www.newsday.com Henry Gilgoff To contact "It's Your Money," send e-mails to hgilgoff@newsday.com or write Henry Gilgoff, Newsday, 235 Pinelawn Rd., Melville, NY 11747- 4250.

March 2, 2003 Even as energy costs surged this winter, thousands of the region's home heating oil customers have taken some solace from a buffer they had built from the full rise in retail prices. Joy Garofalo counts herself among them. By now, consumers know some of the reasons offered up for the high price of home heating oil, including unusually cold temperatures, concerns about war with Iraq, and the turmoil in the oil-producing country of Venezuela. Garofalo, 51, finds it hard to believe America can't do more to protect itself from price spikes. "I think we have the brain power to be more self-supporting as a country," she said. Meanwhile, Garofalo has taken some steps to protect herself. She expects her next oil delivery to cost her no more than $1.299 a gallon - even though she paid $1.829 a gallon on Feb. 5. The high price found in one state sampling of dealers last Monday was nearly $2.10 a gallon on Long Island and in the city. The average reported for the Island was $1.952, and $1.987 in the city. But, as you will see, Garofalo has tapped price-discount programs, which were not included in the survey done by the state Energy Research and Development Authority. She has also protested when the price charged her exceeded what she thought would be the maximum. The purchases Garofalo has made to heat her Garden City home give a glimpse into the myriad pricing arrangements that exist. The questions she raised about a "ceiling" price underscores the need to understand those deals, whether arranged through any of the region's buyers groups or made directly by a consumer with a heating oil dealer. Kevin Rooney, chief executive of the Oil Heat Institute of Long Island, a trade group, said some dealers have aggressively marketed pricing options in recent years, and others have grown more accepting of them as they compete to retain customers. The programs, which vary, can come with conditions like volume- purchase requirements. A fixed price, applied without change for a heating season, may be one option offered by a retailer, but it comes with a gamble for a consumer if the price otherwise charged falls below what has been agreed upon. Garofalo, a Verizon manager who provides technical support within the company and to its customers, is a member of the St. James-based Consumers Fuel Group, which has an annual membership fee of $25 per home and offers a free heating system service contract, with a charge applied for more than one heating zone. It claims about 13,000 members, mostly on Long Island and some in Queens and Brooklyn. She said she had what she understood to be a ceiling on the price for her home heating oil purchases, arranged by the for-profit buyers group. So, Garofalo said, she didn't expect the per-gallon cost to go above what she thought was her ceiling, $1.50. Then on Feb. 5, she got her latest delivery, at $1.83 a gallon. That's when she went through the ceiling. "I was in shock," Garofalo recalled. "My understanding of the cap is that that's the highest the price can go." Although her account has been in the name of her mother, who passed away in December, Garofalo said she had handled the family's dealings with the buyers group for years. She paid the bill for that delivery but protested first to the Plainview-based General Utilities, the dealer chosen for her by the buyers group. Still dissatisfied, she pressed her complaint with the buyers group. Garofalo handled her complaint on her own to her satisfaction. Vincent Cioci, the buyers group president, said Garofalo did not have the kind of plan that has a ceiling price and so the group had no obligation to adhere to one. General Utilities has not participated in ceiling-price plans but offered its own new customers introductory fixed-price plans before the current market became so volatile, said Robert Shea, director of sales for General Utilities. "We've honored all our contracts," he said. Shea said the extreme cold and the volatility in the marketplace has presented difficulties for retailers, too. The frigid weather has taxed homeowners' heating systems and increased service calls, he said. Deliveries have been made difficult by the snowstorms. The plan Garofalo did have through the buyers group, according to Cioci, was what the group's registration form calls a "maximum savings option," with a customer's price "linked directly to the wholesale price." Her plan, Cioci said, offers discounted prices without a cap. The group's promotional material talks of discounts of 10 to 30 cents a gallon. After Garofalo complained, the group switched her to another supplier, Bayview Heating Oil, based in West Babylon. By Cioci's account, his buyers group then made a mistake and gave her a deal intended as a limited promotion for new customers in Nassau and western Suffolk who sign up through March 31. Despite its mistake, Cioci said his group will stand by the deal with Garofalo. So he said, she does have a price ceiling - that cap of $1.299 a gallon through the end of May.

Web Site Fails to Keep Pace To check the state's findings on prices of home heating oil or gasoline, for that matter, go to a Web site - but don't count on it to keep you up to date. The state Energy Research and Development Authority posts the results of its weekly samplings of the marketplace at www.nyserda.org/prices.html. Its home heating oil price survey does not cover discount programs or cash-on-delivery purchases. And with the volatility of the energy market this winter, unfortunately, weekly surveys often can't keep pace with the surge in prices or the blow it's dealing to consumers' budgets. -Henry Gilgoff

Copyright © 2003, Newsday, Inc.

www.irna.com Tehran, March 2, IRNA -- "If concerns over the imminent US-led military attack on Iraq are not removed, oil prices will surge over and above dlrs 50 in the not too distant future," predicted `Iran
Daily' on Sunday.
Crude prices climbed close to dlrs 40 per barrel in America on Thursday, noted the Perspective column in the English-language daily. The surge in oil price started in December after Washington started to use psychologically pressure to forcefully dispose the Baghdad regime. This, along with the conflict in Venezuela and the cold weather contributed to the hike in oil prices, it added.
It must be noted that the Organization of Petroleum Exporting Countries' benchmark price in recent months has been rising, the daily wrote.
On Thursday, it exceeded dlrs 32 and oil traders expect the prices to go beyond dlrs 40 a barrel in view of US pressure, the daily further predicted.
It recalled that the prices of crude oil reached its peak of dlrs 41.50 a barrel in 1991 and before the outbreak of the Persian Gulf War.
It must be noted that an upsurge in oil price of over dlrs 40 a barrel will bring chaos and confusion in the global oil market,
predicted the paper.
"Maintaining the prices at this level will also lead to a recession in America and other industrialized nations," it added.
Based on latest international reports, the world market is not facing a crunch and the current rise in both prices and demand is more political oriented, it said.
Thus, any developments related to the imminent US-led war on Iraq will have dire consequences on the international price of the black gold.
Worse still, if Iraqi supplies are cut as well as the supply of regional countries become problematic, it will adversely affect the global oil markets, added the paper.
Considering that a long war in the region might lead to a rise in demand in the long run, the paper believes that OPEC could compensate the shortfall. But this cannot be done unless some of the OPEC members increase the output and whether this would be possible when the shooting starts, it added.
Another possible scenario, the daily further predicted is the fact that the strategic reserves of the International Energy Agency (IEA) might be used to confront a possible oil shock.
In this connection, the remarks of the IEA Director, Claude Mandil, in London that the "reserves of the IEA members are equivalent of 115 days of total imports needs," is noteworthy, wrote the paper.
Under the circumstances, OPEC is expected to play a more active role in controlling the market and prevent the dire consequences of a new and destructive war, it suggested.
The world fully knows that America is targeting Iraq as a pretext to take hold of that country's oil as well as that of the entire region.
Political experts maintain that the oil market will undergo major changes and America will try to regulate the market based on its own economic policies, the daily believes.
But the possibility that US might succeed to this end depends on several factors and it cannot be hopeful of full success, it added.
OPEC policies based on different and effective criteria can help prevent its weaknesses, the paper believes, highlighting the need of Iranian policy-makers to chart out contingency plans to avoid shocks that could harm the country's economy in the wake of oil price fluctuations.
"All plans should heed long-term goals and based on ground realities so that the national economy is prepared as best as possible for the post-war era," concluded the daily.
FH/AR
End

www.sundayherald.com   THE history of oil prices is a volatile one. The cost of a barrel has rarely remained stable for long and cyclical pricing is part of the industry.

So how concerned should we be that the price of a barrel is likely to break through the $40 barrier for the first time since the Gulf War in 1991? That time, the price of a barrel returned to a reasonable level within weeks of Allied forces invading Iraq. The swift defeat of Saddam's forces put paid to fears of a drawn-out conflict and a wider conflagration across the Middle East. This return to normality was also achieved despite the widespread damage done to Iraqi and Kuwaiti oil assets.

Boom and bust is what the oil industry brings to the economic party. Ever since Edwin Drake drilled the world's first oil well in Pennsylvania back in 1859 and set off a period of excessive drilling that produced a quantity which far exceeded the needs of a limited US market, black gold has witnessed its ups and downs.

As America's appetite for oil grew (domestic oil consumption doubled between 1950 and 1970), the decline of its production business became a fact of life by the early 1970s and the country had to accept that the globe's spare production capacity was in the Middle East. The result of this shift was the rise of the Organisation of Petroleum Exporting Countries (OPEC), which has long sought to control oil prices following the global oil shock of 1973.

The situation last decade when prices were pushed up by a reduction in global oil supplies coupled with growing demand around the world, is ultimately not too disimilar to the one the world finds itself in today.

America's economy has always been partially fuelled by oil, with low prices playing a useful role in keeping inflation, interest rates, and recession, under control. It is also the case that serious spikes in oil prices have historically led to economic downturns. And as US commentators were noting last week, in the past 30 years there has never been a significant move upwards in energy prices that has not been followed by recession.

After Saddam invaded Kuwait in 1990, the price of a barrel more than doubled, briefly hitting $41.15 in October. The result? Recession. And after the leap in 2000, when oil went from $25.50 to a high of $36 within 12 months? Recession. One US economist's recent description of spikes in oil prices as a 'tax on growth' is entirely accurate.

The American economy is just about clinging on. Consumers are spending less and domestic growth is static. Such an economy would struggle to shake off a recession in 2003.

Opec's optimistic members may dismiss fears about price rises as 'psychological' but they can't buck history.

That's perhaps why some industry analysts are beginning to argue that the optimists are just sticking their heads in the sand, hoping the troubles will disappear. And certainly Opec's benchmark of $28 is derived from what remains very much the best possible outcome from any Iraqi conflict.

A quick victory, little collateral damage to either Iraq's oil fields and a rapid return to normality for Venezuela. Opec makes it all sounds so easy. But the great danger for the US economy, and the global economy in turn, is that the potential for damage is ignored, or more likely, underestimated. The oil industry prides itself in being able to factor in all the variables and predict the future. But has the world become a little too complex even for the industry's know-all analysts?

Caution, an old virtue of Scottish business, is needed now. In 2003 no one, unfortunately, has all the answers.

Green words must be matched by investment Last week Tony Blair came up with some noble aspirations about the environment notably that Britain should cut its greenhouse gas emissions by 60% from current levels by 2050. The prime minister did this in an impassioned speech and later in his energy white paper. Unnecessary pollution was fingered as an evil to be rooted out along similar lines to Saddam Hussein.

The paper, already derided by energy insiders as being little more than a 'wish list', was stuffed full of worthy aspirations but gave precious little detail as to how the ambitious targets might be met.

Instead the paper relied on vague promises like improved energy efficiency and use of more renewable sources. But, after what has been described as a bout of cabinet in-fighting, the paper took no steps to keep the nuclear industry alive. That seems perverse as nuclear power is the one proven, large-scale green power source that we have. So why was it condemned to a slow death, taking 25% of carbon-free power capacity to the grave with it?

Conspiracy theorists suspect a plot. They believe Blair's hidden agenda is to prove to the UK population that green energy will ultimately be just too intermittent and unreliable to keep the UK powered-up 24/7, which will enable energy minister Brian Wilson's beloved nuclear to be rebooted, with replacement reactors sanctioned.

There is little doubt that Britons and UK business can be much more efficient in their use of energy, and energy saving is a valid cause to pursue, but in the end it is tinkering around the edges.

At the moment a mere 3% of UK power is generated by renewables, including large-scale hydro projects, and energy insiders believe the targets of 10% by 2010 and 20% by 2020 will prove hard to achieve unless every available stretch of moorland in the UK is to be covered in wind turbines.

Insiders also complain that the paper provided no framework for investment and is therefore unlikely to fuel the use of untried technologies of wave and tidal power.

Jeremy Leggett, chief executive of Solar Century, one of the potential giants in the emerging renewables sector, said after the speech that the £60m pledged to his industry was just one-tenth of the money Blair's government gave to British Energy last autumn to bail out the shareholders of the ailing nuclear industry. It's going to need much much more if it is ever to generate what Blair is hoping it might.

www.canada.com BRUCE STANLEY AP Saturday, March 01, 2003

A recent surge in Saudi Arabian oil production should help cool sizzling prices when crude shipments from the Persian Gulf reach U.S. ports within a month, industry analysts said yesterday.

Prices eased a day after spiking to a 12-year high in the United States on concerns about tight supplies.

Some analysts said OPEC member countries were pumping furiously and argued that the current market turmoil would ease once fresh barrels hit the market.

"A lot of the crude produced in January has not yet arrived. The situation may change drastically," said a senior source at the Organization of Petroleum Exporting Countries.

Fears of a war with Iraq are partly to blame for the latest run-up in prices.

April contracts of U.S. light sweet crude climbed as much as $2 on Thursday to peak at $39.99 a barrel in New York, the highest level since October 1990, when Iraq occupied Kuwait. Yesterday, the April contract fell 60 cents to settle at $36.60 in New York.

Concerns that a war might create supply shortages have inflated prices by at least $5 a barrel, said the source, speaking on condition of anonymity from OPEC's headquarters in Vienna, Austria.

However, analysts said OPEC could probably make up the 2 million barrels a day that Iraq would be unable to export if fighting broke out in the Gulf. OPEC supplies about a third of the world's oil.

The cartel's most powerful member, Saudi Arabia, says it can produce up to 10.5 million barrels a day.

That is substantially higher than the 8.5 million barrels a day that the International Energy Agency, a watchdog for oil-importing countries, said the country was producing in January.

"I think they're well above 10 million barrels, and pumping," said Peter Gignoux, managing director of the petroleum desk at Salomon Smith Barney.

Much of this additional crude is already on its way to the U.S. East Coast, a journey lasting about 45 days.

The United Arab Emirates and other OPEC members that aren't already producing at full capacity could boost the cartel's output further to help make up for any missing Iraqi barrels.

The recent price spike was most pronounced in the United States, the world's biggest importer of crude. While Iraq has been a factor in this surge, analysts said cold weather and the fallout from a strike in Venezuela's oil industry have played a bigger role.

"We've lived without Iraqi oil before. This doesn't bother me," Gignoux said.

www.voanews.com VOA News 28 Feb 2003, 23:11 UTC

World oil prices eased a bit Friday after jumping to 12-year highs of almost $40 a barrel Thursday amid worries over a possible U.S.-led war with Iraq.

U.S. light crude oil dropped to about $37 a barrel while Benchmark Brent eased to about $33.

The easing came despite market skepticism over a statement by the Organization of Petroleum Exporting Countries (OPEC) that it has enough excess supply - up to four million extra barrels a day - to cover demand in the event of war.

A petroleum expert in Vienna says if Iraq were to sabotage oil fields in Kuwait or Saudi Arabia, the extra four million barrels a day may not be enough.

And analysts for J.P. Morgan, Paul Horsnell, and other firms said they doubt Opec's has four million barrels a day in excess capacity, saying the figure is more likely just a bit over two million barrels a day.

OPEC's secretary-general says the cartel does not plan to raise production quotas for the second quarter of 2003 unless there is a war. OPEC ministers are planning to meet on March 11th at a regular session in Vienna.

Prices have also been under pressure from increased demand in the United States and shortages from a recent strike in Venezuela. Venezuela says its oil production has now reached two million barrels per day, and expects it will reach its normal output of three million barrels per day in one month.