sg.biz.yahoo.com Friday March 7, 6:21 AM

CARACAS (Dow Jones)--Venezuela would back any OPEC decision including a temporary suspension of the group's oil output quotas in the case a U.S.-led intervention in Iraq were to happen in the coming weeks, the nation's Oil Minister said Thursday.

"We will back any decision the group may take ... also if that means a temporary suspension of output quotas," Rafael Ramirez told reporters at the presidential palace Miraflores.

OPEC is meeting March 11 in Vienna and is expected to agree to suspend output restraints in the event of a war. But, in practice, due to rampant quota-busting in response to sky-high prices, OPEC already has dropped restraints and is essentially pumping at maximum levels.

Venezuela, however, is not likely to contribute above its official output quota level of 2.819 million b/d due to a crippling strike from which it is only recently recovering.

Earlier Thursday, Ramirez was quoted as saying production stands at 2.5 million b/d. "We're close to reaching our OPEC production ... by the end of this month," Ramirez was quoted as saying by state-run news agency Venpres.

The government's production level sharply contrasts with figures maintained by ex-staff of PdVSA (E.PVZ). They claim production stands only at 1.09 million b/d after PdVSA temporary shut in 500,000 b/d of crude production due to an export bottleneck in the east. The government, however, claims the 500,000 b/d have already been recovered.

A nationwide strike which started Dec. 2 and lasted for two months severely crippled exports and production, which stood at around 3 million b/d by the end of November.

The company is struggling to reach or go beyond the 2 million b/d production level, analysts have said. After focusing on easy oil fields that don't require much added pressure to get the oil flowing, PdVSA faces difficulties as mature oil fields are more labor and capital intensive and take more time to pump oil.

Experts have said they doubt PdVSA would reach 2.5 million b/d any time soon due to a lack of financial and human resources.

-By Fred Pals, Dow Jones Newswires; 58414-2887461; fred.palsdowjones.com

www.easterneronline.com By Brian Triplett March 06, 2003

In the wake of mounting tensions in North Korea and a possible war with Iraq, gas prices have skyrocketed across the nation. By this summer, unleaded gas could cost $2 or more per gallon.

The managers of the local gas stations in Cheney cite a number of reasons for the high prices including, but not limited to, the possibility of going to war, an oil production shortage in Venezuela and being competitive with businesses in Spokane.

Chris Ray of Ray’s Gull pointed out that because of production problems and a country-wide strike, it will take Venezuela about three months “to get up to capacity to what they were shipping.”

The United States is the number one importer of oil from Venezuela, so this creates a problem for car owners.

The Conoco A-n-D and Cheney Station (formerly Gary’s Chevron) may charge more for their gas, but they receive the most business from students and university employees due to their locations.

A-n-D Manager Don Moravec chalks this up to “supply and demand.” According to local A-n-D statistics, Conoco doesn’t purchase any oil from the Middle East, but their wholesale prices are affected by the current production problems in South America because approximately 30 percent of their supply comes from Venezuela.

Moravec said the rest of their oil supply comes from the U.S. and Canada. According to Moravec, A-n-D is part of a five-store chain operating in Washington and Idaho. The chain’s owner sets the prices, which are based on what other competing stations are charging. When asked how gas purchases at his location have been affected by the price increases, Moravec said sales are “about 25-30 percent less. It’s hard to compare to last year because we were selling it [regular unleaded gas] at $.99 this time last year.”

Charlie Fulbright, manager of Cheney Station, explained the Cheney Station has to set prices “a certain margin above our cost.”

“We made special arrangements with Chevron to keep the same price as Spokane,” Fulbright said. “So many people come out of Spokane that we wanted our price to be the same as Spokane.”

Although their gas costs eight to 10 cents more than what some of their competitors are charging, Fulbright emphasizes that what students get in exchange is better variety and service.

Cheney Station is open 24 hours and features auto repair, a car wash, and U-Haul rental services in addition to a selection of products comparable to “a lot of grocery stores.”

While selection is important, some customers just hunt for the best price. Ray’s and the recently opened Xllent Gas & Grocery have the lowest gas prices in Cheney.

Chris and Christy Ray of Ray’s have been in business for almost 12 years. Two years ago, Gull bought their station, but they lease the property from the corporation. Ray’s is currently the oldest operating gas station in Cheney and a favorite among local residents.

The Rays said more people from Eastern have been going to their station ever since they lowered prices to compete with Xllent Gas & Grocery. “Xllent Gas has been good for our business,” Ray said.

In addition to being more competitive, the Rays have seen the benefits for their customers. According to Christy Ray, they have been receiving fewer bad checks and customers can afford to buy more things when they stop in. When it can cost as much as $70 to fill up a Chevy Suburban, anything that helps save customers money is good for inside sales, which can be vital to a station’s success.

Ray believes gas prices are going to continue to rise for at least three months. He sees a direct relationship between wartime conditions and the U.S. economy.

“After every war, there is a huge change in the Stock Market and gas prices drop considerably. Right now, the same thing is happening. If we do go to war, that will probably help the economy. After the war, within three weeks prices will start dropping,” Ray said.

According to Ray, there has been some justifiable fear among consumers. He sees similarities between concerns in the farming community about increases in operating expenses and the public’s reluctance to buy as much gas as they used to. He wanted to stress he believes in being fair to customers. He also wanted to allay any concerns the public might have that gas stations are being unethical in their pricing strategies.

“People think that you can buy a lot of gas when it’s cheap and then overcharge them when prices go up… but we don’t do that. You’re not going to load up on fuel to gouge the public.”

Owner Dave Singh of Xllent Gas & Grocery has seen no significant changes in his sales since everyone else’s prices went up.

“College students don’t come around this side of town,” Singh said. This makes no sense to Singh because of their low “all around prices” on everything from milk, bread and eggs to beer and cigarettes. The Xllent Gas & Grocery is part of a small family-owned chain based out of Spokane. Singh said that Xllent Gas & Grocery tries “to be good friends to the neighborhood.”

Singh said his store is able to offer lower gas prices partly because they sell unbranded gasoline instead of having a franchise from one of the major corporations.

The other reason he cited is “being family-owned. If you’re paying somebody else $9 an hour to manage your store, there is no way you can afford to keep prices so low.”

Both Ray and Singh think that more people from Eastern would shop at their stores if they were closer to Betz Road. College students tend to prefer convenience and being on the route they take to school over hunting for the best prices. Ray also suggested some students probably use gas cards where their parents foot the bill.

With no hope of economic relief in sight at least until the situation in Iraq is resolved, students may be forced to forego convenience and personal preferences and start going where their money goes the farthest. If this happens, eventually small locally owned businesses such as Ray’s, Xllent Gas & Grocery and the Cheney Trading Company will triumph over the major chain stores. 

www.townonline.com By Erin Walsh / Staff Writer Wednesday, March 5, 2003

Where do you buy your gas?

That is a question posed by an e-mail making its way around urging consumers to boycott imported oil from the Middle East by having consumers steer away from filling their tanks at stations notorious for purchasing crude oil from the Middle East.

The e-mail reads "The Saudis are boycotting American goods. We should return the favor." It goes on to claim gas stations like Citgo, Sunoco, Conoco, Sinclair and Hess don't import Middle Eastern oil, while counterparts Shell, Exxon, Texaco and Mobil do.

The talk of war with Iraq and the ongoing strike in Venezuela have spiked gasoline prices over the past few months.

Venezuela rates among the world's top 10 crude oil producers, while Iraq holds the second largest proven reserves, with more than 112 billion barrels of oil.

Energy officials familiar with the e-mail claim it's a hoax and that it's impossible to determine which stations use Saudi oil.

"I'm familiar with it. Every time (gas) prices go up the same e-mail goes around," said Stephen Dodge, associate director for the Massachusetts Petroleum Council in Boston. Dodge says the United States receives 60 percent of its crude oil from overseas, with a good portion coming from Persian Gulf countries.

"Overall, as far as product like gas and home heating oil goes, (individual stations) get a mix from overseas and domestic production," said Dodge. "It's hard to say one company gets all its finished product from Saudi Arabia. So I really wouldn't venture to say (boycotting) would be a symbolic gesture because it's only a meaningless gesture."

Art Kinsman, director of government affairs for AAA New England, says a boycott of Middle Eastern oil is a "silly" notion and one that would only hurt station owners.

"How you could know for a fact a retailer is using only non-imported oil seems ludicrous to me," said Kinsman. "I would hate to see anyone penalize the local Shell guy because someone says his oil comes from Saudi Arabia."

Jonathan Cogan, spokesman for the Energy Information Administration, says the administration has no way to track where all oil comes from at the retail level.

"The only thing we can look at is a mandatory survey importers have to file that looks at the volume and type of oil imported," said Cogan.

"A dealer that owns a local gas station buys from a refiner or a bulk storage terminal that has oil coming from several pipelines."

Kinsman has closely followed gas price jumps in Massachusetts and says consumers can still feel empowered when it comes to the pending War with Iraq and its oil consequences.

"Reward the retailers charging less for gas by shopping around at the pumps," said Kinsman. "The main reason the prices are so high right now is jitter in the market over (threatened) war with Iraq."

Kinsman said this week's survey saw self-serve regular prices averaging from $1.57 to $1.80, with the highest full-serve price coming in at $2.10 per gallon.

"We're paying a war premium now for a war that hasn't happened," added Kinsman, whose not fully convinced individual retailers are making more of a profit when the prices spike.

"In some cases where a little local battle over customers ensues among retailers, some may be making less profit even though overall price is higher," said Kinsman.

Reporter Erin Walsh can be reached at 781-433-8337 or ewalsh@cnc.com.

sg.biz.yahoo.com Thursday March 6, 3:39 PM By David Bird Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Saudi Arabia has told Western government and oil officials that the kingdom's crude oil output has reached its limit at around 9.2 million barrels a day and won't rise further, even with a war looming in Iraq, Dow Jones Newswires has learned.

According to Western officials who have spoken with Saudi officials in recent days, there is an understanding that because Saudi output can't rise further, a release of oil from consumer governments' emergency stockpiles is inevitable, if and when, a U.S.-led war is launched on Iraq.

One Saudi Arabian oil ministry official refused to comment on what the Western sources said, and others were unavailable for comment.

Saudi Arabia has maintained that it has about 10.5 million b/d of oil production capacity and that output could be raised to that level within weeks or months, after considerable investment. But the Saudis haven't pumped at that level in more than a decade.

However, top Saudi officials have let it be known in recent days that they don't intend to take steps to push output to that level, because they don't think the oil will be needed.

The Western officials said the Saudis have expressed the view that the release of oil from consumer stockpiles held by member nations of the International Energy Agency, and already high output from other OPEC members, will be sufficient to cool soaring oil prices, to meet demand and to top-up low global inventories.

The Saudis also have expressed the view that any U.S.-led war on Iraq would be relatively brief and isn't expected to disrupt operations in neighboring oil exporting countries.

Prices Now Hyper-Inflated

The Saudis, and others in OPEC, have said that current oil prices, which soared to $39.99 a barrel last week in the U.S. - the highest level since autumn 1990 - are hyper-inflated by war fears.

They say prices will return to more normal levels once the Iraqi situation becomes clear.

Still, a brief price spike into the mid-$40 level, topping the 1990-91 Gulf Crisis high of $41.15 is expected if war breaks out.

In January 1991, when the IEA offered 2.5 million b/d of oil from strategic stocks, crude oil futures prices on the New York Mercantile Exchange fell by one-third, or more than $10.50 a barrel, in the biggest-ever single-day price decline.

OPEC is set to meet On March 11 in Vienna to review output policy. It is expected to agree to suspend output restraints in the event of a war.

But, in practice, due to rampant quota-busting in response to sky-high prices, OPEC already has dropped restraints and is essentially pumping at maximum levels.

Saudi Arabian Oil Minister Ali Naimi has repeatedly pledged in recent weeks that the kingdom, and other OPEC members, will ensure adequate supply to the market and produce at the group's 24.5 million b/d output ceiling, despite strike-related output problems in Venezuela.

The 24.5 million b/d level, matches on average, the expected demand for oil from OPEC and movements from stocks in the first half of 2003.

Industry surveys have put February output by OPEC's 10 members, excluding Iraq, at above the 24.5 million b/d level in the month, even with Saudi output estimated below 9 million b/d.

Dow Jones Newswires' survey, published Tuesday, put OPEC-10 February output at 24.701 million b/d, with the Saudis estimated at 8.733 million b/d in the month. The Kingdom's official quota now stands at just below 8 million b/d.

Venezuelan officials maintain that the country's crippled oil production is back over 2 million b/d and rising, while independent estimates and those from dissident workers who led the strike at the state oil company, put the figure at below 1.7 million b/d.

In any case, the recovery in the past several weeks in Venezuela's output is helping offset the need for more oil from others in OPEC.

Western officials note that standard industry practice requires producers to keep about 10% of output capacity idle to ensure operational flexibility, and on this basis, too, the Saudis don't find it possible to go beyond output of about 9.2 million b/d.

The Saudis also don't want to make the investment to maintain output readiness at 10.5 million b/d only to have to keep output well below that level, the Western officials said.

No Significant OPEC Output Hike

Apart from a potential uptick from Venezuela and a slight gain of no more than 200,000 b/d from the UAE, OPEC's output won't rise much with the start of a war, the Western officials said.

Kuwait has said that, as a precaution, it will shut in about one-third of its output, or around 700,000 b/d with the start of a war. But the officials said this is expected to be off-line only briefly during the first days or weeks of a war.

The Western officials said that while Saudi Arabia has expressed strong support for reining-in runaway oil prices, there is also concern about a considerable drop-off in oil demand in the second quarter 2003.

The IEA, in its February oil report, forecasts that demand for OPEC oil and required movements from inventories will fall by 2 million b/d with the end of the high-demand winter season in the Northern Hemisphere.

As reported, Naimi met Wednesday in Riyadh with the new head of the IEA, Claude Mandil, and pledged to keep oil markets supplied in the event of war in Iraq.

In the meeting, Mandil welcomed the commitment from OPEC to meet "any further loss of supplies to oil markets in a swift and timely manner," IEA said in a statement.

The IEA, which holds huge reserves of oil in emergency stockpiles, is committed and prepared "to respond convincingly to any loss of oil supplies by making additional oil available to the market when needed," Mandil said.

According to the official Saudi Press Agency, Naimi said the two discussed "the importance and the role of OPEC, in general, and Saudi Arabia, in particular, to make up any shortage in the oil supply as a result of discontinuation of oil production of any country for any reasons."

"In this situation, IEA agreed with OPEC opinion that the producers should utilize their spare capacity before resorting to the oil available in the strategic reserves by consumers," the SPA report said.

The IEA statement doesn't refer to any agreement or understanding that OPEC would use its spare capacity before consumer countries would open their reserves.

The agency said after a Feb. 20 Paris meeting of its governing board that it would open its reserves to supplement OPEC's efforts if needed.

IEA Can Provide Near 13M B/D

Member countries of the IEA, which is the oil-market watchdog of the Organization for Economic Cooperation and Development, hold about 4 billion barrels worth of crude and petroleum products in government and industry stockpiles.

This is enough to cover 115 days of their total net imports.

In the January 1991 Gulf War, the IEA activated a plan to release 2.5 million b/d of oil into the market, with 45% of that coming from the U.S.

IEA countries can release about 13 million b/d of stocks from strategic reserves, hugely in excess of Iraq's current output of around 2.4 million b/d.

The U.S. Strategic Petroleum Reserve, at a record level of just under 600 million barrels, is the single biggest chunk of this reserve inventory.

-By David Bird, Dow Jones Newswires; 201-938-4423; david.bird@dowjones.com

-Edited by Simon Hall

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.