www.suntimes.com February 27, 2003 BY TAMMY WILLIAMSON Business Reporter

When it comes to your gas bill, March isn't just going to come in like a lion. It's going to bite like one.

Fuel prices are rising amid a pending war against Iraq and striking oil workers in Venezuela. March is shaping up to be the most expensive heating month of all winter, based on local companies' regulatory filings.

That's unusual--typically, during a winter heating season, prices are highest in January and February, because it's coldest and demand is highest.

"There isn't just one thing that is driving" the increases, said Dave Wiers, an energy consultant with Sieben Energy Associates.

The nation's spot oil prices this week jumped to the highest point seen in years following a government prediction that the first two weeks of March are expected to be colder than normal, he said.

Here's how all of this will hit your pocketbook in March:

• Nicor Gas customers will pay about 64 cents per therm, the highest price for natural gas those customers have paid in two years. That's also a 16 percent increase over February.

• Peoples Gas customers will pay 55.49 cents per therm, a nearly 9 percent increase from this month and the highest per-therm rate since June 2000.

• Customers of North Shore Gas, a sister company to Peoples, will pay 56 cents per therm, an 11 percent increase from February.

Those prices are for the commodity and are passed along to customers without a markup, under Illinois law. The cost of distribution of gas is unchanged, and that is affected by how much gas is used.

Other factors are conspiring to drive up fuel prices.

This winter has been 29 percent colder than a year ago in the areas of the country that mainly use natural gas for heating--the Midwest, the Mid-Atlantic and the Northeast, according to the Natural Gas Supply Association, an industry trade group.

That has drawn down natural gas supplies more quickly than experts predicted at the beginning of winter.

A potential war with Iraq is driving oil prices, and natural gas prices tend to follow oil because sometimes natural gas is a replacement for some oil, Weirs said.

Peoples and Nicor do buy some gas in the summertime and draw down from storage as demand requires it. As supply dwindles, the utilities are faced with the cost of replacing the gas. And to a limited extent, gas companies buy gas supplies on the spot markets, too.

"It's safe to say, we're looking at higher gas prices for some time," said Nicor spokesman Don Ingle. "There's a lot of factors making us nervous."

Ingle said Nicor is encouraging customers to take advantage of its budget billing plan, which averages bills over 12 months. It also sets up payment plans for customers who have fallen behind on their bills, he said.

www.boston.com By Peter J. Howe, Globe Staff, 2/27/2003

Massachusetts homeowners and businesses using natural gas for heating are likely to see rates jump 13 to 36 percent in March and April, as the effects of soaring global energy prices, plummeting inventories, and heavy winter demand trickle down to utility bills.

Gas utilities including KeySpan Energy Delivery, Bay State Gas, and NStar Gas are asking state regulators for permission to raise rates starting Saturday, ranging from a 12.7 percent cost-of-gas increase for former Boston Gas customers now with KeySpan to a 35.6 percent increase for Bay State's 270,000 customers.

The local gas hike requests, which are likely to be approved by the state Department of Telecommunications and Energy, come as US crude oil futures soared to their highest prices since Iraq invaded Kuwait in 1990, hitting $37.70 a barrel yesterday for April delivery on the New York Mercantile Exchange.

Besides fears that a war with Iraq could disrupt supplies and the effects of an oil workers strike in Venezuela could linger, futures prices jumped on reports from the Energy Department that domestic inventories of oil, gasoline, and other fuels have dropped. Oil inventories are down 14 percent from a year ago and supplies of so-called distillates, including diesel fuel and heating oil, dipped below 100 million barrels for the first time since May 2000.

At the same time, bitterly cold weather in the Northeast and Midwest has raised natural gas demand sharply, causing storage inventories to drop 43 percent below last year's levels and 27 percent below five-year averages, according to Bloomberg News surveys. The Energy Department is widely expected to report today that US gas inventories are at their lowest level since May 2001.

The demand-supply squeeze has caused gas prices to jump about 40 percent this year and has caused the more volatile futures market prices to triple in the last 12 months. Because gas is used to produce roughly half the electricity generated in New England, soaring gas rates could begin to drive higher electric rates this spring and summer as well.

Massachusetts gas utilities filing for rate increases cited the national and global market trends.

''Weather is probably the single biggest factor, because usage is up, and we can only charge the customer what we pay,'' said KeySpan Energy spokeswoman Carmen Fields.

KeySpan owns the former Boston Gas, Essex Gas, and Colonial Gas. The new rates would raise the cost per therm - a unit of gas - used by Boston Gas customers by 12.7 percent, to 86.15 cents for March and April.

Essex rates would jump 18.9 percent, to 76.6 cents. Rates in Colonial's Lowell-Merrimack Valley territory would climb 16.9 percent, to 88.6 cents. And rates in Colonial's Cape Cod territory would rise 17 percent, to 88.02 cents. Those figures are for the cost of gas only and do not include fixed delivery and service charges. The typical homeowner uses 100 to 200 therms of gas for heating in colder months.

Bay State, which serves 61 Massachusetts cities and towns, would increase energy rates from 73 cents per therm to 99 cents, a 35.6 percent increase, according to spokesman Charles Moran. That would produce a total rate of $1.17 per therm, including delivery and service fees.

NStar, which provides gas service to 246,000 customers in 51 cities and towns as well as electricity to 1.1 million customers, also plans to seek higher gas rates, as will several smaller utilities around Massachusetts.

NStar spokesman Michael Durand said last night it is seeking to raise the cost of gas per therm from 70.7 cents to 89.4 cents. For typical NStar customers using 144 therms of gas for heating, hot water, and cooking, the new rate would raise their monthly bill by about $27 to $186, Durand said. Direct comparisons, however, are difficult because most customers use less gas in March and April than in January and February.

Some economists fear the soaring retail energy prices could become one more drag on an already weak US economy. Steven Wieting, a Salomon Smith Barney Inc. economist, said the current annual rate of total US consumer spending on gasoline, heating oil, and natural gas is $50 billion higher than it was a year ago and totals about 0.7 percent of disposable personal income.

''It will affect the consumer's capacity to spend and will affect sentiment,'' Wieting said.

Dwindling supplies sent oil futures as high as $1.18 a gallon in New York trading yesterday, a 25-year record. Heating oil supplies on the East Coast, which accounts for about three quarters of US heating oil use, fell 16 percent last week to their lowest levels since May 2001.

Regulators at the Commodity Futures Trading Commission, which polices US energy futures markets, yesterday said they have increased ''floor surveillance'' at New York trading pits but found no evidence of market manipulation driving soaring futures prices.

''There was nothing in that [surveillance] that gave us any pause or gave us any feeling that there was any sort of manipulation taking place,'' Michael Gorham, director of the CFTC's market oversight division, told Reuters. Gorham said increases appear to be explanied by cold weather, lower inventories, and the threat of war with Iraq.

Peter J. Howe can be reached at howe@globe.com. Material from Globe wire services was used in this report.

This story ran on page C1 of the Boston Globe on 2/27/2003.

www.courier-journal.com

By BILL WOLFE bwolfe@courier-journal.com The Courier-Journal

UPDATE Last we knew: The last big surge in gasoline costs came in December, when some stations pumped up their prices by 10 cents to $1.50 a gallon and more for regular. In the following weeks, prices would edge up to about $1.60 to $1.65 per gallon.

The latest: After a week that saw prices drop by about a dime a gallon in Louisville, prices again spiked Tuesday night, with some stations raising prices by 20 to 25 cents. Now prices range from around $1.55 per gallon in Southern Indiana to more than $1.80 a gallon in parts of Louisville.

Why it's news: Gasoline prices reflect short supplies of crude oil and worries about possible war in the Middle East. Some experts expect oil prices to move still higher.

For more info:

• AAA Daily Fuel Gauge Report If you filled your car's gas tank Tuesday, it's OK to feel smug today: You probably saved a few bucks. Prices in most of the Louisville area shot up by 10 cents to 25 cents a gallon yesterday, topping $1.80 a gallon for regular and $1.95 for premium at some stations.

If your fuel gauge is headed toward "E" today, don't despair. There are still bargains around, especially if you can fill up in Southern Indiana, where some stations were still pumping regular for about $1.55 a gallon yesterday.

Why prices shot up so far and so fast is a mystery, said AAA Kentucky spokesman Roger Boyd. "I am as filled with questions as the motorists are right now. Other markets don't seem to be going through this."

Prices had been creeping up across much of the nation, even as Louisville gasoline costs were headed down. "We came down a dime over the past week, but now were are back up as much as 25 or 30 cents for a net 15-cent increase," Boyd said.

In the past, such large overnight increases had only been seen in times of wars or embargos, Boyd said.

The Kentucky attorney general's office was getting complaints about the price increases yesterday, but price changes are "a national issue," said spokeswoman Jennifer Deans. "It's the market reacting to a whole lot of different forces."

Nate Potter pumped $20 worth of gasoline at the Chevron station at Eighth Street and Muhammad Ali Boulevard. He said he just goes with the flow. He spends more than $100 a week on gasoline and said worrying doesn't help. PHOTOS BY PAT McDONOGH, THE COURIER-JOURNAL Still, if consumers notice one station charging prices much higher than other stations in the same area, they can notify the attorney general's Consumer Protection Division at www.law.state.ky.us/cp/forms/consumer.htm or by calling (888) 432-9257, she said.

Linda Casey, spokeswoman for Speedway gasoline stations, said the higher prices reflect increased costs for oil, which climbed about 5 percent to $37.93 a barrel before closing at $37.70 on the New York Mercantile Exchange yesterday. That's close to the previous post-Gulf War high of $37.80 on Sept. 20, 2000.

The U.S. Department of Energy reported yesterday that crude oil inventories fell by 1 million barrels last week and are more than 16 percent below their levels one year ago. The Organization of Petroleum Exporting Countries has been pumping more oil, but it may not get here until next month, analysts said.

Speedway had raised prices about a dime a gallon since Tuesday, Casey said. In Findlay, Ohio, home of parent Marathon Ashland Petroleum, Speedway gasoline was $1.74 a gallon for regular, she said. In Michigan, a gallon cost about $1.79. Louisville and Covington, Ky., were at $1.74, and gasoline in Indiana was about a penny less, she said. "Prices are fairly consistent."

She said an oil-supply crunch stemming from an oil strike and economic turmoil in Venezuela, coupled with concerns about a war with Iraq, helped push crude oil prices sky high. Some station managers and owners said they were puzzled — and disappointed — by the price rise. When wholesale prices go up rapidly, gasoline stations have to pass on the increase, even if it costs sales, said Dave Jones, who owns a BP station on Fern Valley Road.

A BP station on Fern Valley Road was charging $1.81 cents a gallon yesterday for regular unleaded. "When gas was going up 2 or 3 cents, it wasn't bad. But when it goes up 10 cents, that's your whole profit" unless the increases are passed along, said Jones, whose pumps were set at $1.81 a gallon for regular.

The Chevron station at Muhammad Ali Boulevard and Eighth Street sold regular gasoline yesterday for $1.69 a gallon, up 4 cents from the day before, said Bob Arnold, a partner in the station.

Arnold said he saw several other stations raise prices 25 cents a gallon, but he tries to avoid such price spikes. "I think it makes you look really bad," he said.

Business was a little slow yesterday, he said, even though gasoline cost less at his station than at many competitors. "Prices will hurt business. It always does," he said. "A lot of people just park their car."

Not Nate Potter, who pumped $20 worth of gasoline into his Chevy van at the station, said it was either that or "park it and take TARC" buses.

Potter, who spends $100 to $120 a week for gasoline, said worrying about prices doesn't help. "Just go with the flow," he said. "If you need it, you need it."

But Ray Stump of Hillview said he would like to fight high gasoline prices — if there were way. 

"I don't know what we can do about it," Stump said as he filled his tank at a Court Avenue BP station in Jeffersonville. "If the American people really got together, maybe we can change things."

Mike Parada of Rensselaer, Ind., about 220 miles north of Louisville, said drivers in the Louisville area are getting a good deal compared with prices he's seen recently in Chicago and California.

At the Court Avenue BP station, regular gasoline was $1.55 per gallon. "Gas is reasonable here," Parada said. "I'm grateful."

www.newsday.com By Tom Incantalupo STAFF WRITER February 27, 2003

Home heating oil prices are the highest in three years on Long Island and in New York City - and they might go still higher, experts say, before this dreadful winter is over.

The New York State Energy Research and Development Authority said the average price for home heating oil as of Tuesday was $1.952 per gallon in Nassau and Suffolk counties and $1.987 in the city. The state surveys full-service oil retailers; cash-on-delivery prices usually are lower.

In January and early February of 2000, prices had soared to about $2.20 a gallon during a cold snap, but quickly fell as the weather moderated.

This winter has been consistently colder than normal - not just in the Northeast but in other regions and other countries where oil is consumed for heat. Meanwhile, the flow of crude and refined products from Venezuela, the fourth-largest supplier to this country, still is about 30 percent below normal because of a two-month strike by oil workers. Fears of supply interruptions from a war with Iraq also are pushing up petroleum prices. In this area, last week's oil barge explosion near Staten Island further tightened supplies of petroleum products.

"This is going to be from start to finish one expensive heating season," said Joe Roy, Long Island coordinator for the New York Public Interest Research Group's fuel buyers cooperative.

Natural gas prices also have soared to near record levels, said Phil Flynn, senior market analyst at the energy trading firm Alaron Trading Corp. in Chicago. Spokesman Andrea Staub of KeySpan Energy Delivery said homeowners who heat and cook with natural gas will pay about 30 percent more this heating season than last, or about $1,155 per household, in part because of the price increase but, mostly, she said, because of additional usage.

Kevin Rooney, executive director of the Oil Heat Institute of Long Island, estimates that the average bill for this season will be about 40 percent higher than last year, or about $1,224. About 80 percent of a typical home's annual oil use is burned during the heating season.

Flynn says heating oil prices could rise further if the weather stays colder than normal in coming weeks. "If this winter hangs around past St. Patrick's day," he said, "it's going to be the spending of the green."

www.ctnow.com February 27, 2003 By STACY WONG, Courant Staff Writer Heating oil prices in Connecticut this week climbed to an average $1.79 a gallon - the second-highest ever, according to a weekly survey conducted by state officials. This week's survey of 27 dealers across the state recorded prices as high as $2.05 a gallon. This week's average is second only to the $1.98 recorded in a survey Feb. 7, 2000, when frigid weather pushed prices as high as $2.25 a gallon. During that period, some home oil tanks ran dry, and consumer protection officials launched an investigation into price gouging by the state's heating oil dealers. Conditions aren't quite as bad this time around, industry executives said, but this year marks the first time in three years that weather-driven demand for natural gas has been so high that large commercial or industrial gas customers have been asked to temporarily switch to heating oil. And this higher demand for oil, coupled with continuing war jitters and a tight supply, has pushed prices charged by some dealers past the $2 a gallon mark again, they said. The large amounts of oil needed by institutions such as colleges and hospitals create upward pressure on heating oil prices, they said. "It's not like we're talking about picking up a home heating oil customer who wants 175 gallons; it's large customers," said Chris Herb, associate director of the Independent Connecticut Petroleum Association, a trade group of some 350 heating oil dealers. And in fact, St. Francis Hospital and Medical Center in Hartford - which usually heats with natural gas - has spent 25 to 30 days this year burning 120,000 gallons of heating oil, a volume the hospital has not seen since the 1990s, said facilities Vice President Bob Falaguerra. St. Joseph College for Women and the University of Hartford also have switched from gas to oil to heat some of their buildings this winter. Gas distributors such as Yankee Gas and Connecticut Natural Gas have asked some "interruptible" customers to use oil during parts of January and February, including this week. Those customers get a discounted rate on gas in exchange for agreeing to switch. Yankee Gas spokeswoman Sandy St. Pierre said that when cold weather pushes up consumption, there is not enough capacity in the gas lines to insure an adequate supply to residential customers who don't have the ability to switch between fuels. Falaguerra said St. Francis Hospital locks in an oil-price contract so it won't be hurt if it has to switch from gas more often. The hospital also burns No. 6 oil, which is cheaper than the No. 2 heating oil most homes use. St. Joseph College, however, will usually call up Kasden Fuel in East Hartford and buy No. 2 heating oil at the daily price, with a volume discount, said associate vice president Mike Jednak. While it's too late to lock in a contract with most oil dealers, customers can still get lower prices by buying in bulk, securing senior citizen discounts, using coupons or paying in cash on delivery. Buying clubs such as the Citizen's Oil Co-op in West Hartford also sell oil for less, although customers have to sign up for regular deliveries and pay a $10 membership fee if they don't register online. On Wednesday, the Co-op was selling oil for $1.45 a gallon, and the phones were busy. "I've just been inundated today with phones calls, I'm trying to call everybody back," said Rosie Stanko, who runs the Co-op with her husband, Mark Hutson. People who joined the Co-op earlier this year are paying $1.09 a gallon for oil, but, Stanko said, "$1.45 is still a whole lot better than $1.79." Herb, of the oil dealers' group, said it was hard to tell if prices would remain stable until the end of winter several weeks away. Factors such as a war against Iraq and a strike in oil-exporting Venezuela can't be predicted, he said. "You see the price bounce like a ping pong because of things beyond the control of Connecticut (heating oil) retailers," he said. "Prices are not set on Main Street, Connecticut, they are set on Wall Street."