortium to build a 400-mile pipeline to the Pacific coast. The idea was to liquefy the gas and ship it to California, with projected sales of $21 billion over 20 years.
But with $350 million already invested, the project that was once heralded as Latin America's largest infrastructure development is now close to collapse, a casualty of roiling nationalism and political turbulence in Bolivia.
"The project is coming to the end of its opportunity window," said Mr. Miller, 47, an American who recently left the consortium and now runs a pipeline that transports gas to Brazil. "I would say the window was wide open a year ago, and now it's almost shut."
Indeed, the government of President Gonzalo Sánchez de Lozada, buffeted by antigovernment protests that killed 30 people in February, has delayed plans to announce a decision on the project's next phase: whether to build a pipeline through Peru or through Bolivia's old enemy, Chile. Instead, the government is now talking about consulting with Bolivians, to let them to make the decision. But the companies of the Pacific LNG project, as the consortium is called — Repsol-YPF of Spain; British Gas; and Pan American Energy, a BP subsidiary — insist that Chile is the only viable option, because building through Peru would cost $600 million more. An American consulting firm working for the Bolivian government recently reached the same conclusion.
Aides to Mr. Sánchez de Lozada said the government was still carefully studying both options.
But people close to the project said the president was actually paralyzed, because deciding on Chile would lead to huge, destabilizing protests.
"The government does not have the political oxygen to decide," said Gonzalo Chávez, an economic analyst and former vice minister of energy.
Opposition to the project is intense and spreading, fueled by left-leaning indigenous leaders who strongly reject the Chilean option. Most Bolivians have never forgiven Chile for snatching Bolivia's coastal province in a 19th-century war, including the region around the present-day port of Patillos, where a liquefaction plant would be built.
The opposition also includes senior military officers who pronounced themselves against the project for reasons of "national dignity." Even the president's partner in the government coalition, former President Jaime Paz Zamora, has questioned the sale of natural gas, saying, "Bolivia must come first."
In one of Latin America's most nationalistic countries, some critics also oppose the very idea of selling gas to the United States, which is viewed as an imperialist aggressor.
"The gas stays here," explained Choque Huanca, a newly elected member of Congress, who represents a left-leaning indigenous political party. "We can consume it here."
Such talk, though, ignores the fact that Bolivia, with a gross domestic product of just $8 billion, could make use of only a tiny fraction of its gas reserves — now estimated at 52 trillion cubic feet, second in Latin America only to Venezuela's. Even supplying California for 20 years would consume only 13 percent of the gas.
Economic analysts say this desperately poor country could vastly improve its economic outlook by positioning itself as an important gas supplier to California before other countries do. Taxes and royalties on exported gas could bring in up to $7.7 billion in a generation.
But to become a great gas power, Bolivia needs foreign capital to finance the Pacific LNG project, whose total cost is estimated at $5 billion or more.
Changing minds in Bolivia will not be easy. Companies of all kinds have faced stiffening opposition to their investment plans as Bolivians have turned against the market reform model once championed by the president.
"There is a repudiation," said José Guillermo Justiniano, minister of the presidency, the executive's administrative arm. "That is why there is a conviction against the model. They see the model as the devil. Market economies are the devil."
The government of Mr. Sánchez de Lozada has been so battered by opponents that it lacks the political capital to undertake austerity measures or make unpopular economic decisions. In an interview, the president acknowledged the influence of his opponents.
"If I announced the second coming of Christ, they would vote against it," he said.
Bolivia's future, though, will remain grim unless it is open to foreign investment, political analysts say.
"The fact of the matter is, you cannot go back on globalization, and no country can afford to isolate itself from the international currents," said Eduardo Gamarra, a Bolivian-born expert on the country at Florida International University in Miami.
Mr. Miller, a Californian who first came to Bolivia in 1978, ran an Argentine company that in the late 1990's was among the first to find major gas deposits. After mapping out the pipeline plan on a barroom napkin, he assumed Bolivians would welcome a project that promised to inject billions of dollars into a moribund economy.
But now, the dream is all but dead — prompting him to abandon Pacific LNG. "I essentially became frustrated and burned out," he said.