www.milforddailynews.com Associated Press Thursday, March 6, 2003

WASHINGTON -- President Bush ordered a rush of oil into the government's Strategic Petroleum Reserve after the Sept. 11 attacks, and the Energy Department stopped its practice of holding off shipments to the reserve when prices got high or supplies got tight.

A report by Senate Democrats yesterday maintained the decision, which diverted 40 million barrels of crude from the markets into the government-owned reserve last year, helped drive up gasoline and other energy prices.

With markets tight and oil prices high, refiners dipped into their inventories to replace the oil going into the government reserve, said the report produced by the Democratic staff of the Senate Governmental Affairs investigations subcommittee.

"We're confident this had a significant impact on the price of oil in 2002," Sen. Carl Levin of Michigan, the ranking Democrat on the subcommittee and its chairman last year.

Energy Secretary Spencer Abraham rejected the notion that the government's decision significantly affected energy prices. He said the amount was too small to have an impact.

"The principal issue here is national security, and we believe and continue to believe that enlarging the amount of emergency reserves we have in the strategic reserve is very important to America's energy and national security," said Abraham.

A department spokesman, Joe Davis, added that the reason inventories dropped was OPEC's decision to cut production in early 2002, a decline in Iraqi oil exports and losses of oil from Venezuela last December. As for oil that went to the SPR, "we're talking about a drop in the bucket," said Davis.

Some critics also have said taxpayers have lost million of dollars because of oil acquisitions for the reserve during periods of high prices. While the government does not technically buy oil, it accepts oil in lieu of royalty payments on oil pumped from federal land.

At 100,000 barrels a day, filling the reserve when crude was selling at $30 a barrel rather than $20 a barrel cost taxpayers $1 million a day in lost royalties, the Levin report said.

During 2002, when oil was diverted steadily into the strategic reserve, oil prices climbed steadily from the low $20s early in the year to over $30 a barrel by September. After easing a bit, prices soared again toward the end of 2002, remaining largely above $30 a barrel as crude inventories tightened. War jitters have caused prices to continue their climb this year, recently passing $37 a barrel before retreating modestly.

The department reversed course on filling the reserve last December, with Venezuelan oil production halted and commercial inventories extremely low, and suspended delivery of oil to the SPR from December through March. On Tuesday, it said April deliveries also would be deferred.

Levin said such a decision should have been made a year ago, arguing that the reserve already has plenty of oil to meet emergency needs. Currently there are 600 million barrels of crude -- equivalent to four months of oil imports from the Middle East -- stored in salt caverns on the Gulf Coast.

Before December, oil company requests for deferrals of deliveries to SPR were routinely denied, the report said.

Internal DOE documents indicated that career officials involved in the SPR program cautioned that private oil inventories could suffer, leading to higher prices.

"Commercial petroleum inventories are low, retail product prices are high and economic growth is slow," said one memo from a senior SPR official in late May of 2002. "The government should avoid acquiring oil for the reserve under these circumstance." Such purchases "would be difficult to defend," he continued.

A reduction in private oil inventories equal to amounts put into the SPR "could have a substantial price impact," said another memo, obtained by Levin's subcommittee.

John Shages, a director of policy for the SPR program, expressed his concern last June that filling the reserve could significancy impact private crude stocks and force up prices.

He characterized the SPR diversions as potentially "a powerful 30 million barrel reduction of private inventory over 10 months" if the oil is not replaced by OPEC or other producers. "Come December ... we will have higher prices, nervous traders, a more confident OPEC..."

Commercial crude inventories declined from 310 million barrels to 280 million barrels during 2002 and another 10 million barrels early this year. Energy economists have cited the low inventories as a key reason for the sharp price increases of crude as well as gasoline and heating oil.

In April 2002, a BP executive repeatedly sought to have a scheduled delivery to the SPR postponed, according to e-mails obtained by the Senate investigators.

"Oil prices keep rising," wrote James Dyer to Michael Waggoner at the SPR office. "As of this morning we calculate a year's deferral would be worth an extra 750,000 to you," Dyer wrote, referring to the premium in barrels that BP would agree to pay for later delivery.

But the department said no.

In October, Marathon Ashland Petroleum asked to defer its scheduled shipment to the SPR because a hurricane had kept oil from getting to its Louisiana refinery and it needed all the crude it could get. The refinery had "nearly depleted all its crude oil working inventory," wrote Marathon Ashland's Daniel Pears to Waggoner.

His request was also denied.

washingtontimes.com EDITORIAL • March 6, 2003

     During a visit to The Washington Times last week, journalists from Venezuela detailed the physical dangers they are facing. And to the extent that the freedom of the press gauges the health of a country's democracy, the intimidation and harassment of the media in Venezuela signals a wider problem for the society and, if instability spreads, for the region.      Luis Alfonso Fernandez is probably Venezuela's most famous reporter. He and his cameramen covered, from the rooftop of a building in Caracas, snipers opening fire at protesters during the infamous demonstration against President Hugo Chavez on April 11 that killed 17 persons. Later, on April 13, as supporters of Mr. Chavez protested a short-lived coup, 23 protesters, probably supporters of the president, were killed.      Mr. Fernandez, a television reporter for Venevision, won a prestigious award from the king of Spain for his April 11 coverage, which documented a member of Mr. Chavez's party in the City Council of Caracas shooting at protesters. Mr. Chavez has charged Mr. Fernandez for fabricating his report in a computer.      Mr. Fernandez also said his colleagues in state-owned media companies suffer abuse from the anti-Chavistas. There were no reporters for state-owned media outlets present at the meeting, but a report put together by journalists lists numerous accounts of physical attacks on journalists for state-owned media.      "We didn't know who they were," said Mr. Fernandez, regarding the rooftop snipers. But after the footage was aired and some snipers were identified, he started getting death threats on a regular basis. Some journalists have been less lucky. One cameramen covering the April 11 protest was fatally shot in the head, said Mr. Fernandez. Another journalist, Alicia La Rotta, a reporter for the newspaper El Universal, said that she was physically assaulted by a member of military intelligence. Journalists photographed the man as he cocked back his fist to hit Mrs. La Rotta. She said she has since gotten numerous death threats, as well, and that her access to official sources has been limited.      Last month, the Chavez government began "administrative procedures" against media outlets for airing reports unflattering to the government. And in late January Mr. Chavez said: "The world should not be surprised if we start closing TV stations in Venezuela shortly," adding, "This is a country at war."      Regardless of how Mr. Chavez and his supporters regard the objectivity the press in Venezuela, the president would make a big mistake to limit its freedoms. After all, Mr. Chavez can use speeches and state-owned outlets to counter any perceived subjectivity or inaccuracies.      Weakened accountability could well result in serious human rights abuses in Venezuela, as seen in other places in the world.

usinfo.state.gov 05 March 2003 (Powell interview with CNBC March 4) (2760)

Secretary of State Colin Powell says he hopes that, in the event that military force is needed to disarm Iraq, the United Nations will pass a resolution expressing its "understanding" for the necessity of such a course of action.

"[We] are going to deal with Saddam Hussein. We'll deal with him peacefully through the United Nations, and if conflict does become necessary, I hope the United Nations will understand that and pass a resolution that will express that understanding," Powell said in an interview with the CNBC television channel March 4.

Powell said that, while time is running out, war can still be avoided if Iraqi leader Saddam Hussein demonstrates that he is totally committed to complying with U.N. resolutions that he eliminate Iraq's weapons of mass destruction. Powell added it would be good for the Iraqi people if Saddam Hussein stepped down.

Powell said that longer inspections and more inspectors would not solve the problem. The inspectors are in Iraq "to verify that he is complying with the resolution and not to be detectives running all over the countryside looking for prohibited materials," he said.

Commenting on the problem of North Korea's nuclear program, Powell said the United States is sending the message to North Korea through various channels that it would not be wise to start uranium reprocessing while the search for a political solution to the problem is under way.

Powell said the United States wants to deal with North Korea through a multilateral forum that would involve all the countries affected by North Korea's nuclear program.

Following is the transcript of Powell's interview with CNBC:

(begin transcript)

U.S. DEPARTMENT OF STATE Office of the Spokesman

March 4, 2003

INTERVIEW

Secretary of State Colin L. Powell By Alan Murray and Gloria Borger CNBC's Capital Report Washington, D.C.

(As aired at 9 p.m. EST)................

www.usatoday.com

As the USA moves closer to war with oil-rich Iraq, gas prices are on the rise. So are concerns about terrorist attacks that might involve radiological materials available from widespread sources. In addition to tackling these pressing concerns, the Bush administration has proposed spending $1.7 billion over five years to start developing hydrogen fuel cells that could power cars, eventually eliminating U.S. dependence on foreign oil. Energy Secretary Spencer Abraham, the administration's point man on these issues, met this week with USA TODAY's editorial board. His comments were edited for space and clarity:

Question: A USA TODAY poll found that 66% of Americans believe oil companies are overcharging. What is your view?

Answer: The average price of gasoline is about 10 cents higher this winter than the winter two years ago. The strike in Venezuela has constrained supply. The economy in comparison to last year is stronger, so demand is greater than it was a year ago. The reduction in production from OPEC on several occasions in recent years has affected supply. And uncertainties about what is going to happen in Iraq have fueled a lot of speculation in terms of price in the energy markets. All that having been said, we do not want to see people exploited. The Energy Department has a hot line available to anyone who wants to report evidence of price gouging. The Federal Trade Commission and others are monitoring. We should always be vigilant. These high prices hurt average working families, and we are concerned about them.

Q: How do you fend off charges that a war with Iraq would be an oil grab?

A: That is blatantly untrue. Our concerns have nothing to do with oil. We believe the oil in Iraq belongs to the people of Iraq. They should decide how much of it is sold and what the proceeds should go for.

Q: There is increasing concern about terrorists getting a nuclear or radiological weapon. What is being done to prevent that?

A: One reason we focus so much attention on Iraq is the concern that a nuclear weapon or radiological material could be used by Saddam Hussein or conveyed to terrorists for their use. We also have worked with Russia for a long time — very intensely since 9/11 — to secure such materials in the former Soviet Union. We've reduced by about two years the time frame for securing the materials our department works on. The other challenge, radiological dispersal devices, is a big one because the material that could be employed in that type of a weapon is available in almost every country. I've been concerned about this for quite some time. Next week, there's a conference in Vienna of about 600 representatives from about 100 countries that will focus on this threat and give people a better understanding of ways to account for and secure these materials.

Q: What is the long-term solution to our energy challenges?

A: Because of his background in the world of energy, the president has a pretty strong understanding of the challenges ahead. He asked us for game-changing technologies and approaches, and we took that seriously. Our idea is a hydrogen-fuel-cell powered vehicle. Instead of trying to design the vehicle itself, our focus will be on operating systems that can be applied to the kinds of vehicles that Americans desire to drive, rather than what Washington might think consumers should have. At the same time, we faced a chicken-egg sort of challenge: What comes first, the operating system — the vehicle — or the infrastructure to support it? We concluded you have to do these concurrently, not consecutively. If you don't, it'll always be 30 years before we have a hydrogen-fuel-cell motor-vehicle fleet. If we move them together, we believe a commercialization decision would be made as early as 2015 that would translate into mass-market penetration in showrooms by the year 2020. We are very serious about this commitment.

Q: What are the advantages?

With a hydrogen-fuel-cell powered fleet, we wouldn't have to import oil. We would produce the fuel from a variety of sources here at home. There would be a lot of other applications. And the great thing is that the only byproduct is water. If we can get to that point, we will surmount both how we deal with our growing dependency on energy and how we can continue to allow consumers to have choice and continue to grow the economy in a way that is consistent with environmental concerns.

Q: How do you respond to critics on the right who see this as a misguided policy?

A: This has managed to create some unusual coalitions in opposition. The role we project for the government is perfectly legitimate, given the stakes and the potential payoff. First, we will fund the high-risk research the private sector cannot justify because it's so long-term. The other thing that makes the federal role so indispensable is the real need for coordination to bring everybody to the table. But we're not going to mandate and dictate, we're not going to pick the cars, we're not going to do the sorts of things that are within the venue of the private sector.

Q: Does this put all your eggs in one very expensive basket?

A: No. Hybrid-technology, clean-diesel, hydrogen-powered internal combustion engines all have a role to play here. But they all require oil to work, and our goal is to transcend that debate at some point. Where the game could be changed is in moving beyond oil-based operating systems, or oil-focused ones, to ones in which the source is hydrogen. And we think we've got an approach that can make that happen. But we by no means put all our eggs in that basket.

www.scoop.co.nz Thursday, 6 March 2003, 12:19 pm Press Release: US State Department

............Ma'am.

QUESTION: Can we move to the Western Hemisphere?

QUESTION: No, can we do Turkey?

MR. BOUCHER: I'm always happy to.

QUESTION: Okay. Yesterday Colombian officers from the Colombian government said that, or confirmed that the leader of the Colombia guerilla, FARC, Marulanda, was operating from Venezuela. My question is, Assistant Secretary Stroebel last week said that the U.S. Government had some doubts about the reliability of Venezuela as an oil supplier and that it doubted that the President Chavez would honor his word to hold elections in Venezuela. Do you believe that President Chavez could be a reliable partner to try to fight the Colombian guerillas in Venezuela?

MR. BOUCHER: I, the first think I need to say is every time somebody quotes what Acting Assistant Secretary Stroebel said in testimony to me, we look it up and we find out if that's not exactly what he said. I haven't had a chance to look up this exact quote yet. But I would suggest that people check it carefully before they use it.

He certainly did talk about our concerns about the situation in Venezuela and stressjed that the situation is deteriorating, said we need to help Venezuela find a solution to avoid further harm, a viable solution that's peaceful, constitutional, democratic and electoral. And that's what we've been saying all along. That needs to be agreed by the government and the opposition.

The effort the United States has made is to try to help Venezuela solve its political problems and get back to a situation of democratic representation and stability. That would certainly contribute to the stability of the region, and that's something that's important not only for us, but for others in the region. That's why we have the Friends Group.

As far as the operation of the FARC, of the Colombian guerillas from Venezuela, as you know, that's been reported from time to time. It's something we've kept in close touch with. We have made very, very clear our view that every government in the region should be doing whatever it can to prevent that sort of thing from happening and that's a view that we've often expressed here as well as to the Venezuela Government.

Yes..........