www.azcentral.com Reuters Mar. 17, 2003 04:24 PM

NEW YORK - Time is running out for extra oil supplies expected from the OPEC cartel to hit U.S. shores and allow the world's biggest fuel consumer to smoothly build gasoline supplies before the summer driving season.

Not getting the supplies could leave the United States more dependent on imports than ever, at a time when the White House edges to the brink of war on Iraq and retail gasoline prices hit all-time highs, threatening the stuttering economy.

''The U.S. needs large slugs of extra oil to cope with the increase in (refinery) runs, stop the erosion of inventories and to begin to claw back some cover,'' JP Morgan said in a research note. ''The U.S. oil market is undersupplied.''

U.S. oil stockpiles have fallen below 270 million barrels, the government's suggested level for seamless operations, as supply disruptions from Venezuela and an unusually long, cold winter drained supplies.

Resulting inventories, near the lowest level since 1975, could prove a problem for U.S. suppliers, who tend to use the brief respite in consumer demand in the second quarter to refine more crude and build fuel stocks before summer.

''The main problem is that while global oil demand does indeed hit a minimum in (the second quarter), U.S. crude oil runs increase,'' said JP Morgan, meaning deeper declines in crude supply are likely if imports don't shoot higher.

SECOND QUARTER INCREASED DEMAND

The U.S. second-quarter increase in crude oil demand averaged roughly 1 million barrels per day in 2001 and 2002, and is expected to be even sharper this year as the industry struggles to buffer paper-thin inventories.

''There's potential for trouble,'' said Tim Evans, senior analyst at IFR-Pegasus. ''Low crude inventories limit the extent to which higher refinery rates can be sustained. But the cavalry rising up over the hillside is represented by OPEC, which has already started pumping away.''

OPEC, which accounts for 60 percent of world oil exports, has signaled it will defend against global short supply by increasing shipment volumes even as it declines to lift its official production curbs due to worries over overall weakness in global demand.

OPEC powerhouse Saudi Arabia has already raised production sharply in the first two months of this year to make up for lost Venezuelan supply. Tanker brokers said on Friday the kingdom snapped up 14 tankers to move 29.5 million barrels of crude oil to the U.S. Gulf for May delivery.

So far, the increased production has yet to translate into higher U.S. crude stockpiles.

ENOUGH SAUDI CAPACITY?

And, while Saudi Arabia has reassured the market that it will continue to pump more oil in the event of a war, there are doubts about whether Riyadh has enough spare capacity to compensate fully for disruptions from Iraq, which has a sustainable export capacity of 2.2 million bpd.

The International Energy Agency in a monthly report on the oil market outlook released on Wednesday estimated that OPEC in total has only 900,000 bpd to spare, with 400,000 bpd in Saudi Arabia.

If crude becomes scarce enough to hinder the U.S. oil industry's attempt to build up gasoline supplies before summer, pump prices will likely continue to surge, pushing through record levels.

The average retail price of gasoline in the United States on Saturday was $1.719 a gallon, a new all-time high, according to the American Automobile Association's latest survey.

The U.S. inventory situation has worried the White House enough to consider tapping the Strategic Petroleum Reserve -- something reserved for only the most dire supply crunches.

U.S. Energy Secretary Spencer Abraham said on Friday Washington reserved the right to make a unilateral release of crude from the emergency reserve in the event of a severe supply disruption. The statement came after a similar comment from Japan, which said it would tap its reserve if Iraq is invaded by U.S.-led forces.

Sen. Jeff Bingaman, the top Democrat on the Senate Energy Committee, urged the Bush administration on Monday to immediately begin releasing up to 750,000 barrels of oil a day from the reserve until fresh OPEC supplies arrive.

Oil from the Middle East takes about 45 days to reach the U.S. market.

''This modest release would complement and not compete with the oil that is heading this way,'' Bingaman said. ''We will be helping to prevent a gasoline supply shortage and further price spikes,'' he said.

news.ncmonline.com Eastern Group Publications, Ingrid Maida, Mar 17, 2003

There is a saying in Spanish that goes “In times of thin cows, not only do meat prices go up, but so do people’s taste for beef.” The same trend appears to be happening with gasoline.

“If something has increased besides gas prices, it is gasoline sales,” says Ignacio Pilar, an Arco gas station attendant in Boyle Heights. “I don’t know why, but when the prices skyrocket, people buy more gas.”

As the American economy suffers through ever more serious woes and as gas prices break new records across the country, it is becoming more and more difficult to understand this phenomenon.

“It’s not that people are buying more, but what is happening is that the same amount of money buys you less gas,” affirms Jorge Perez, a Mexican immigrant. “Before I could fill up my tank with $20, now I need $40.”

Lester Garcia, a student who also works full time, assured this reporter he is buying the same amounts of gas now than he usually does. “Actually, I’d like to reduce my gas consumption, but I have to get to school and work. You have to do what you have to do, no matter how high the prices go.”

Despite his assurances, many gas stations are beginning to see not only an increase in profits, but also in the amount of gas they sell.

“We’ve tripled our sales,” says Agustin Campero, an Exxon gas station manager in Huntington Park. “Before we used to sell about four thousand gallons a day, but now we’re selling between 10,000 and 12,000 per day.”

It’s not entirely clear why that is, he explained. He speculated that the high gas prices have forced drivers to seek out gas stations with the lowest prices, thereby increasing sales at those places.

“Our sales our down by 25 percent,” said Nassim Hassen, a manager of a Shell gas station on the corner of Olympic and Soto streets. “I know our prices are a little bit more expensive than at other places, but we get our prices from the owners and we have to do what they tell us.”

Luckily for Nassim, however, most drivers interviewed said they usually buy their gas at the same place and don’t necessarily go where gas is cheapest.

“I always buy at Shell, though it’s higher here,” said Chilo Neri, who works in a clothing store. Ernestine Allen says the same thing. “I go to the 76 Station, though it’s a few cents more expensive.”

Well for some people it may just be a few cents more or less, it is evident that higher gas prices are harming many members of the local community.

“Sometimes I can’t scrape up enough money to put gas in the tank, so I walk or take the bus,” said Ramon Padilla as he put $5 worth of gas into his car.

Antonia Gutierrez, a mother of four from the state of Jalisco, Mexico, is upset over the increase in prices. “Latinos are always in worse shape because we earn less money and now we have to spend more,” she said.

According to the Automobile Club of Southern California, gas prices in California are breaking new records. “The last record was on May 15, 2001, when prices shot up to an average of $2.03,” said Paul Gonzales, an Auto Club spokesman.

Today, the average price is well above $2 in California. According to economic analysts, the threats of war, the strikes in Venezuela and the severe winter in the East Coast are the principle villains of the high prices. However, the majority of drivers blamed the imminent war for having to pay more at the pump.

“This imperialist government and this president who want to start a war in Iraq and ruin us here are to blame,” said an angry Juan Jose, a construction worker. But not everyone agrees.

“Everyone says high gas prices are due to the threats of the war, but they’re not. The oil companies are gouging us, pure and simple,” said Fernando Antezana. “There is no shortage of petroleum.”

Whatever the real causes may be, today most people’s pockets are being emptied at the pump while other people’s pockets are being filled, with the certainty on both sides of the gas pump that it’s strictly a temporary situation.

“Every year they find an excuse to raise gas prices because they know people need it and have no other choice but to buy it,” said Campero. “These are cycles of the market that take advantage of things like a war or events like September 11 in order to raise prices, but eventually they have to come back down again.”

foxnews.com Monday, March 17, 2003

NEW YORK — Time is running out for extra oil supplies expected from the OPEC cartel to hit U.S. shores and allow the world's biggest fuel consumer to smoothly build gasoline supplies before the summer driving season.

Not getting the supplies could leave the United States more dependent on imports than ever, at a time when the White House edges to the brink of war on Iraq and retail gasoline prices hit all-time highs, threatening the stuttering economy.

"The U.S. needs large slugs of extra oil to cope with the increase in (refinery) runs, stop the erosion of inventories and to begin to claw back some cover," JP Morgan said in a research note. "The U.S. oil market is undersupplied."

U.S. oil stockpiles have fallen below 270 million barrels, the government's suggested level for seamless operations, as supply disruptions from Venezuela and an unusually long, cold winter drained supplies.

Resulting inventories, near the lowest level since 1975, could prove a problem for U.S. suppliers, who tend to use the brief respite in consumer demand in the second quarter to refine more crude and build fuel stocks before summer.

"The main problem is that while global oil demand does indeed hit a minimum in (the second quarter), U.S. crude oil runs increase," said JP Morgan, meaning deeper declines in crude supply are likely if imports don't shoot higher.

The U.S. second-quarter increase in crude oil demand averaged roughly 1 million barrels per day in 2001 and 2002, and is expected to be even sharper this year as the industry struggles to buffer paper-thin inventories.

"There's potential for trouble," said Tim Evans, senior analyst at IFR-Pegasus. "Low crude inventories limit the extent to which higher refinery rates can be sustained. But the cavalry rising up over the hillside is represented by OPEC, which has already started pumping away."

OPEC, which accounts for 60 percent of world oil exports, has signaled it will defend against global short supply by increasing shipment volumes even as it declines to lift its official production curbs due to worries over overall weakness in global demand.

OPEC powerhouse Saudi Arabia has already raised production sharply in the first two months of this year to make up for lost Venezuelan supply. Tanker brokers said Friday the kingdom snapped up 14 tankers to move 29.5 million barrels of crude oil to the U.S. Gulf for May delivery.

So far, the increased production has yet to translate into higher U.S. crude stockpiles.

And, while Saudi Arabia has reassured the market that it will continue to pump more oil in the event of a war, there are doubts about whether Riyadh has enough spare capacity to compensate fully for disruptions from Iraq, which has a sustainable export capacity of 2.2 million bpd.

The International Energy Agency in a monthly report on the oil market outlook released Wednesday estimated that OPEC in total has only 900,000 bpd to spare, with 400,000 bpd in Saudi Arabia.

If crude becomes scarce enough to hinder the U.S. oil industry's attempt to build up gasoline supplies before summer, pump prices will likely continue to surge, pushing through record levels.

The average retail price of gasoline in the United States on Saturday was $1.719 a gallon, a new all-time high, according to the American Automobile Association's latest survey.

The U.S. inventory situation has worried the White House enough to consider tapping the Strategic Petroleum Reserve -- something reserved for only the most dire supply crunches.

U.S. Energy Secretary Spencer Abraham said Friday Washington reserved the right to make a unilateral release of crude from the emergency reserve in the event of a severe supply disruption. The statement came after a similar comment from Japan, which said it would tap its reserve if Iraq is invaded by U.S.-led forces.

Sen. Jeff Bingaman, the top Democrat on the Senate Energy Committee, urged the Bush administration on Monday to immediately begin releasing up to 750,000 barrels of oil a day from the reserve until fresh OPEC supplies arrive.

Oil from the Middle East takes about 45 days to reach the U.S. market.

"This modest release would complement and not compete with the oil that is heading this way," Bingaman said. "We will be helping to prevent a gasoline supply shortage and further price spikes," he said.

reuters.com Mon March 17, 2003 04:24 PM ET By Richard Valdmanis

NEW YORK (Reuters) - Time is running out for extra oil supplies expected from the OPEC cartel to hit U.S. shores and allow the world's biggest fuel consumer to smoothly build gasoline supplies before the summer driving season.

Not getting the supplies could leave the United States more dependent on imports than ever, at a time when the White House edges to the brink of war on Iraq and retail gasoline prices hit all-time highs, threatening the stuttering economy.

"The U.S. needs large slugs of extra oil to cope with the increase in (refinery) runs, stop the erosion of inventories and to begin to claw back some cover," JP Morgan said in a research note. "The U.S. oil market is undersupplied."

U.S. oil stockpiles have fallen below 270 million barrels, the government's suggested level for seamless operations, as supply disruptions from Venezuela and an unusually long, cold winter drained supplies.

Resulting inventories, near the lowest level since 1975, could prove a problem for U.S. suppliers, who tend to use the brief respite in consumer demand in the second quarter to refine more crude and build fuel stocks before summer.

"The main problem is that while global oil demand does indeed hit a minimum in (the second quarter), U.S. crude oil runs increase," said JP Morgan, meaning deeper declines in crude supply are likely if imports don't shoot higher.

SECOND QUARTER INCREASED DEMAND

The U.S. second-quarter increase in crude oil demand averaged roughly 1 million barrels per day in 2001 and 2002, and is expected to be even sharper this year as the industry struggles to buffer paper-thin inventories.

"There's potential for trouble," said Tim Evans, senior analyst at IFR-Pegasus. "Low crude inventories limit the extent to which higher refinery rates can be sustained. But the cavalry rising up over the hillside is represented by OPEC, which has already started pumping away."

OPEC, which accounts for 60 percent of world oil exports, has signaled it will defend against global short supply by increasing shipment volumes even as it declines to lift its official production curbs due to worries over overall weakness in global demand.

OPEC powerhouse Saudi Arabia has already raised production sharply in the first two months of this year to make up for lost Venezuelan supply. Tanker brokers said on Friday the kingdom snapped up 14 tankers to move 29.5 million barrels of crude oil to the U.S. Gulf for May delivery.

So far, the increased production has yet to translate into higher U.S. crude stockpiles.

ENOUGH SAUDI CAPACITY?

And, while Saudi Arabia has reassured the market that it will continue to pump more oil in the event of a war, there are doubts about whether Riyadh has enough spare capacity to compensate fully for disruptions from Iraq, which has a sustainable export capacity of 2.2 million bpd.

The International Energy Agency in a monthly report on the oil market outlook released on Wednesday estimated that OPEC in total has only 900,000 bpd to spare, with 400,000 bpd in Saudi Arabia.

If crude becomes scarce enough to hinder the U.S. oil industry's attempt to build up gasoline supplies before summer, pump prices will likely continue to surge, pushing through record levels.

The average retail price of gasoline in the United States on Saturday was $1.719 a gallon, a new all-time high, according to the American Automobile Association's latest survey.

The U.S. inventory situation has worried the White House enough to consider tapping the Strategic Petroleum Reserve -- something reserved for only the most dire supply crunches.

U.S. Energy Secretary Spencer Abraham said on Friday Washington reserved the right to make a unilateral release of crude from the emergency reserve in the event of a severe supply disruption. The statement came after a similar comment from Japan, which said it would tap its reserve if Iraq is invaded by U.S.-led forces.

Sen. Jeff Bingaman, the top Democrat on the Senate Energy Committee, urged the Bush administration on Monday to immediately begin releasing up to 750,000 barrels of oil a day from the reserve until fresh OPEC supplies arrive.

Oil from the Middle East takes about 45 days to reach the U.S. market.

"This modest release would complement and not compete with the oil that is heading this way," Bingaman said. "We will be helping to prevent a gasoline supply shortage and further price spikes," he said.

reuters.com Mon March 17, 2003 02:05 PM ET

NEW YORK (Reuters) - World oil prices eased further on Monday as dealers wager 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 dropped 63 cents to $34.75 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 fell 71 cents to $29.42 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 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 $1.719 a gallon for an average price of regular unleaded, the American Automobile Association 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.