www.sfgate.com Tuesday, March 4, 2003
(03-04) 16:08 PST (AP) -- Dow Jones News Service

NEW YORK (Dow Jones/AP) -- Crude oil futures rallied Tuesday, staging a sharp recovery after three straight sessions of declines on hopes that a war with Iraq could be averted.

Between Thursday and Monday, prices fell sharply as Iraq's increased cooperation with U.N. weapons inspectors and Turkey's rejection of access to U.S. troops sparked speculation that a U.S.-led attack on Iraq could be avoided, or at least delayed by several weeks.

But prices turned around Tuesday as the U.S. stepped up military preparations for a possible war and indicated it would seek U.N. Security Council approval of a resolution on military action next week, analysts said.

At the New York Mercantile Exchange, April crude oil futures rose $1.01 to end at $36.89 a barrel after rising as high as $37.18 intraday.

April heating oil futures ended up 1.26 cent at $1.0486 a gallon, while April gasoline futures climbed 1.74 cent to settle at $1.1122 a gallon.

At London's International Petroleum Exchange, April Brent futures rose 61 cents to close at $33.09 a barrel.

Natural gas for April delivery retreated 12.1 cents to settle at $7.041 per 1,000 cubic feet.

American officials, dismissing Iraq's destruction of its short-range Al Samoud 2 missiles as inadequate and insincere, pressed ahead for a final confrontation.

Military forces continued to mass in the Persian Gulf, with the United States deploying an additional 60,000 troops to the region atop the 230,000 troops already there. Turkey is also debating whether to resubmit a parliamentary motion to allow more than 60,000 U.S. troops to use the country as a northern front against Iraq.

At the same time, officials said they plan to bring to a vote next week a Security Council resolution authorizing military action against Iraq.

The measure, backed by Great Britain and Spain, faces stiff opposition from Security Council members, with Russia's foreign minister Igor Ivanov issuing a veiled threat to veto it.

But a White House spokesman said the United States believes it has the nine votes necessary to pass the resolution, though he left open the possibility that the United States might withdraw the resolution if it concludes it would not pass.

Regardless of the outcome of a vote, the United States says it's prepared to press ahead with an attack, barring an 11th-hour decision by Iraq to give up its weapons of mass destruction.

U.S. officials say there is virtually nothing Iraq could do to convince them that it is serious about disarming. In a speech Tuesday, President Bush reiterated his determination to see Iraq stripped of its weapons of mass destruction.

Energy traders worry that an attack on Iraq could disrupt the flow of oil from the Persian Gulf.

Meanwhile, OPEC and non-OPEC oil ministers will meet next week to discuss what they could do in the event of a war in Iraq, an official from the Organization of Petroleum Exporting Countries said.

OPEC countries have increased production in recent months in response to a strike in Venezuela and soaring oil prices. According to a Dow Jones Newswires survey, OPEC crude oil output jumped by 1.43 million barrels a day to 27.091 million barrels a day in February from January.

www.hopewellnews.com By ALEX BRIDGES News Staff Writer

Even as temperatures warm up across much of Virginia, Columbia Gas customers may feel the cold reality of increased prices as they could begin to see their bills jump more than 30 percent. Columbia Gas announced Monday the company's customers would likely see a 33 percent increase in their utility bill starting in March and depending on how much gas they use, consumers will feel that cost increase. Columbia Gas used the example of a current monthly bill of about $106 increasing to more than $140. Bob Innes, a spokesman for Columbia, explained the increase comes as a result of greater usage by its customers during an unusually cold winter. The price Columbia pays for the fuel increased, forcing the company to pass the cost onto the customers. Specifically, reasons for the increase include: • Continued colder weather resulting in heavier than anticipated withdrawals from underground storage facilities. • The sustained cold weather in Columbia Gas’ service territory has been about 10 percent colder than normal for the season. • The time required to develop new drilling of natural gas versus the increased demand is creating added price pressures. • Oil is adding upward pressure on natural gas prices. This is contributed to the Venezuela strike and Middle East uncertainty. • According to the American Gas Association natural gas demand is expected to increase nearly 8.7 percent above last winter’s level. Innes also explained the driving cost comes from the unrest in the Middle East and in Venezuela. "The energy market is being pressed," Innes said. Industries have helped drive up the cost, as well, since many use natural gas for fuel. Ken Schrad, spokesman for the State Corporation Commission, explained the entire energy market has reacted to the problems involving foreign oil. "They had no choice but to pass the cost on to the consumer," Schrad said. Schrad said Columbia files reports with the SCC and looks at both past and future costs of natural gas. He acknowledged the cost of the fuel had spiked following the cold snap Industries often have the capability to switch fuel sources, Schrad said. When oil prices increase, they can revert to natural gas. This switch then raises the demand and the price of natural gas, the SCC official said. Although the company couldn't fully anticipate the weather, Innes said Columbia Gas looks at a 30-year average when determining future prices. Those currently on a budget payment plan with the utility may also be in for a shock: Their March bill may appear about double what it should be. The annual March adjustment is indicating a potential for the monthly budget customer to have their amount double the current amount, according to a Columbia Gas press release. Customers will see their individual account change in their March bills. Columbia Gas has about 47,000 customers participating in the budget payment plan. Schrad said Columbia will work with its customers to allow them to pay their bill to the best of the consumer's ability. Additionally, area social services departments offer assistance through a crisis program; the Salvation Army also helps with Heatshare. Although the company offers the payment plan, "there's an obligation of the customer to contact them" about whether they can receive assistance. Prices may not go down any time soon, Innes said, adding the company cannot predict whether prices will go down.

www.thedesertsun.com

Statewide average gasoline prices at the pump have jumped more than 18 percent over the last month to $2.01 from $1.70. This is the first time that average prices moved above the $2 barrier.

PALM SPRINGS -- The average price of a gallon of regular gasoline in California has broken the $2 barrier for the first time.

The California Energy Commission, a Sacramento agency that monitors energy issues, said Monday that regular gasoline averaged $2.01 a gallon statewide for the week ended March 3.

Regular gas statewide on average now costs 43.5 cents a gallon more than it did the first week of January, and 68 cents more than it did at this time last year.

In the Automobile Club of Southern California’s latest gas price survey, Palm Springs averaged $1.97 per gallon of gas.

"They’re inching toward that $2 barrier, and probably will hit it in a matter of days," said Jeff Spring, a spokesman for the Santa Ana-based automobile club.

The club is expected to issue its monthly fuel report on average gas prices for cities like Palm Springs and others in the Coachella Valley on March 11.

Terry Parker, director of maintenance operations and transportation for the Desert Sands Unified School District, is getting dizzy over the rapid rise in gas prices.

He’s thinking of ways to renegotiate gas prices with two local supply vendors, and get better deals on repair parts.

Under a worst-case scenario, he might even have to consider layoffs, he said.

The district budgeted $110,000 for fuel costs in its fiscal year ending June 30.

Over the past two months, however, fuel prices have jumped 18 percent on average for diesel and regular gasoline -- and there are four months left in the fiscal year, Parker said.

That’s a projected $20,000 over annual budget, he estimates.

The fuel is needed to run a fleet of 62 buses, and transport a sizeable chunk of the La Quinta-based district’s 25,000 students.

"We have to cut back across the board, not just in fuel prices, but we’re going to have other budget shortfalls as well," said Parker of budget cuts that have been passed along by the state.

For some motorists, the stratospheric gas prices might not mean much.

David Murphy, president and co-owner of Desert European Motorcars Ltd., isn’t worried about his clientele, for instance.

"A rise of 50 cents on the gallon isn’t going to affect them to drive down the street from El Paseo to downtown Palm Springs," Murphy said.

Murphy’s high-brow dealerships in Rancho Mirage and Palm Springs sell Bentley and Rolls-Royce automobiles, Jaguars, Porsches, BMWs and Mercedes Benzs.

"They are probably spending more for heating oil for their other home in Aspen (Colorado) than on their other car," he added.

Crude oil prices have soared because of uncertainty about supplies from the Middle East given the U.S. saber rattling over Iraq, as well as oil supply problems in Venezuela and Nigeria.

In addition, continuing cold temperatures in the eastern United States have increased the demand for heating oil, increasing the competition for available oil supplies.

Additional factors are at work in California as well. Several refineries are down for planned yearly maintenance, tightening supplies and increasing prices on the spot market, explained Rob Schlichting, a spokesman with the California Energy Commission.

When gas prices are adjusted for inflation, gasoline has been more expensive in the past, Schlichting explained.

Average pump prices of $1.34 a gallon in 1981, for example, equate to $2.45 a gallon in today’s dollars.

Schlicting urged motorists to shop around for gas because retail prices varied as much as 30 cents a gallon from station to station in its price survey.

Pat Maio is the Business Editor for The Desert Sun. He can be reached at 778-4625 or via e-mail at pat.maio@thedesertsun.com

abclocal.go.com

With oil prices nearing $40 a barrel, and the economy stumbling, many are calling on President Bush to tap into the massive oil supplies known as the Strategic Petroleum Reserve.

The reserve is a nearly 600-million-barrel, 53-day supply of crude oil held in Texas and Louisiana, and designed to protect the country in case of a shortage big enough to threaten the national safety of the economy.

It's up to the president to determine when it should be used.

It took a national energy crisis — the Arab oil embargo of 1973 — to create the reserve in the first place. And some see a crisis in the making now.

"If ever there was a rainy day in the oil market and the economy, this is it," said economist Donald Straszheim of Straszheim Global Advisers in Santa Monica, Calif.

Release Could Drop Oil Prices Those who favor tapping into the reserve right away say it would calm fears and lower prices.

When the first President Bush authorized the use of strategic reserves on the first day of the 1991 Gulf War, for instance, the price of crude oil plunged from $31 to $21 a barrel in a single day — the largest one-day drop ever. He was later criticized for acting too late to keep the country out of recession.

When President Clinton tapped the reserve in September 2000 to relieve high prices and temporary shortages, the price of crude fell $3.50 in a week. He too was later criticized, in this case for using the reserves for political reasons.

The steep rise in crude oil prices over recent months, fueled by talk of war with Iraq, as well as the ongoing work strike in Venezuela and unusually cold winter weather, has had a real impact on the economy and consumers, driving up prices at gas pumps and for home heating oil.

But for now this President Bush is sitting tight. Energy Secretary Spencer Abraham last week told ABCNEWS, and the Senate, that strategic reserves are for emergencies only. "Obviously we are prepared to act. But that situation has not yet in our judgment arrived," said Abraham.

As one analyst put it, you can't afford to act on a rainy day when there may be a full-fledged storm coming — a war with Iraq. But with oil prices approaching $40 a barrel and oil supplies at a 28-year-low, the pressure on the president is intensifying.

Source: ABCNEWS

Last Updated: Mar 4, 2003

www.forbes.com Reuters, 03.04.03, 1:29 PM ET

NEW YORK (Reuters) - Exxon Mobil Chairman Lee Raymond said Tuesday that the Bush administration could release emergency crude reserves in the event of a war with Iraq, depending on the extent of disruption to oil supply. "It's clear if there's going to be a war, then Iraq is going to stop exporting," Raymond told analysts in New York. "The U.S. government could release some oil from the SPR. I wouldn't want to suggest to you that there will be clarity on this at all. There are a lot of what ifs and whens," he added. World crude prices have recently soared to 12-year highs on fears of a U.S. military strike against Iraq, the world's eighth largest oil exporter. Energy Secretary Spencer Abraham said last week that the United States was prepared to act quickly to release emergency crude oil reserves if needed to offset a severe disruption to Middle East supplies in the event of war. Raymond said that the OPEC oil cartel, which pumps a third of world supply, may be able to raise production enough to cover the supply shortfall. "(It) depends on how long a war is going to be or has Saddam Hussein torched his oil fields. I have no doubt OPEC could deal with that... I believe the Saudis have more capacity," he said. Saudi Arabia, the world's biggest oil exporter has raised production around one million barrels per day (bpd) to nine million bpd since the start of the year as a workers' strike in Venezuela cut into global supply.