www.gopbi.com By Ted Jackson, Palm Beach Post Staff Writer Friday, January 31, 2003

Gasoline prices are fast approaching the highest levels ever recorded amid fears of an approaching war in the Middle East and petroleum production shutdowns in Venezuela.

Analysts say that if oil prices do not fall before the spring, technical factors affecting refining costs because of Clean Air Act regulations could send gas prices to their highest levels in history.

This could mean trouble for the economy as consumers spend more on energy and less at the mall.

Already the consumer, whose spending accounts for two-thirds of the economy, appears to be in trouble. As part of its report on overall economic growth, the U.S. Commerce Department revealed Thursday that consumer spending increased by the smallest amount in 10 years last quarter.

Driven by soaring oil prices, the price of gas in Palm Beach County is less than 10 percent below the all-time high of $1.725 per gallon reached in May 2001. At $1.579 per gallon for regular unleaded, gas prices are 30 percent higher than at this time last year.

Local station owners say their business has been hurt.

Joseph Williams, proprietor of the 45th Street Hess station in West Palm Beach, said that sales have declined over the past month and a half as gas prices have climbed.

"It's bad," Williams said.

Analysts say the outlook for gas prices is difficult to ascertain because so much of the recent increase in oil prices is due to political developments, which are difficult to forecast.

"So much of what the future holds depends on how the oil strike in Venezuela is resolved and, to a lesser extent, on developments with respect to Iraq in the Middle East," said John Lichtblau, chairman of the Petroleum Industry Research Foundation in New York.

But if oil prices do not fall before spring, AAA auto club spokesman Geoff Sundstrom believes, gas prices could set new records by summer.

When gasoline refiners begin using regional blends dictated by the Clean Air Act it could add 10 cents per gallon to the price, Sundstrom said.

"So if oil prices don't fall, we will be in trouble," he said.

Faced with a slowdown in consumer spending, analysts say, if oil prices continue to rise President Bush might decide to release stocks from the nation's Strategic Petroleum Reserve.

This might mitigate increases in gas prices at the pump.

The president already has begun diverting oil supplies meant for the reserve to commercial oil stockpiles, which in recent weeks have fallen below the five-year average for this time of year.

One bright spot is that production in Venezuela, a key U.S. oil supplier, is starting to ramp up.

The strike by oil company workers and management there continues, but the beleaguered government of President Hugo Chavez has managed to increase production to 33 percent of capacity, according to Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association.

Several weeks ago, Venezuela was producing virtually no oil.

ted_jackson@pbpost.com

www.forbes.com Reuters, 01.30.03, 4:58 PM ET

NEW YORK, Jan 30 (Reuters) - Output at the Lyondell-Citgo refinery in Houston was at 265,000 barrels per day (bpd), or near capacity, according to officials at Lyondell Chemical Co. (nyse: LYO - news - people).

"Operating rates have recently been increased to 265,000 barrels per day, which is essentially full capacity," said Douglas Pike, Lyondell's director of investor services, in a conference call on Thursday.

From Dec. 27 until about mid-January, run rates at the 270,000 bpd plant, were reduced to approximately 130,000 bpd due to the disruption of crude oil supplies caused by a general strike in Venezuela.

Prior to the strike, Lyondell-Citgo received about 230,000 bpd of oil from Venezuela, the world's fifth largest exporter.

The company told an earnings conference call with analysts that the Lyondell-Citgo Refining LP refinery, maintained near capacity operating rates through Dec. 27 using inventories, shipments already in transit from Venezuela and spot purchases.

In mid-January supplies of crude oil from Venezuela and crude oil purchased on the spot market allowed the refinery to begin to ramp up output. In a Jan. 21 statement the company had said runs were between 220,000 and 230,000 bpd.

The company said in its fourth-quarter earnings release on Thursday that it is confident that it has established both Venezuelan and spot-market supplies to enable the refinery to operate "at high rates until the situation is resolved."

Now in the 60th day of the stoppage, Venezuela's striking oil workers have estimated oil production returning to 1.0 million bpd while the embattled government has estimated output at 1.4 million bpd.

Lyondell said that since the strike began, only 15 ships had set out from Venezuela to the refinery in Houston. Normally the refinery would have received 28 to 30 ships with 500,000 barrels capacity during this period, according to the company.

Analysts were told there is no significant maintenance work planned for the near term. There was some minor work done on the refinery when the facility was running at reduced rates. Total crude oil consumption for the fourth quarter 2002 averaged 250,000 bpd, the firm said.

Lyondell-Citgo is a joint venture between Lyondell and Citgo Petroleum Co., which is an indirect, wholly-owned subsidiary of Petroleos de Venezuela SA, the state oil company of Venezuela. (Reporting by Robert Gibbons, edited by Gary Crosse; Reuters Messaging: robert.gibbons.reuters.com@reuters.net; +1 646 223 6059; email: robert.gibbons@reuters.com)

www.wmtw.com Friday,January31,2003,7:14 AM By NewsRadio WMTW 870/1470 AM and 106.7 FM

WASHINGTON -- Senator Snowe is renewing her fight to force car manufacturers to improve fuel economy on SUVs.

Sen. Snowe and Senator Dianne Feinstein introduced a bill Thursday that would require SUVs and light-duty trucks to average 27.5 miles per gallon by 2011. It's a bill Snowe first introduced two years ago -- and she says we'd all be better off now if it'd passed the first time around.

"Consumers would have choices in the next model year for more fuel-efficient SUVs had we passed that legislation, not to mention the very volatile situation when it comes to our energy, with the strike in Venezuela, the situation in Iraq making an already volatile market more precarious," Snowe said.

SUVs and light trucks now make up almost half of the passenger vehicles on U.S. highways.

hartfordadvocate.com by Chris Harris - January 30, 2003

It pays to shop around, one AAA spokesman says. but legislators and the AG want zone pricing to stop.Thanks to America's oil shortage scare, propelled by curtailed oil and gas exports from Venezuela and the impending threat of a battle royale in Saddam country, gasoline prices are rising, and fast. Within the last month, Connecticut motorists have been shelling out more and more dough at the pumps -- well, some motorists maybe more than others.

Petrol prices are up, and there are no signs they'll be slowing, says Fran Mayko, an American Automobile Association spokeswoman.

According to the latest figures from AAA's daily fuel gauge, the national average has jumped almost 10 cents a gallon within the last month -- up from $1.37 to $1.47 a gallon.

Connecticut's average price is $1.59 a gallon, up from $1.55 a little more than a month ago, and $1.20 a year ago. The average price in the Hartford area was $1.58 last week. In Norwich, it was $1.53, while in the Bridgeport region, gas was priced at $1.62 a gallon.

Gasoline prices obviously fluctuate exponentially with the ebb and flow of the crude-oil market tide. But some Connecticut automobile owners are still going to end up paying more than others -- regardless of what happens, if anything, in Iraq.

Basically, market insiders tell the Advocate, it comes down to where you're living -- in essence, regional factors, based on demographics, dictate who pays what to fill 'er up, even during times of market stability.

It's a practice known as zone pricing -- a price-setting strategy used by the corporate brands to "better compete." At least that's the public spin. Zone pricing is commonplace in both affluent areas and low-income areas throughout the country and state.

The rich industry watchdogs, for instance, are targeted, as they're usually more willing to pay higher prices. Meanwhile, customers in more distressed communities are also marked for inflated prices because they're usually more isolated and less able to shop around.

Local examples of zone pricing are abundant. Last week, for instance, the Advocate passed through Avon, stopping at several service stations along the way; we found that the going rate for regular unleaded self-serve gasoline was, on average, $1.67 a gallon. On Albany Avenue in Hartford, the average rate was $1.66. In Tolland and East Hartford, not affluent nor indigent areas by any means, the average rate was $1.55.

Harry Murphy, a spokesman from the Service Station Dealers of America, a national association of service station dealers, repair facilities, car washes, and convenience stores, says each service station sets its own prices. One uncontrollable influence factors into the pricing equation more than any other."Generally, it's based on what they must pay to wholesalers," says Murphy. Stations in towns with a higher per capita income might be asked to pay more per gallon to wholesalers like Exxon and Citgo than stations in nearby, yet less affluent towns.

"They might say, 'This guy over here is in a high-income area -- we can get away with it,'" says Murphy.

When that happens, says one of the service station owners the Advocate spoke with, who asked not to be named, "we have to pass it along to our customers -- we have no choice. Otherwise, we wouldn't be in business."

Gas companies divide most states into zones and charge dealers within each zone different wholesale prices based on relative wealth, isolation and other factors. Prices are set based on what the oil companies determine each specific market will bear.

In Simsbury, explains the station owner, "we're definitely charged more" for gas. "We pay more than the rest of the state just because of where we are."

The good news? State lawmakers are trying to do something about the problem. State Attorney General Richard Blumenthal, Rep. John Wayne Fox (D-Stamford), and Rep. Christel Truglia (D-Stamford) have been vocal opponents of zone pricing, and have introduced several bills within the past few years seeking to eliminate the practice. None have become law.

"Zone pricing is invisible and insidious," Blumenthal testified during public hearings back in 2000, before the House Judiciary Committee. "It distorts the free market. The power of the major oil companies to charge inflated, excessive, arbitrary prices results from gasoline dealer franchise agreements dictating that the gasoline dealers are required to purchase products from a single supplier.

"As a result of such sole source provisions, gasoline dealers are powerless to seek or shop for a cheaper supply of gasoline," Blumenthal continued. "Hence, consumers in the higher price zones pay a higher retail price."

Blumenthal et al. will likely propose another zone pricing bill during this year's legislative session.

In the meantime, Jim McPherson, a spokesman for AAA's Hartford office, offers these words of advice: "Motorists concerned about the price of gasoline can often get good results when they shop around."

charris@hartfordadvocate.com

Chris Harris can be reached at charris@hartfordadvocate.com.

www.forbes.com Reuters, 01.30.03, 7:58 AM ET

IRVING, Texas (Reuters) - Exxon Mobil Corp. , the world's No. 1 publicly-traded oil company, Thursday said fourth-quarter profit rose, as sharply higher oil and gas prices boosted exploration and production results. The Irving, Texas company reported fourth-quarter net income of $4.09 billion, or 60 cents a share, compared with net income of $2.68 billion, or 39 cents a share, in the year-ago quarter. Excluding special items, the company reported earnings per share of 56 cents, helped by the sharp rise in oil prices due to expectations of a U.S. war in Iraq and a labor strike in Venezuela. Analysts had forecast earnings of 45 cents to 53 cents a share, with a consensus estimate of 50 cents a share, according to research firm Thomson First Call. Shares of Exxon Mobil, a component of the Dow Jones industrial average, closed Wednesday trade on the New York Stock Exchange at $33.85. During the quarter, they rose almost 10 percent, outperforming the Standard & Poor's Integrated Oil & Gas index which increased 5 percent in the same period.