reuters.com Mon March 17, 2003 01:46 PM ET By Tom Doggett

WASHINGTON (Reuters) - As a possible war on Iraq looms, the U.S. Energy Department is ready to release oil from the nation's emergency stockpile if needed to counter any disruption in crude supplies, the Republican head of the House Energy and Commerce Committee said on Monday.

A war with Baghdad would shut down Iraq's 1.7 million barrels a day in oil exports. However, there are market fears that military action could also disrupt oil shipments from neighboring Saudi Arabia and Kuwait.

Rep. Billy Tauzin, the Louisiana Republican who chairs the House energy panel, said the Strategic Petroleum Reserve (SPR) was ready to be used if needed.

"Our review with the Department of Energy has convinced me that the SPR is fully operational and capable of releasing crude oil within the parameters required to prevent interruptions in crude oil deliveries to the market," Tauzin said in a letter to fellow lawmakers.

"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," Tauzin said.

Oil markets have been skittish in recent weeks due to the possible war, supply disruptions in Venezuela and skyrocketing prices. Tauzin made his comments in a letter to U.S. lawmakers urging their support to expand the reserve to 1 billion barrels from its current capacity of 700 million barrels.

Congress created the stockpile in 1975 after the Arab oil embargo. It now holds 599 million barrels of crude in underground salt caverns at four sites in Texas and Louisiana.

An Energy Department spokeswoman said she had not seen the Tauzin letter and could not comment on it directly.

'NOTHING NEW'

However, she said there was "nothing new" with the administration's position on when and if it will use the emergency reserve.

She repeated comments by U.S. Energy Secretary Spencer Abraham that the administration "was prepared" to tap the reserve if there was a severe oil supply disruption.

"But at this point we have not made a decision to move on the Strategic Petroleum Reserve," the spokeswoman said. "We are monitoring the situation very carefully."

The price of U.S. oil traded at the New York Mercantile Exchange fell on Monday on talk that the United States was ready to release oil from its emergency reserves if war broke out with Iraq.

At 12:40 EST (1740 GMT), crude oil for delivery in April was down 83 cents at $34.55 a barrel.

If the administration decided to release oil from the SPR, the reserve's crude could be moved into the market between 10 and 15 days after a drawdown order from President Bush.

A White House spokesman would not say if Bush would include an announcement regarding the oil reserve in his televised address to the American people Monday at 8 p.m. EST.

reuters.com Mon March 17, 2003 01:42 PM ET By Richard Valdmanis

NEW YORK (Reuters) - U.S. gasoline prices are at all-time highs at the pumps due to thin supplies and fears that a war on Iraq could disrupt oil shipments from the Middle East, the American Automobile Association (AAA) said on Monday.

Retail gasoline prices are roughly 50 cents a gallon higher than they were a year ago, the AAA said.

Energy experts say they expect prices to continue higher as spring weather tempts drivers back onto the roads and boosts demand during a time of war -- a situation that could threaten a U.S. economic recovery by cutting discretionary spending.

The American Petroleum Institute (API), which represents a number of big U.S. oil companies, has said that the surge in retail gasoline prices can be justified by a dramatic rise in the cost of crude oil as dealers fret over potential supply woes in the event of war.

But the price boom has again raised concern over potential price-gouging by retailers, with a group of Midwest lawmakers already calling for stringent monitoring of pump prices to ensure fair pricing.

The average price of regular unleaded gasoline hit a record $1.719 a gallon on March 15, with prices breaching the $2 mark in a number of major cities, according to the AAA's latest survey of more than 60,000 self-serve stations.

Crude oil futures prices were hovering around $35 a barrel Monday, up about 35 percent in four months as tensions rose between Washington and Baghdad and amid supply disruptions from OPEC-member Venezuela due to a national strike there.

In a sign that an attack on Iraq is nearing, the United States, Britain and Spain on Monday ended diplomatic efforts to win U.N. approval for an ultimatum to Iraq, paving the way for war. United Nations weapons inspectors were withdrawn.

President Bush will demand in a speech to the American people on Monday night that President Saddam Hussein leave Iraq to avoid an attack, a White House spokesman said.

The AAA, the nation's largest automobile and travel association, said in a statement last week that motorists should avoid "panic buying" in the event of a U.S. invasion of Iraq because it has "the potential of causing needless fuel shortages in local areas."

www.msnbc.com NEW YORK, March 17 — 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 ahead of the summer driving season.
THE SITUATION COULD MARK a large problem for the United States, leaving it more dependent on imports than ever at a time when the White House pushes to the brink of war on Iraq and retail gasoline prices hit all-time highs, threatening an economic recovery. “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. gas prices hit record highs 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.
The resulting low oil inventories, near the lowest level since 1975, will prove a problem for U.S. fuel suppliers, who tend to use the brief respite in consumer demand in the second quarter to refine more crude oil and build fuel stocks ahead of higher summer gasoline demand. “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 — requiring a strong increase in imports.
“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 upping shipment volumes even as the group 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.
And, while Saudi Arabia has reassured the market it will continue to pump more oil in the event of a war, there are doubts 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. If crude supplies become scarce enough to hinder the U.S. oil industry’s attempt to build up gasoline supplies before summer, pump prices are likely to 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 inventory situation in the U.S. has worried the White House enough to consider the use of a release of the nation’s Strategic Petroleum Reserve — a move reserved for only the most dire of 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.

www.forbes.com Reuters, 03.17.03, 1:09 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures were sharply lower at midday on Monday as traders speculated that a looming war with Iraq would be short. Traders also believed U.S. could offset any supply shortage from the Gulf region by releasing oil from its strategic reserves, which helped pull down prices. At 12:55 p.m. EST (1755 GMT), NYMEX April April crude was down 93 cents at $34.45. Nearby May was down $1.01 at $32.30 and June down $1.06 at $30.90. NYMEX April crude oil surged as much as $1.02 higher to $36.40 in volatile trading and then quickly nose-dived as low as $1.38 to $34.00. "It appears very likely that the attack on Iraq will begin late in the week or shortly after...the advice for U.N. inspectors to get out was a serious signal that the time is nigh," said an energy market analyst from Houston. In London, Brent crude's new prompt month May was down 88 cents at $29.25. The United States, Britain and Spain ended Monday morning diplomatic efforts to win U.N. approval for an ultimatum to Iraq to disarm or face war. That, analysts said, now clears the way for the three countries to launch a war without a vote in the Security Council. U.N. Secretary General Kofi Annan told the U.N. Security Council that he is now pulling U.N. staff out of Iraq and that all U.N. work in the country, including the oil-for-food program, would be suspended. U.N. arms inspectors were packing their bags and were expected to leave Baghdad early Tuesday, a diplomat in Baghdad told Reuters. The impetus to remove inspectors followed an ultimatum from Bush on Sunday that the U.N. Security Council had just one more day to give its blessing to a resolution sanctioning the use of force to rid Iraq of suspected weapons of mass destruction. The U.S. has vowed to lead a coalition to disarm Saddam, who it accuses of violating U.N. disarmament resolutions, with or without U.N. support. More than 250,000 American and British troops are already poised to attack if the signal is given. Bush will deliver a television message at 8:00 p.m. EST, in which he is expected to make a final ultimatum to Iraqi President Saddam Hussein to leave or face invasion. The U.S. has yet to decide whether it would tap its 600-million-barrel Strategic Petroleum Reserve to stabilize domestic supply once Iraqi oil exports stop flowing, the U.S. Department of Energy said. U.S. Rep. Bill Tauzin from Louisiana, the Republican chairman of the House Energy and Commerce Committee, said earlier that the reserves had been switched to "flow mode" and was prepared to be put in the market if ordered by Bush. Iraq currently exports about 1.7 million barrels per day (bpd) of crude under U.N. supervision as part of sanctions when it invaded Kuwait in 1990. Last January, Iraq sold about 600,000 bpd to the United States. On Monday, the U.N.-supervised Iraqi oil exports were at a standstill and will likely stay that way until after a U.S.-led assault, which is now expected imminently, trade and U.N. sources said. Iraq's oil exports will be halted indefinitely once U.N. oil export inspectors are evacuated, which is expected to coincide with the pullout of U.N. arms inspectors by Tuesday. Saddam said early Monday that while Iraq had weapons of mass destruction in the past, it no longer had them. The day's prices have erased about $5.50, or nearly 14 percent, since NYMEX crude hit a 12-year high of $39.99 on Feb. 27. From mid-November to that high point, NYMEX crude prices had built up more than $15, or 60 percent, about half of which was seen as a war premium amid fears of supply disruptions that a war with Iraq would entail. Crude prices also rose as U.S. supplies thinned due to a crippling two-month strike in Venezuela backed by its oil workers that began Dec. 2. Venezuela's production is gradually being restored. Crude futures jumped to an all time high of $41.15 in October 1990 after Iraq invaded Kuwait in August of that year. Meanwhile, NYMEX refined product futures tumbled sharply, moving with crude. April gasoline futures were off 1.74 cents at $1.023 a gallon while April heating oil futures were down 1.67 cents at 92.40 cents.

www.sentinelandenterprise.com49921250232,00.htmlArticle Last Updated: Monday, March 17, 2003 - 10:37:55 AM EST By Megan Blaney

LEOMINSTER -- Henry Muldoon of Fitchburg remembers when a dollar would buy three gallons of gas.

But these days, Muldoon is spending more than $20 to fill his gas tank, and he is none too happy about it.

"These prices are horrendous," he said. "And I don't think they are justified."

Muldoon, a retired bookkeeper at the former Junkala Car Dealership, which has since been renamed Chapdelaine, described "a different age" where a thrifty shopper could find a better deal.

"During the Depression, the price per gallon dropped to 19 cents a gallon," he said, while filling up at the Country Farms station in Leominster, where unleaded gas prices start at $1.61.

Fitchburg resident William Velez said that only last month, he could fill up his Ford Windstar for about $20.

"Now it's at least five dollars more," he said.

Regular unleaded gas prices in Massachusetts are 54 cents higher on average than they were a year ago, rising from $1.139 to $1.679 per gallon, according to a March 10 survey by the American Automobile Association. The national average on March 10 was $1.68.

The increase in gas prices is due, in part, to the cost per barrel of crude oil, which topped $37 a this week, an increase of $7 from December 2002.

The cost of crude oil is affected by rising heat demands in the winter, the uncertain situation with Iraq and labor unrest in Venezuela, according to American Petroleum Institute analyst Ron Planting.

Gas prices are determined not only by the cost of oil, but by the cost of delivery, maintenance and taxes.

Federal and state taxes add up to 40 cents per gallon in Massachusetts.

The gas station is then allowed to set a price for gas which is gauged depending on the costs, and often on the competing filling stations in the area.

AAA spokesman John Paul said his agency keeps a watchful eye on dealers to prevent the possibility of price gouging, which would artificially inflate the prices.

"This type of increase has the potential for gouging," he said.

Manager Tina Lane of the Route 13 Leominster Hess station said she is "just trying to remain competitive."

She said she tries to keep the prices low "for her regular customers."

The Hess station is sandwiched between two filling stations that charge about 12 cents per gallon more than Hess.

Local gas station owners find themselves at a disadvantage in this economy and are forced to offer lower prices or incentives to draw in the customers.

Getty stations are offering a coupon for a free Whopper from Burger King with a fill-up, and several stations have days when premium gas is offered at a discount.

The Massachusetts average gas price falls in the middle of prices for the 50 states that range from $1.53 per gallon of "regular" unleaded gas in Georgia to $2.06 in California.

Harry Bronson, who works at the Pace Station at Kimball and Rollstone streets, said customers aren't filling up their tanks any more.