www.themercury.news.com.au By KANE YOUNG 22feb03

TASMANIAN petrol prices could soar to more than $1.20 a litre if war breaks out in Iraq, the Tasmanian Automobile Chamber of Commerce warned yesterday. With world oil prices having reached a 2-1 year high, Tasmanian petrol prices have already cracked the $1 barrier and chamber general manager Malcolm Little says there may be worse to come.

"It wouldn't take very much for prices to get to $1.20 per litre," he said.

Mr Little said the price rises would affect the whole country, with Tasmania hit especially hard because of a 2c a litre premium paid by Tasmanian distributors.

The price of petrol is currently more than $1 a litre in most Australian capital cities, with Sydney motorists paying up to $1.10 a litre this week.

Mr Little said some international observers had predicted prices would rise to as much as $1.50 a litre, although he personally doubts the situation would get that bad.

He said several international factors had driven up Tasmanian prices lately, including the threat of war in Iraq, a general strike in Venezuela, and the heavy demand for oil during the Northern Hemisphere winter.

"At the end of the day, it's not you and me buying the product, or even the service station owners, who determine the prices," he said.

Mr Little called on motorists not to get angry when service station owners were forced to raise their prices.

"As prices go up, there is only ever one winner - the Federal Government," Mr Little said. "Service stations merely make a margin, and their prices reflect their costs.

"They are not winners in this, they are just doing their job.

"There's no point venting your frustration at service stations, just as there's no point venting your frustrations at grocery store owners when their prices go up."

www.smh.com.au By Michael Dobbs February 22 2003

Enough oil is stored in the deep salt caverns along the Gulf of Mexico for the United States to replace a year's worth of its imports from Saudi Arabia.

Originally conceived as a response to the oil crises of the 1970s, the Strategic Petroleum Reserve has become as much a part of the US's strategic arsenal as the aircraft carriers, airborne divisions and spy planes converging on the Persian Gulf.

According to the Department of Energy, the 599-million barrel reserve constitutes the US's "first line of defence" against disruptions in energy supplies.

As President George Bush prepares for war with Iraq, he has come under pressure to use the reserve to calm an increasingly jittery market.

In addition to the uncertainty caused by the Iraqi crisis, a general strike in Venezuela has helped push oil prices to new highs, and slashed inventories in many parts of the world.

If the past is a guide and Mr Bush follows the precedent set by his father in the Gulf War in 1991, he probably will resist the temptation to tap into the underground sites in Texas and Louisiana until the onset of any hostilities.

Once an attack on Iraq begins, he will order the release of some of the oil to signal the US's ability to ride out any temporary panic over the oil market.

If the war went badly, and Iraqi President Saddam Hussein succeeded in torching Iraqi oilfields or hitting oil facilities in neighbouring Kuwait or Saudi Arabia, the reserves would assume huge strategic importance.

The 50 or so caverns contain enough oil to replace 53 days of lost imports. In practice, officials say, supplies should last considerably longer, as the US buys much of its oil from Canada and Mexico, whose supplies would be unlikely to be interrupted by a crisis in the Middle East.

An economist at the American Petroleum Institute, Edward Porter, said that because of the tightness of the international oil market, the Strategic Petroleum Reserve might end up playing "a much more central role" in a war than it did in 1991.

Today, it is much more difficult to offset a likely loss of Middle Eastern oil, if the region became embroiled in war.

How much oil should be released from the reserve, and under what circumstances, is the subject of great debate among energy specialists.

Oil industry executives oppose releasing any, except in a national emergency.

The Bush Administration is keeping its options open. The Energy Secretary, Spencer Abraham, said last week that the reserve should be used only in the event of severe supply disruptions, and not to bring down prices.

The Washington Post

reuters.com Fri February 21, 2003 07:41 AM ET By Tom Ashby

LONDON (Reuters) - World oil prices rebounded on Friday toward two-year highs as the United States said it had massed enough troops in the Gulf to attack Iraq, the world's eighth largest oil exporter.

Defense Secretary Donald Rumsfeld said more than 150,000 troops were ready to move on Baghdad if Washington decided to attack, while Turkey and the United States moved closer to a deal over troops.

International benchmark Brent crude oil rose 41 cents to $31.97 a barrel, versus a two-year high of $33.10 hit last week. U.S. crude futures climbed 47 cents to $35.21.

"Oil prices are unlikely to shift too far away from a continuing upward bias until the situation with respect to Iraq moves to a more decisive phase," said Paul Horsnell of investment bank J.P. Morgan.

The global oil market had slipped on Thursday on U.S. data showing an unexpected recovery in U.S. commercial crude oil stocks from their lowest levels in 27 years.

But prices are still some 50 percent up in three months as the market has absorbed the threat to Iraq's two million barrel per day of exports.

Turkey held out hope for a late "aid for bases" deal with the United States that would allow Washington to deploy tens of thousands of troops on Turkish soil for a possible invasion of Iraq. "There is mutual understanding," Prime Minister Abdullah Gul said.

HEATING OIL RUNNING LOW

Blistering cold weather in the northeastern United States has also boosted demand for heating oil in a world market that is otherwise suffering from slow growth.

Commercial U.S. stocks of heating oil are running at almost 31 percent below last year, latest official data shows.

Inventories have also been crimped by a cut in supplies from Venezuela, which is struggling to restore normal exports after 10 weeks of strike by key oil company employees.

Venezuela, the world's fifth largest exporter before the strike, is now pumping about half its normal three million barrel per day rate.

TotalFinaElf chief Thierry Desmarest said on Friday he expected oil prices to rise further if the United States went ahead with war on Iraq, but said OPEC would easily be able to cover for any interruption in Iraqi supply.

Desmarest predicted prices would rise for a few weeks if the U.S. launched an assault against Baghdad but then fall in the second half of the year because of slow growth in global oil demand.

Washington plans to propose a new resolution to the U.N. Security Council next week authorizing a strike against Baghdad.

But the United States, backed by ally Britain, is likely to face strong opposition from France, Russia and China, who want U.N. arms inspectors to be given more time to search for Iraq's alleged stockpiles of biological, chemical and nuclear weapons.

Baghdad denies it has such weapons.

www.forbes.com Reuters, 02.21.03, 4:16 AM ET SINGAPORE, Feb 21 (Reuters) - Oil prices rebounded on Friday from a sharp fall, with an eye on slim fuel stocks and cold weather in the United States and next week's diplomatic play at the United Nations over a possible war in crude exporter Iraq. U.S. light crude climbed 51 cents to $35.25 a barrel. In London, benchmark Brent crude leapt 43 cents at the open to $31.99 a barrel, partly reversing a 67-cent fall on Thursday. Thursday's sharp drop in prices came as U.S. crude inventories showed a modest gain from 28-year lows and traders moved to collect profits after six days in a row of gains, which saw oil hit a 29-month peak above $37. "After yesterday's very sharp sell off, the market is really trying to adjust but it's not easy to trade at the moment. This is really a technical rebound," said Lawrence Eagles at London-based GNI-Man Research. Analysts said crude was unlikely to come under significant downward pressure as much of the United States remained blanketed by snow, pushing up demand for winter heating fuels. National stocks of heating oil are running at about 40 million barrels, almost 31 percent below levels a year ago, government statistics released on Thursday showed. Total crude inventories are just three million barrels above the minimum required 270 million barrels to ensure operation of U.S. refineries. Gasoline tanks are also on a contra-seasonal decline as refiners raise output of heating fuels, which has ignited concerns of a possible supply crunch at the pump in summer months when vacation season is in full swing. Apart from winter demand, U.S. stocks have also been crimped by a cut in supplies from Venezuela, which is struggling to bring its oil exports back to normal from the ongoing anti-government strike, now in its 11th week. Venezuela used to supply 13 percent of U.S. oil imports before the strike.

DIPLOMATIC PLAY Adding to concerns over tight oil supplies is the possibility of a military attack on Iraq, the world's eight biggest crude exporter, and potential disruptions to crude flows from other Middle East producers. The region supplies about 40 percent of globally traded crude oil. The United States said on Thursday that it had amassed a big enough military force in the Gulf region to launch an invasion of Iraq, if President George W. Bush decides to go to war. Washington plans to propose a new resolution to the U.N. Security Council next week, authorising a strike against Baghdad to force it to give up any banned weapons it has hidden. But the United States, backed by ally Britain, is likely to face strong opposition from France, Russia and China, who want U.N. arms inspectors to be given more time to search for Iraq's alleged stockpiles of biological, chemical and nuclear weapons. Baghdad denies it has such weapons. The new draft resolution is expected to say Iraq is in "further material breach" of a November 8 resolution, wording that Washington and London claim can be used as justification for war.

www.vanguardngr.com By Victor Ahiuma-Young Friday, February 21, 2003

 LAGOS— LONG queues at filing stations, reminiscent of the Abacha era, returned to Lagos metropolis and other parts of the country, yesterday as the current fuel scarcity worsened. The re-emergence of the queues occurred on a day workers of the Department of Petroleum Resources (DPR) suspended their seven-day old strike, while US crude oil prices broke above 37 dollars a barrel for the first time in 29 months with prospect of a war in Iraq influencing fear in world market.

The queues spilled onto highways, causing traffic jams in many parts of the Lagos metropolis. Private car owners and commercial drivers in their hundreds abandoned their businesses to join in the queues with a view to buying fuel. The fuel black market which had practically disappeared is also back, with the operators hawking fuel along highways.

Yesterday, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and the National Union of Petroleum and Natural Gas Workers (NUPENG) directed their striking members in DPR to suspend their seven-day industrial action following a meeting in Abuja with government officials.

General Secretary of PENGASSAN, Mr. Kenneth Narebor, told Vanguard on telephone that the government had now agreed to work with the two unions in the oil industry as well as the National Assembly to ensure speedy passage of the DPR Autonomy Bill, the bone of contention. DPR management and the workers had, Wednesday, in Lagos reached some understanding concerning the welfare of the workers.

"We have concluded the meeting with government officials. The Special Adviser to president Obasanjo on petroleum matters, Dr. Rilwan Lukman, has promised to work with the workers and the National Assembly to ensure speedy passage of the DPR Autonomy Bill. So, DPR workers have agreed to suspend the action. The communique reached has been taken to Dr. Lukman and other government officials. There are other issues in the communique. We shall make it available soon."

Vanguard also gathered yesterday that contractors supplying petroleum products to the country have been putting pressure on government to review the terms of their contracts in line with the rising crude oil prices in the international market. Sources close to the Nigerian National Petroleum Corporation (NNPC) said the contractors had actually reduced the volume of petroleum products they supply to the country in an effort to force government to re-negotiate with them and the reduction in supply is believed to be the cause of the re-emergence of queues at the filling stations in the last few days. The source said, however, that NNPC had so far not yielded to the pressure as that would amount to hiking the pump prices of fuel.

"Since the Venezuela crisis and the Iraq/US face-off started, which has shot up the prices of crude in the international market, the contractors supplying petroleum products to the country have been putting pressure on NNPC to re-negotiate the terms of their contracts in line with the rising crude price in the international market. You know these contractors have a ready market where they can take their products to and make the profit they are after," the source said.

"Ordinarily, the NNPC should not have bothered because a contract is a contract. They have been benefitting from the contract before this time and NNPC did not call for a re-negotiation. But the problem facing NNPC is that most of these contractors were politically appointed, hence the corporation is in a fix. Not until this issue is resolved, this fuel scarcity will persist."

•US oil prices hit fresh 29-month high

However, US crude oil prices broke above 37 dollars a barrel for the first time in 29 months, Wednesday, as the prospect of a war in Iraq instilled fear in world markets. Concern over the possibility of short fuel supplies in the United States also kept prices higher a day before the release of government and private data on US oil stocks. New York’s benchmark light sweet crude contract for delivery in March advanced 20 cents to 37.16 dollars a barrel, the highest close since September 2000.

Earlier, London oil prices moved in the opposite direction. Brent North Sea crude oil for April delivery slipped 23 cents to finish at 32.31 dollars per barrel. "We’re waiting for tomorrow’s data (on oil stocks), said A. G. Edwards analyst Bill O’Grady, forecasting a decline of 1.5 million barrels in crude stocks. Most analysts expected stocks to rise, he said. Trade was volatile, he said. "We chopped around all day."

Analysts in London said prices were propped up by the threat of war despite a British press report that Britain was pressing the United States to give UN weapons inspections more time. "People just don’t want to be short of this market ahead of a possible war and tomorrow (Thursday)’s US stocks data," said Prudential Bache oil broker Tony Machacek. The Times newspaper said British Prime Minister Tony Blair was trying to buy weapons inspectors three more weeks before the United Nations was asked to trigger military action against Iraq.

In a front-page report, it said Blair and Jack Straw, the foreign secretary, were suggesting that a crunch meeting of the UN could take place on March 14. But GNI-Man Financial analyst Lawrence Eagles said comments Tuesday by US President George W. Bush indicated that a war was unlikely to be averted for long. "War is my last choice, but the risk of doing nothing is even a worse option," Bush said, adding that while UN backing for a US-led attack on Iraq would be useful it was not necessary. Meanwhile, analysts said, the market eyed developments in Nigeria where junior oil workers joined a three-day-old strike by government inspectors. The country’s oil companies said the strike had so far had no impact.