news.ft.com By Rebecca Bream in London and Carola Hoyos in New York Published: February 25 2003 19:26 | Last Updated: February 25 2003 19:26

Spencer Abraham, the US energy secretary, attempted to calm oil market nerves on Tuesday, saying that the US would release some of the country's strategic oil reserves in the event of war with Iraq.

The world's oil stocks have fallen to historically low levels and commercial oil producers are facing supply problems. Those arguing for the release of strategic oil reserves - held in countries such as the US and Japan - fear that these factors could further inflate the price of oil.

"We will and can act quickly to use the Strategic Petroleum Reserve to fortify efforts by producers to offset any severe disruption if needed," said Mr Abraham, speaking at a senate energy committee hearing in Washington.

Crude oil prices fell by more than 30 cents immediately after Mr Abraham's comments, but US prices soon shot back up.

In midday trade, April crude oil futures on NYMEX rose 27 cents to $36.75 a barrel. In London the April Brent future price stayed lower, down 22 cents at $32.93 per barrel.

Oil prices recently hit their highest level in more than two years, boosted by a so-called war premium under which the market has priced in potential risks to the oil supply posed by a second Gulf war. The price has also been kept high by a surge in demand for heating oil caused by a cold winter in the US.

Analysts were sceptical about whether releasing strategic stocks would make any difference to the oil price. Steve Turner, oil analyst at Commerzbank in London, said: "Only the removal of uncertainty about whether there will be a war is going to calm this market."

The oil market is not only facing possible supply problems in the Gulf region but analysts are also worried about the political situation in oil-rich Nigeria. They says that, if strike action disrupts output in other countries, as it has done in Venezuela, there is no safety net for oil supplies.

Mr Abraham's move towards releasing US oil reserves followed a speech by Claude Mandil, the director of the International Energy Agency, warning against using reserves too soon.

Mr Mandil told a conference at the Royal Institute for International Affairs in London that Opec had assured the agency, which controls the west's oil reserves, that it would raise oil output to offset any disruption in production caused by war.

"I believe that the producers should act first. Reliance on strategic reserves should be a last resort," said Mr Mandil. But he acknowledged that Opec had already raised its production to mitigate the effects of the general strike in Venezuela and that it could not be relied on to fill all possible gaps in world supply.

During the first Gulf war in 1991, the agency was criticised for releasing strategic oil reserves too late in the conflict which, some said, led to an overinflated oil price.

www.nbc4columbus.com POSTED: 12:15 p.m. EST February 25, 2003 UPDATED: 1:37 p.m. EST February 25, 2003

COLUMBUS, Ohio -- Central Ohio motorists continue digging deep into their wallets to pay for expensive gas, but are the prices fair?

U.S. Sen. Mike DeWine is investigating why gas prices in Ohio and other parts of the Midwest are rising faster than anywhere else.

Some gas prices have risen as much as 12 cents a gallon per day, NewsChannel 4's Beth Dal Ponte said.

Pump Patrol: What Are You Paying?

DeWine said he noticed that the prices seem to be going up the most in the Midwest.

The Ohio Republican, along with Wisconsin Sen. Herb Kohl, is asking the Federal Trade Commission to investigate any possible anticompetitive or anticonsumer practices.

The senators explained to the FTC that the causes of the price increases are not clear, and that it's critical to ensure they aren't caused by price fixing or price gouging.

Motorists think the investigation is a good idea.

"I think somebody should look into it," motorist Todd Coe said. "Right now, with the economy so bad, everybody is having a hard time anyway."

Ohio Petroleum Council Executive Director Terry Fleming said prices in the Midwest are not necessarily higher than other areas.

"In California, they're paying much higher prices for gas than we pay here," Fleming said. "So I don't know that that's true. And sometimes it might be, but it all averages out."

Fleming said there are several reasons for the high prices.

He said crude oil prices have gone from $18 a barrel to $37 within the past year, a worker strike in Venezuela has been going on for four months and there is a possibility of a war with Iraq.

Fleming said he is confident the oil refiners aren't doing anything wrong.

"Over the past 20 years, there have been 26 separate investigators by the FTC, many by states, including Ohio," he said. "Not once in any of those investigations have we been found to be doing anything illegal."

Gas-Saving Tips

There are several ways to cut back on the gas motorists use and reasons why they may not be getting good gas mileage.

Dirty spark plugs or other bum components can cost drivers about $540 per year, so tuneups are important.

Stopping and accelerating quickly and speeding will use a lot of gas, costing about $500 per year.

Only fill a car up with premium gas if the car's manufacturer calls for it.

Motorists can save up to $90 per year by keeping the correct tire pressure.

Motorists should not carry a lot of stuff in their trunks because it can waste gas.

reuters.com Tue February 25, 2003 01:05 PM ET By Tom Doggett

WASHINGTON (Reuters) - U.S. Energy Secretary Spencer Abraham said on Tuesday the United States was ready to act quickly to release emergency oil reserves if necessary to offset any disruption to Middle East supplies in the event of war with Iraq.

"We will and can act quickly to use the Strategic Petroleum Reserve to fortify efforts by producers to offset any severe disruption if it is needed," Abraham told lawmakers at an Senate Energy Committee hearing.

Crude prices have in recent weeks risen to two-year highs on fears a war in Iraq, the world's eighth largest oil exporter, could slow supplies from the Middle East, which pumps a third of the world's oil.

The United States has said it will disarm Iraq by force if necessary, despite widespread international opposition to war and concern that rising energy costs could smother a weak world economy.

The U.S. emergency oil stockpile was created in 1975 and currently has about 600 million barrels of crude oil stored in deep underground salt caverns in Texas and Louisiana.

It can be drawn at a rate of 4.3 million barrels a day for 90 days, before the rate drops as storage caverns are emptied.

The U.S. government sold 17 million barrels of oil from the reserve in January 1991 at the start of the U.S. offensive in the Gulf War.

The 1991 release helped pull oil prices down to near $20 a barrel, but analysts warn that oil inventories are so low that prices would not fall as far this time in the event of a release.

U.S. crude stocks have fallen to their lowest level since 1975 as a decline in imports from strike-bound Venezuela has drained supplies while sustained cold weather has stoked demand.

Heating oil and natural gas prices have recently hit all-time highs, and analysts are warning of big jumps in gasoline prices as summer vacation driving demand heats up.

New York oil prices shed early gains, dropping after Abraham's comments, and were 3 cents lower at $36.45 a barrel at 1:00 p.m. EST.

INDEPENDENT OF THE IEA

Abraham said the United States could release emergency reserves independently of its partners in the International Energy Agency, adviser on energy for 26 industrialized countries.

When asked if the United States had ruled out the possibility of releasing emergency oil on its own, Abraham said, "No of course not."

Abraham also said Washington would at least consult with the IEA before taking any decision to release reserves.

The head of the IEA said earlier Tuesday that strategic reserves in major oil-consuming nations will only be used should producers fail to make up any supply shortfall.

"I believe the producers should act first. Reliance on strategic reserves should be a last resort," said Claude Mandil, Executive Director of the Paris-based IEA.

Producers in the Organization of the Petroleum Exporting Countries oil cartel have told the IEA they have enough spare capacity to meet any stoppage of Iraqi exports if there is a war.

Iraq oil exports remained steady at 1.7 million barrels per day (bpd) in the week ended to Feb 21, U.N. officials said on Tuesday.

The IEA's Mandil said its members will expect a commitment from OPEC to cover any shortage very quickly, but could wait for "weeks" for firm evidence of the extra output.

Members of the IEA, formed after the Arab oil embargo in the 1970s to protect consumer nations' interests, include the United States, Germany and Japan and it holds four billion barrels of reserves, equivalent to about 115 days of net imports.

www.forbes.com Reuters, 02.25.03, 11:18 AM ET

WASHINGTON (Reuters) - U.S. Energy Secretary Spencer Abraham said on Tuesday the United States was ready to act quickly to release emergency oil reserves if necessary to offset any disruption to Middle East supplies in the event of war with Iraq. "We will and can act quickly to use the Strategic Petroleum Reserve to fortify efforts by producers to offset any severe disruption if it is needed," Abraham told lawmakers at an Senate Energy Committee hearing. "We would make that kind of decision on a release of oil reserves only in consultation with our IEA (International Energy Agency) partners," he added. Crude prices earlier this month hit their highest level in more than two years on fears that possible war in Iraq, the world's eighth biggest oil exporter, could lower supplies from the Middle East, which pumps a third of the world's oil. Oil prices fell after Abraham's comments and by 11:15 a.m. EST were 21 cents lower at $36.27 a barrel in New York. U.S. crude stocks have fallen to their lowest level since 1975 as a decline in imports from strike-bound Venezuela drained supplies and sustained cold weather stoked demand. The head of the IEA, the west's energy watchdog said earlier on Tuesday that strategic reserves in major oil consuming nations will only be used as a last resort should producers fail to make up any supply shortfall. "I believe the producers should act first. Reliance on strategic reserves should be a last resort," said Claude Mandil, Executive Director of the Paris-based IEA. Producers in the Organization of the Petroleum Exporting Countries have told the IEA they have enough spare capacity to meet any outage of Iraqi exports if there is a war. The U.S. emergency oil stockpile was created in 1975 and currently has about 600 million barrels of crude oil stored in deep underground salt caverns in Texas and Louisiana. Oil was sold from the reserve in 1990-91 during the Gulf War. Members of the IEA, formed after the Arab oil embargo in the 1970s to protect consumer nations' interests, include the United States, Germany and Japan and it holds four billion barrels of reserves, equivalent to about 115 days of net imports The IEA will expect a commitment from OPEC to cover any shortage very quickly, but could wait for "weeks" for firm evidence of the extra output, Mandil said.

www.pal-item.com Tuesday, February 25, 2003

Wholesale natural gas prices jumped nearly 40 percent and heating oil costs hit their highest level on record Monday, developments that point to increases in already bloated home-heating bills.

"I've never seen it this high," veteran oil dealer Blake Warfield of Richmond said. "It's been moving up little by little every day," Warfield said.

"And the cold weather compounds the problem."

Residential heating oil prices are up 50 percent from a year ago, when the average winter heating oil bill was $642, the U.S. Department of Energy says. Bills might approach $1,000 this winter.

Warfield Oil was charging $1.49 a gallon for oil this morning, the same as two weeks ago, but Warfield said he expects to increase prices this week to keep up with soaring wholesale costs.

A year ago heating oil was selling for $1.20 to $1.25 per gallon. In January 2001, oil was selling for 98.9 cents per gallon here.

Although natural gas prices are not as easy to track, consumers were reporting similar jumps before Monday's rise. The average household heating bill for natural gas users was $596 last winter.

"Higher natural gas and heating oil prices will cut more into consumer budgets," says Jim Williams of WTRG Economics, an energy consultant. "If you are old enough to remember, it is time to bring out that sweater that President Carter used to wear while encouraging us to turn our thermostats down."

In futures trading in New York, natural gas prices rose from $6.61 per million BTU to $9.14, the highest in more than two years. Heating oil hit $1.15 a gallon, surpassing the previous record high set in December 1979, before ending the day slightly lower.

Futures prices usually have an impact on retail prices later, and not necessarily by the same magnitude, but point to the direction of prices.

More than half of U.S. homes are heated with natural gas, while 8 percent are warmed with heating oil. Prices for electricity, which heats 30 percent of U.S. homes, also might rise, because natural gas and oil are among fuels used to produce it.

Richmond Power & Light fires its generators with coal.

The increased heating costs, which in part reflect higher demand during an especially cold winter in many parts of the country, act as a drag on the economy.

"We're in a weak recovery as it is, and this is just one more headwind in an economy that is facing many headwinds," says Stephen Brown, director of energy economics at the Federal Reserve Bank of Dallas.

Forecasts for another mass of cold air to sweep through parts of the East Coast and the Midwest later this week led traders Monday to bid up prices. Energy prices were already on the rise because of a strike in Venezuela that has drained oil off the international market and concerns that a war with Iraq would choke off oil supplies.

In other energy news:

• Crude oil prices rose to $36.48 a barrel Monday, up 90 cents from Friday's close.
• After rising for 10 weeks, the average price of a gallon of gasoline in the United States last week was flat at $1.66, the highest price since June 2001.

Heating help Residents who fit income guidelines can apply at Community Action for heating assistance. Proof of income and utility bills are needed. Yearly maximum income for a household:

• One person: $11,075
• Two people: $14,925
• Three people: $18,775
• Four people: $22,625