www.nytimes.com By NEELA BANERJEE

he oil industry is already feeling powerful repercussions from the current economic and political volatility spawned by fears of war in the Persian Gulf, according to Lee Raymond, the chairman and chief executive of Exxon Mobil, the world's largest oil company.

In a rare and broad-ranging meeting yesterday in New York with securities analysts and journalists, Mr. Raymond pointed out, for example, that oil prices near $40 a barrel create a number of problems for oil companies.

"Frankly, we're not comfortable with oil prices in the high 30's," he said. "They can have long-range impacts that are not all that attractive."

When prices rise so high, they usually fall quite far and quite rapidly, and such volatility "over a long period of time puts a damper on investment" in the industry, Mr. Raymond said.

"It's easy to live with the peaks, but the fear is what the valleys will bring," he said. When investment in new fields and projects declines, less oil gets produced and prices generally remain higher.

Mr. Raymond said he also worried that high prices would lead to a backlash against the oil industry.

"We seem to have an investigation every time prices are high," he said. "Why is there never an investigation when prices go down?"

With the strike in Venezuela continuing and the looming possibility of war with Iraq, Mr. Raymond declined to predict how long oil prices would stay high.

Analysts estimate that Iraq currently exports a little less than 2 million barrels a day, legally and otherwise, and there is a very strong chance those exports would halt if the United States attacked.

"If the Iraqi oil disappears, you get into the question of whether it is transitory or whether capacity has been lost," Mr. Raymond said. "It's clear if there is a war, they will stop exporting. But what the markets will ask is, how long the war will be? Or will Saddam Hussein have torched his oil fields?"

Mr. Raymond said he thought the Organization of the Petroleum Exporting Countries would try to make up for any shortfall of Iraqi oil, although they were already pumping at near full capacity. But he also predicted that if supplies dwindled and an oil shortage became a real possibility, the Bush administration might step in.

"I think under those circumstances the United States government would start releasing oil from the Strategic Petroleum Reserve," Mr. Raymond said, referring to an emergency stockpile of crude oil the country keeps to cushion disruptions of oil supplies.

Mr. Raymond said that the energy crisis of 1973 had taught the government and the oil companies how to cope with supply crises. He urged the government not to cap prices, as it did in the 1970's, or domestic supplies might dwindle and rationing might have to begin.

"You have to focus on whatever you need to do to keep the continuity of supply," he said. "It's very important not to have gasoline lines at service stations."

www.forbes.com Reuters, 02.28.03, 3:25 PM ET

(Adds comments from ConocoPhillips in paragraphs 4-5) CARACAS, Venezuela, Feb 28 (Reuters) - Venezuela's four foreign-financed extra-heavy-oil upgrading projects in the Orinoco region are back online following the restart of the Petrozuata joint venture on Friday, project officials said. The projects, which partner state oil firm Petroleos de Venezuela PDVSA with international firms such as U.S. ExxonMobil Corp. (nyse: XOM - news - people) and French TotalFinaElf <TOTF.PA>, had been pumping over 400,000 barrels of extra heavy oil before shutting down due to an oil strike that started Dec. 2. The Cerro Negro and Sincor projects resumed output this week after PDVSA restarted natural gas supplies needed as feedstock for processing units that upgrade the ultra-heavy oil into synthetic crude for export. Petrozuata, which partners PDVSA and ConocoPhillips (nyse: COP - news - people), reestabished production on Friday. "We have started running the plant's crude processor and coker at reduced rates," a spokesman for ConocoPhillips told Reuters. He did not give initial production levels. A fourth project, Hamaca, has resumed limited output of the tar-like Orinoco oil mixed with lighter crude to create an exportable blend. Hamaca's synthetic crude upgrader has not been completed. Initial output from all four projects will increase as gas supplies improve. Venezuela's government has been battling to restore the strike-hit oil sector, which provides half of state revenue. President Hugo Chavez fired over 15,000 PDVSA workers who took part in the strike, hiring replacement workers and the military to staff abandoned posts. The OPEC nation, normally the world's No. 5 crude exporter, was pumping nearly 3.1 million bpd of oil including output from the Orinoco region before the strike. On Thursday, oil minister Rafael Ramirez said total oil production had been restored to 2.08 million bpd. But PDVSA employees and rebel oil workers said that output temporarily fell by 450,000 bpd to 500,000 bpd on Friday. The rebel workers say output is now 1.13 million bpd.

straitstimes.asia1.com.sg

DUBAI - Opec officials sought to ease fears of looming oil shortages, signalling that they may raise output to lower crude oil prices which shot up to 12-year highs yesterday.

The group, which supplies a third of the world's oil, will consider increasing production for a second time this year when it meets on March 11, said oil ministry officials from Qatar and Kuwait yesterday.

Opec secretary-general Alvaro Silva Calderon also said the group 'won't use oil as a weapon' if war breaks out in Iraq.

'We have around 4 million barrels per day of spare capacity. We are ready to put this amount on the market if necessary,' he added.

US light crude in electronic trade hit US$38.66 a barrel yesterday, the highest since the 1990-1991 Gulf crisis when crude peaked at more than US$41 shortly after Iraq invaded Kuwait.

'The supply situation in the US and parts of Asia is very, very dangerous,' said commodity strategist Tetsu Emori of Mitsui Bussan Futures.

'It's easy for crude oil prices to reach US$45 to US$50' a barrel once a war starts in Iraq, he added.

In another worrying development, oil traders said yesterday that Asia might find itself short of fuel oil next month.

Fuel oil shipments from Syria, Saudi Arabia's Yanbu refinery, Venezuela and the US west coast that are expected to arrive next month in Asia will not be enough to meet demand, they said.

High tanker rates are discouraging suppliers in Europe, the US and South America from shipping cargoes to Asia.

Some suppliers preferred to send cargoes to the US, where supplies are low, traders said. --AFP, Bloomberg News, Reuters

www.news4jax.com Posted: 10:41 a.m. EST February 26, 2003

TALLAHASSEE, Fla. -- Big Oil representatives are telling Attorney General Charlie Crist that the threat of war with Iraq, a two-month strike in Venezuela and a cold winter are driving would gas prices up.

Crist questioned officials from six companies yesterday, asking for an explanation of how pricing works in the petroleum industry. It's part of a general, but so far informal, inquiry into why gas prices in Florida have risen to their highest February level ever.

Crist says his office has gotten 176 complaints from Florida residents in the last week about the rising cost of gas at the pumps. He says the oil companies cite international pressures on the price of crude oil that are beyond their control.

Crist says he's not suggesting government interfere with the setting of prices on the gasoline market. He says he's only trying to see if there are any violations of antitrust laws.

Crist also was on a conference call Tuesday with 10 other attorneys general from around the country and Federal Trade Commission Chairman Timothy Muris, discussing the rising cost of gasoline.

www.e4engineering.com From E4 : Engineering, 26 February 2003, in Home

BP announced today that it has agreed to transfer to Perenco its interests in two Venezuelan production assets for $160 million in a cash transaction. The interests are a 60 per cent stake in the Boqueron field in eastern Venezuela and 100 per cent in the DZO (Desarrollo Zulia Occidental) field in the west of the country. BP currently operates both fields. BP's share of production from these fields is said to have averaged 26,100 barrels of oil a day in 2002. The transaction follows a number of recent asset sales made by BP in other parts of the world, including the sale of several UK Southern North Sea gas production assets to Perenco, which is based in London and Paris. On completion of this transaction and the UK Southern North Sea gas acquisition, Perenco's operated oil and gas production is expected to rise to 275,000 barrels of oil equivalent a day (boed) and its net production to 185,000 boed.