www.sunspot.net Associated Press Originally published March 20, 2003

WASHINGTON - Global oil production has been on a rebound for weeks, but little of the increase has reached U.S. shores, the Energy Department said yesterday. The department's statistical agency said U.S. crude oil stocks remain at an uncomfortable 270 million barrels, a level the industry considers a minimum for smooth refinery operation. That's about the same as stocks have been since early January.

At the same time, oil producers, led by Saudi Arabia, have been increasing the amount of oil they're taking from the ground.

That, together with an expectation that war with Iraq might be brief and avoid major damage to oil fields, has sent oil prices tumbling this week. The price of crude dropped again yesterday to $31.05 a barrel on the New York Mercantile Exchange, a decline of nearly $7 from a week ago when it reached a 12-year high of $37.83 a barrel.

Oil traders "are beginning ... to realize there's a bit of a glut of oil around," said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

Much of that oil is now in storage in the Persian Gulf or in tankers at sea, oil analysts said. Saudi Arabia is believed to have as much as 50 million barrels in storage in the country and more en route to other storage facilities. That's enough to replace Iraq's 1.5 million to 2 million barrels a day for about a month.

But that oil has yet to reach the U.S. markets.

Crude inventories have consistently been 300,000 to 400,000 barrels below a year ago, said Doug MacIntyre, an oil analyst for the Energy Information Administration, the DOE's statistical arm. Imports also have been down from previous levels, although OPEC producers other than Iraq and strife-torn Venezuela have been pumping more oil for weeks.

The low U.S. inventories reflect transportation delays, as well as reluctance by refiners to buy oil when the price has been $35 to $37 a barrel, analysts said.

Larry Goldstein, president of the private Petroleum Industry Research Foundation, said he anticipates that U.S. oil stocks will begin to grow in the coming weeks, adding to a calming of the markets - as long as a war in Iraq does not become messy and threaten Persian Gulf supplies.

"If we can contain whatever negative consequences [from a war] to Iraq, then the Saudis ... have enough flexibility to take care of the loss of Iraqi oil," Goldstein said.

Still, there remains some trepidation among oil traders and analysts should war in Iraq last a while. Crude oil prices are likely to remain volatile in the months to come, they cautioned.

"This thing could go right back up," said Tom Bentz, an analyst at BNP Paribas in New York, suggesting prices could rebound once fighting erupts. "We're still vulnerable because inventories are tight."

The biggest fear in the market is that oil facilities in other Middle Eastern countries, such as Kuwait or Saudi Arabia, could be attacked - a scenario that would cause oil prices to shoot higher very quickly, said Fadel Gheit, senior oil analyst at Fahnestock & Co. in New York.

www.cato.org March 18, 2003 by Jerry Taylor

Jerry Taylor is director of natural resource studies at the Cato Institute.

Is the coming war with Iraq about oil when all is said and done? The anti-war movement seems to think so. I am not so sure.

Unless the peace movement has discovered telepathy, I doubt that it's in any better position to divine the hidden thoughts or secret motivations of George Bush and Tony Blair than I am. Arguing about unstated motives, therefore, is a waste of time -- claims cannot be proven or disproven.

Is it so difficult, however, to imagine that both Bush and Blair sincerely believe -- rightly or wrongly -- that a well-armed Iraq poses an intolerable danger to the civilized world? If access to oil were of concern to them, one might have expected members of their administrations to hint as much. The Thatcher and Bush administrations, after all, were quite open about the role that oil played in justifying the first go-around in Kuwait. Polls in the United States revealed at the time, moreover, that the public responded favorably to the argument. Why the supposed reticence now?

Regardless, it's difficult to know exactly what is being alleged when one is confronted by the slogan "No Blood for Oil!"

If the argument is that war is primarily being executed to ensure global access to Iraqi oil reserves, then it flounders upon misunderstanding. The only thing preventing Iraqi oil from entering the world market in force is the partial U.N. embargo on Iraqi exports. Surely if access to Iraqi oil were the issue, it would have occurred to Bush and Blair that removing the embargo is about $100 billion cheaper (and less risky politically) than going to war.

If the argument is that war is being undertaken to rape Iraqi reserves, flood the market with oil, bust the OPEC cartel, and provide cheap energy to western consumers, then war would be a dagger pointed at the heart of the "Big Oil." That's because low prices = low profits. Moreover, it would wipe out "Little Oil" -- the small-time producers in Texas, Oklahoma, and the American Southwest that President Bush has long considered his best political friends. Accordingly, it's impossible to square this story with the allegation that President Bush is a puppet of the oil industry.

In fact, if oil company "fat cats" were calling the shots -- as is often alleged by the protesters -- President Bush would almost certainly not go to war. He would instead embrace the Franco-German-Russian plan of muscular but indefinite inspections because keeping the world on the precipice of uncertainty regarding conflict is the best guarantee that oil prices (and thus, oil profits) will remain at current levels.

If the argument is that "Big Oil" is less interested in high prices than it is with outright ownership of the Iraqi reserves, then how to account for Secretary of State Colin Powell's repeated promise that the oil reserves will be transferred to the Iraqi government after a new leadership is established? Do the protestors think that this high-profile public commitment is a bald-faced lie? Moreover, if that's the real goal of this war, then I'm forced to wonder why the U.S. didn't seize the Kuwaiti fields more than 10 years ago.

If the argument is that this war is aimed at installing a pro-American regime more inclined to grant oil contracts to American and British rather than French and Russian oil firms, then it invites a similar charge that France and Russia are against war primarily to protect their cozy economic relationships with the existing Iraqi regime. Regardless, only one or two American or British firms in this scenario would "win" economically while the rest would lose because increased production would lower global oil prices and thus profits. Because no one knows who would win the post-war contract "lottery," it makes little sense for the oil industry (or the politicians who supposedly cater to them) to support war.

Moreover, the profit opportunities afforded by Iraqi development contracts are overstated. The post-war Iraqi regime would certainly ensure that most of the profits from development were captured by the new government, whose reconstruction needs will prove monumental. In fact, Secretary Powell has repeatedly hinted that Iraqi oil revenues would be used for exactly that purpose. Big money in the oil industry goes to those who own their reserves or who secure favorable development contracts, not to those who are forced to surrender most of the rents through negotiation.

If the argument is that the United States is going to war to tame OPEC (accomplished, presumably, by ensuring that a puppet regime holds the second largest reserves within the cartel), then it runs up against the fact that the United States has never had much complaint with OPEC. Occasional posturing notwithstanding, both have the same goal: stable prices between $20-$28 a barrel. The cartel wants to keep prices in that range because it maximizes their profits. The United States wants to keep prices in that range because it ensures the continued existence of the oil industry in the United States (which would completely disappear absent OPEC production constraints) without doing too much damage to the American economy. The United States doesn't need a client state within the cartel, particularly when the cost of procuring such a state will reach into the hundreds of billions of dollars.

Oil, however, is relevant to this extent: Whoever controls those reserves sits atop a large source of potential revenue which, in the hands of a rogue state, could bankroll a sizeable and dangerous military arsenal. That's why the United States and Great Britain care more about containing the ambitions of Saddam Hussein than, say, the ambitions of Robert Mugabe. Still, if seizing oil fields from anti-western regimes is the name of the game, why aren't U.S. troops massing on the Venezuelan border and menacing Castro "Mini-Me" Hugo Chavez?

In sum, the argument that the impending war with Iraq is fundamentally about oil doesn't add up. While everyone loves a nice, tidy political morality play, I doubt there is one to be found here.

allafrica.com March 18, 2003 Posted to the web March 18, 2003 Donald Andoor Port Harcourt

In spite of the brutal assassination of the All Nigeria Peoples Party (ANPP) chieftain Dr Marshall Harry, the party still went ahead with the flag-off of its presidential rally in Port Harcourt last Saturday. Although the party had planned an elaborate two day programe which was to have kicked off last Friday with a grand finale on Saturday, this was later compressed into a one-day ceremony as a result of the assassination and its devastating effects.

The reason why the party went ahead with the ceremony, according to its national chairman, Chief Don Etiebet was because, "the late Harry had done all arrangements for the event including the speech he was to have read (the speech was read by his son Mr Sunny Marshall Harry)" and for the fact that "today is a day which Dr Harry had always dreamt of ... the party as a family decided to honour him by going ahead with the presidential flag off ceremony which we have dedicated to his honour."

Etiebet who addressed the mammoth crowd at the Libe-ration Stadium, explained that ANPP was not insensitive to the tragedy that had befallen the immediate family members of Dr Harry or the people of Rivers State and the entire South South region but that the party had planned to honour its slain chieftain by bringing his corpse to the stadium "but the forces of reaction did not allow us to take the corpse from Abuja." This was later corroborated by the Chai-rman, Board of Trustees, Rear Admiral Augustus Aikhomu (rtd) in his speech.,

The National Chairman who spent so much time eulogising the leadership qualities of the slain ANPP chieftain recalled that when the leadership of the ANPP took the decision to flag off its presidential campaign in Port Harcourt, "Dr Harry wasted no time in accepting the challenge ... He went ahead and put in his personal resources before asking us for anything ... A true fighter to emancipate the Niger Delta people and a great politician who craved for nothing else but excellence ... we are here to celebrate instead of mourning because we know what he stood for and we are ready to implement what he fought and died for."

He recalled how the slain ANPP leader worked for the success of the PDP in the last elections "but because of the deceit of the PDP government, because the elected officers of PDP have become one and only all knowing, he decided to pull out to work for the ANPP the party of choice, a party to watch, a party to win the presidential and all governorship seats and many others, we have become a target of attack."

Citing the case of Jesus Christ who cried in the hands of his torturers, he appealed to the members of the immediate family of Dr Harry to have solace in God because the slain Harry did not die in vain: "I appeal to all his family and sons as well as all lovers of democracy to celebrate the sacrifice which Dr Harry has made for democracy." As a mark of respect, Etiebet called for a three minutes silence and prayers in honour of the slain politician. Immediately after the three minutes silence, balloons were released in the air as a mark of martyrdom for the late politician.

Son of slain ANPP leader, Mr Sunny Marshall Harry was thereafter called upon to read the speech his late father had prepared before leaving for Abuja where life was snuffed out of him. But before reading his father's prepared text, he made a few remarks of his own. In a cracked voice full of emotion, the younger Harry shouted "ANPP" for three times and for each time the crowd yelled "One Nigeria." And having shaken off the emotion, he rhetorically thanked the killers of his father. "I thank those who killed my father, he was a regional leader or at best a national figure but at his death, he is a celebrated international figure today."

He paused, surveyed the audience and asked "what was his crime?" He did not wait for an answer but continued, "the right thing shall be done; that there should be justice; that the resources meant for the people are used to better their conditions." He told the crowd that "he (Marshall) was not a Martin Luther King but he sure had a dream for Rivers State and Nigeria; that one day Rivers people be they Ikwerres, Okrikas, Ogonis, Ekpeyes, Kalabaris, etc wherever they may be, will one day sit together on one table as brothers and be contented with justice and fair play from misrule and governance."

In a short but powerful moving tribute to his father, Sunny concluded that "I may not be a Marshall Harry and would not pray to be; but I am grateful to God for one thing; that I am the son of a great Marshall Harry," to which the stadium erupted and reverberated with applause.

He warned: "Those that killed my father to achieve success will have death waiting for them at the doorstep of their success" to which the mammoth crowd chorused "Amen".

The young Harry then went on to read the father's speech: "The event we are witnessing today marks the beginning of the end of journey of the corrupt PDP government at all levels that will us-her in a new dispensation of hope, security to life, property, prosperity to our children, youths and women and national security. To-day, we are laying the foundaiton of a just and stable society where equity and fair play will reign supreme in a country where every tribe, no matter how small or big will have the sense of belonging ... "We hear the noise of the PDP priding itself as the largest party in Africa. I tell you that the PDP is nothing but the biggest liability not only to Nigeria but Africa and the entire black world. A few days ago, the PDP members came to this arena to present themselves in their usual selfish and dishonest manner to canvass for votes from the South South people and in the process asked us to vote for continuity. But let me ask, continuity of what? Continuity of devastation of our land and economy? That we vote for continuity of galloping inflation? Continuity of unemployment of our youths? Continuity of insecurity to lives and property ..." And the crowd shouted NO! NO!! NO!!! in disapproval of voting for PDP.

By the time the young Harry was through with the written text his father had prepared, it became clear that the family had endorsed the holding of the rally that very Saturday.

Presidential flagbearer of the party, General Muhammadu Buh-ari who was ushered unto the dais at 4.07 p.m. lamented the brutal assassination of Dr Harry. He promised that the "party will no doubt honour him (Harry) at the appropriate time." The brutal killing of Dr Harry in the nation's capital Abuja, he stressed showed clearly the absence of security in Nigeria. He reiterated the commitment of the party to make the issue of security of lives and property its cardinal priority if elected into office.

Buhari while pledging that the campaign of ANPP will be issue oriented took on the PDP government's inability to tackle skyrocking inflation, the problems facing education, agriculture, environmental and electricity sectors. "We will fight this election on these platforms and by God's grace, we will win. These are issues we will base our campaigns on and not religion, ID card and ethnicity."

Identifying the railways, the textiles and the construction ind-ustry as heavy employers of labour, he said they are on the verge of collapse. He then declared, "All these critical sectors are in recession because of the PDP government's incompetence and its inability to attend to the problems of the economy. From 1999, the railways have lost 100,000 workers, the textile in 1999 employed 250,000, today they employ less than 60,000, many construction firms have closed operations thereby resulting in a loss of over 100,000 jobs. The list is endless...

"what about our currency? In 1999, it was N85 to one US dollar. Today, it is N140 to one dollar ... This government has expended over N3 billion on NEPA. It is worse than before and this government has no answer for any of these problems."

He recalled that since the PDP government came to power, the nation has known no peace. He accused the government of causing most of the ethnic and communal crises since "there is no peace and harmony either in the country or among government officials themselves."

Recalling the discordant tunes amongst the government officials over the ongoing fuel shortage in the country, Buhari noted how one government official attributed it to sabotage, another to the crisis in Venezuela which has shot up oil prices and how another had pro-mised Nigerians that the shortage would be over in one week and queried "which one do we believe? ... This shows there is no harmony in this government. What a shame!"

The ANPP presidential flagbearer who cleared himself of allegations of religious bigotry or that he called on northerners to boycott the ongoing registration of national identity card scheme explained that he was quoted out of context in Sokoto when he addressed moslem faithfuls by a journalist who was not present at the event and can neither hear nor speak Hausa language. He called on Nigerians to disregard allegations that he asked northerners to boycott the registration for the national identity card scheme and queried "How can I register and then ask others not to do same? All these allegations are because of desperation by the PDP members that are afraid of me."

He pleaded with Nigerians to disregard allegations that he is not a democrat by arguing "If I were not a democrat, I could not have joined a political party to seek election and be campaigning here and there and I would not have been calling for a free and fair elections."

But if the rally were to have a prize tag for the best appearance, stage performance, oratorial skills and prowess, the former Senate President and running mate to Buhari, Dr Chuba Okadigbo would have carted away all the prizes at stake. Okadigbo unlike Buhari who quietly slipped into the stadium through the VIP gate behind the state box, entered the stadium from the popular side gate, from the north east flank of the stadium. He came in about five minutes after the master of ceremony had announced the arrival of Buhari and people were beginning to ask where was Okadigbo.

As soon as Okadigbo emerged, there was a stampede from that side of the stadium as a large crowd clustered around him with the shouts of Oyi! Oyi!! Oyi!!! and at same time walking him to the state box. And repeatedly, he waved his horse tail to salute the mammoth crowd as well as acknowledge the shouts of "Oyi."

Okadigbo, spotting an immaculate white Senegalese kaftan over a pair of white trousers with a red cap to match in a theatrical display surveyed his audience left to right, and from right to left. He mounted the dais and was handed the microphone. He then thundered "you have listened to Buhari; will you vote for him?" he queried. "Will you vote Obasanjo out? the crowd yelled "yes." For three times, he thundered the same question and for three times the stadium reverberated "yeeesss!"

He paused, surveyed the audience again and waited for the defeaning applause to die down before he again shouted "God will punish them (killers of Dr Harry wherever they may be." He lampooned the PDP government for its lack of focus and insensitivity about the plight of the suffering masses of this country.

Displaying his theatrical skills as a man in great pains, he went on speaking without a break in his speech about the incompetence of the PDP controlled government. He suddenly bursts into a song "PDP is evil, PDP is evil" to which the crowd joined him.

He explained that as the Senate Chairman on Communal Conflicts, he visited 23 riot spots in different parts of the country and the result is that "only the PDP controlled states had witnessed violent crisis in the last three and a half years." According to him, "it is clear that those crises were being fuelled by the PDP government officials."

Chairman, Board of Trustees of the ANPP, Rear Admiral Augustus Aikhomu in his brief remarks told the gathering that the issue of the onshore/offshore oil dichotomy was not raised by the party's flagbearer because, "to the party it is a constitutional matter and every state must be given its 13 per cent derivation in line with the constitution of Nigeria."

He, however, said the ANPP is opposed to the backdoor arrangement the governors of the Niger Delta region have gone into with President Obasanjo on the onshore/offshore dichotomy bill since the party had accepted the decision earlier taken by the National Assembly on the matter.

Rivers State gubernatorial flagbearer of the party, Chief Sergeant Awuse in his message to the ruling PDP and INEC warned that there should be no rigging in the coming elections. "Those that will try to rig the elections should be inviting trouble because we have the will and capacity to resist any form of rigging." The event was witnessed by all the incumbent ANPP governors, the Presidential Campaign Co-ordinator, Alhaji Umaru Shinkafi, former Chief of Army Staff, Major-General Victor Malu, National Vice Chairman North-Central, Major-General Jerry Useni, Senators Musa Adede, Gbenga Aluko, Daniel Saror, Ro-wland Owie, Khairat Abdulrazak, Vincent Osulor and all gubernatorial flagbearers of the party.

www.oaoa.com Monday, March 17, 2003 By Julie Breaux Odessa American

John Bell said the Clinton administration and then-Texas Gov. George W. Bush nixed the idea of a differential tariff. Four years ago, he said the chairmen of Exxon Mobil and BP Amoco told him that crude oil would be priced at $12 to $14 through 2007, "and that I needed to sit down and shut up and go away. It was crazy."

At some point, everyone reaches his or her limit. John Bell reached his in 1998-99.

That’s when Venezuela flooded the market with crude oil, forcing some small, independent producers to shut in production. For Bell, a second-generation oil man from Kermit, the price of crude had fallen so low that any further production was unprofitable.

But, instead of grousing about the sad state of domestic oil and gas industry and accepting the status quo, Bell did something about it. And since that time, the soft-spoken Bell has been a consistent voice for regulatory and legislative change.

In January 1999, he organized an independent producers’ movement that climaxed when more than 300 producers demonstrated at the state Capitol to bring attention to the plight of Permian Basin oil producers then facing historically oil low prices.

He’s written scores of letters to top-level oil executives and to last few energy secretaries, sharing with them his concerns for the industry. He has also testified on the industry’s woes on Capitol Hill.

In early 2001, he applied for a position with the Department of Energy, hoping to influence debate on a national energy policy. At the time, though, Democrats controlled the Senate and his nomination never got out of committee.

Now, Bell wants to leverage his years of activism to obtain a seat in Congress.

Late last week, Bell said he was considering running for the open 19th Congressional District seat and would announce his decision sometime this week.

If he decides to run, Bell would have to hit the ground running. Since Rep. Larry Combest in January announced he would retire in May, about a dozen people from Odessa, Midland and Lubbock have announced their candidacies.

"I’m going to have to run like crazy."

Of the many issues he could focus on, the woeful status of the oil and gas industry would be his for the taking.

Bell has made it his mission to promote ways to stabilize energy prices, which, he says, would benefit producer and consumer alike.

"We’ve got to get off this (price) roller coaster," Bell said. "We need a long-term strategy to help us encourage stability instead of ‘Let’s spike it today and bust it tomorrow.’"

Out-of-control crude oil and natural gas prices typically spell trouble, too, he said, citing a 1997 Department of Energy study that found energy price spikes playing a significant role in nine of the 10 recessions since World War II.

"They (recessions) hurt the whole economy, and not just the United States but the world economy, because they send too many market shivers," Bell said. "All I used to think about were higher prices, but that’s not correct. I want a price that’s reasonable, that the public can afford and a price I can afford to produce it."

Energy-related recessions could be avoided and price stability achieved through a federal price floor, which would be tied to supply and demand, Bell said. A price floor would encourage domestic drilling, which in turn, would reduce the United States’ dependency on foreign imports.

Bell and petroleum engineer Kirk Edwards are kicking around the idea of promoting a nickel tax on diesel and jet fuel. The tax would, in essence, pay for a price minimum, he said.

"I don’t know that it’s acceptable in government or economic circles, but I think it would be beneficial to the country, and there’s lot of people in the industry who want that," Bell said.

If a price floor won’t fly, Bell believes a "floating" tariff on imported oil would help break the vicious circle of unrealistically high or low prices routinely leading to supply gluts or shortages. The tax would kick in when a barrel of crude dipped below a certain price, say $20, and increase the lower the price fell.

"There would be zero tariff at $20, and at $18 it would be $2 a barrel. At $10 a barrel, the tax would be $10," Bell said.

The government could reap billions of dollars from the import tax, Bell said, but few have indicated much support for the plan.

"Everybody from the (Department of Energy) on down said we couldn’t do that. It was just impossible."

In addition to floor prices and import tariffs, Bell believes a restructuring of the use of the Strategic Petroleum Reserve would be a "natural way" to moderate wide swings in crude oil prices.

The Strategic Petroleum Reserve is a U.S. government complex of four sites created in deep underground salt caverns along the Texas and Louisiana Gulf Coast that hold emergency supplies of crude oil.

"I think the SPR needs to be expanded and full so we have the reserve supply to help soften the economic impact to the country," Bell said.

Bell was critical of the way Bush has been filling the 700-million-barrel reserve with crude averaging slightly more than $27 a barrel.

"Supply and demand influence prices," Bell said. "So, if you have dropping (private) inventories, it’s telling you that supply is not keeping up with demand. Then quit buying it. When you see excess supplies available, you buy."

Bell said he felt vindicated by the release of a report by Senate Democrats two weeks ago that maintained Bush’s decision to divert 40 million barrels of crude from the market into the SPR helped drive up gasoline and other energy prices.

During 2002, when oil was diverted steadily into the reserve, oil prices climbed 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 the year, remaining above $30 a barrel from Dec. 23 through last Thursday, or 50 days straight.

Abraham has rejected the notion, but Bell doesn’t.

"We don’t need to buy $35 oil and put it in storage," Bell said. "It’s just plain, simple Economics 101. It isn’t rocket science. This is just smart, intelligent buying that will help soften what we’re doing even without some of these other ideas. Adding to the SPR in times of shortage is adding fuel to the fire. And somebody somewhere at pretty high levels is not picking that up."

biz.yahoo.com Reuters Monday March 17, 4:34 pm ET

NEW YORK (Reuters) - World oil prices eased further on Monday as dealers wagered that the looming war in Iraq would be short and inflict only limited damage on Middle East oil flows.

The possibility that the United States could release oil from its 600-million-barrel emergency oil stockpile further weighed on prices, which have fallen more than eight percent over the last three trading sessions.

"The market believes the war will be short and quick, so there should be a relatively soft landing for crude prices," said Charlie Luke at Aberdeen Asset Management.

U.S. light crude futures (CLc1) dropped 45 cents to $34.93 per barrel, down from a 12-year high of $39.99 hit late last month. That is $6 short of a $41.15 all-time peak during the 1990-91 Gulf War crisis.

Brent crude oil (LCOc1) fell 65 cents to $29.48 per barrel on London's International Petroleum Exchange, which was forced to close for two hours when anti-war protesters raided the London market waving banners saying "Oil fuels war."

Prices fell as the United States and its allies ended diplomatic efforts to win U.N. approval for an ultimatum to Iraq, clearing the way to launch war without Security Council authority.

Speculative investors that fueled a 60 percent rise in oil prices in just over three months are now selling to avoid being caught out by a sudden price slide if Middle East oil flows escape severe disruption.

In the first Gulf War, prices sank from over $30 to barely $20 when the U.S. launched its January 1991 offensive as it became clear that Iraq would not harm oilfields in Saudi Arabia.

But prices could quickly go back up if Iraq inflicts substantial damage on its own oilfields, or the war is prolonged, analysts said. Iraq and its Gulf neighbors together pump about 40 percent of global crude exports.

U.S. plans to quickly secure Iraq's northern Kirkuk oilfields in the event of war has also been undercut by Turkey's refusal to let U.S. troops through its territory.

"The market is betting on a short, straightforward campaign that would be over fairly quickly," said Steve Turner of Commerzbank in London.

"But there is definitely upside if the war is long and difficult and there are repercussions across the Middle East."

NO MARGIN FOR ERROR

A cold winter and prolonged supply hitch from Venezuela simultaneously drained commercial stockpiles to historic lows, and the OPEC (News - Websites)oil cartel has little spare production capacity to cover further supply disruption.

U.S. gasoline pump prices have already hit a new all-time high of $1.73 a gallon for an average price of regular unleaded, the government said on Monday. A sustained increase in energy costs could further weaken an already soft economy, analysts say.

Iraq's U.N.-supervised oil exports, which recently averaged almost two million barrels daily, will slow to a trickle this week as dealers have already stopped buying for fear of an imminent attack.

Iraq's two authorized export terminals in Turkey and the Gulf were both idle early on Monday. The United Nations later announced that it was pulling out all inspectors, including oil monitors.

Further pressuring prices, the chairman of the U.S. House Energy and Commerce Committee said the Energy Department told him the Strategic Petroleum Reserve is ready to release oil to counter a disruption in crude supplies, if necessary.

"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," Republican Rep. Billy Tauzin said in a letter to fellow lawmakers.

The United States and other members of the International Energy Agency (IEA), which comprises 26 industrialized nations, has said that it will allow OPEC oil producers to try to cover any shortages in war, releasing inventories from emergency stockpiles only as a last resort.

The IEA built strategic oil reserves after the 1974 Arab oil embargo. They were last used in the 1990-91 Gulf War after Iraq's invasion of Kuwait.