www.barbadosadvocate.com Web Posted - Sun Feb 16 2003 By Petal Smith

GOVERNMENT has been careful to shield the public as far as possible from the effects of the increasing oil prices which were triggered by the pending Gulf war and the protracted strike in Venezuela. Speaking against the backdrop of increases in energy prices yesterday, Parliamentary Secretary in the Ministry of Economic Development, Senator Tyrone Barker, said government has been trying its best to contain the increases.

He pointed out that other Caribbean countries like Jamaica and Guyana have already had sharp increases in the price of fuel.

Speaking to the Barbados Advocate yesterday, Senator Barker said that even with this increase, the price for gasoline was less than it was ten years ago. He noted that the price of gasoline in 1997 was $1.54 per litre, and that price, he said was reflected since 1993 to 1994. “The excise tax was 90 cents out of the $1.54. We have reduced the tax by 25 cents per litre, that is almost $1 per gallon,” he said.

The Parliamentary Secretary said for every cent in the reduction of tax, government was losing approximately $1million on gasoline and about $750 000 on diesel.

“The reduction of 25 cents in gasoline will cost the treasury every year about $25 million on gasoline alone. Also, the tax for diesel went down even further by 33 per cent per litre,” Barker said.

He said because diesel is more of an industrial fuel, a massive cut on tax has being put in place. “In October of 1994, one of the first things we did was to remove the tax on imports to both the manufacturing and fishing sector.”

Furthermore, because of the impact of the fuel price on electricity, Government took a decision in 1998 to completely remove tax on fuel oil, “so we have done a lot to maintain the price of fuel at a level which will allow the industry to flourish”.

Senator Barker added: “We recognise the importance of the cost of fuel on production and we have taken concrete steps in the last eight years to lower the price.” He said if the full tax was levied on the fuel, consumers would have to pay an increase of 25 cents per litre for fuel.

www.sfgate.com Robert Collier, Chronicle Staff Writer Sunday, February 16, 2003

Ras Tanura, Saudi Arabia -- Pipes, ducts, tanks, towers and an infinite variety of refining, storage and shipping facilities stretch for miles along the desert seashore, resonating with a low, almost imperceptible hum.

This is the heart of the Saudi oil empire, an empire that has made the conservative kingdom an indispensable U.S. ally in the Mideast.

To talk about the place is to make superlatives seem almost banal -- Ras Tanura is the world's largest petroleum products export facility, owned by the world's largest oil firm, in a nation that is the world's largest petroleum producer.

But Saudis are worried that their empire may soon be eclipsed by a powerful new challenger rising out of the ashes of war -- Iraq.

If a U.S.-led invasion succeeds in overthrowing Saddam Hussein's government and installing a pro-American regime in Baghdad, Iraq's immense, largely untapped oil wealth will be opened to foreign investment and the country could become the major economic powerhouse in the region, casting a long shadow over Saudi Arabia.

"If the United States takes over Iraq and Iraqi production rises dramatically, Saudi Arabia will lose position in the market and political influence with the United States," said a strategic planning executive for Saudi Aramco, the state-owned oil monopoly.

Such an outcome would be a triumph for the growing anti-Saudi lobby in Washington, which notes that the country produced Osama bin Laden and 15 of the Sept. 11 hijackers, and whose religious charities have funded a variety of extremist anti-Western groups.

"If Iraq gets a democratic government open to foreign investment, there would be an alternate source of oil supply to (that of) the Saudis, so we wouldn't have to defer to their blackmail, their use of the (oil) revenues that we give them for activities that are very jihadist and dangerous," said Frank Gaffney, a Pentagon adviser and president of the Center for Security Policy, a Washington think tank.

In public declarations, Saudi officials insist they are not worried about Iraqi competition. "We hope there will be enough demand to absorb new production, whether it be from the Caspian or West Africa or Iraq," said Abdulatif Al-Othman, the executive director of Saudi Aramco. "The more the merrier."

But privately, many Saudi officials wring their hands.

"Saudi Aramco doesn't like this, but of course we can't talk about it," said the company's planning executive, who wished to remain anonymous. "Some analysts say Iraq could eventually become No. 1."

Iraq has 113 billion barrels of proven reserves, second only to Saudi Arabia's 262 billion barrels. Iraq's potential remains largely unexplored because of the disruption of the past two decades of war and economic sanctions. The U.S. Energy Department estimates that Iraq has as much as an additional 220 billion barrels in undiscovered reserves, bringing the Iraqi total to the equivalent of 98 years of current U.S. annual oil imports.

FOREIGN OIL COMPANIES

It is widely assumed that U.N. economic sanctions would be quickly lifted after the ouster of the Hussein regime and that the new U.S.-installed government would invite foreign oil companies into Iraq.

"Iraq cannot do without opening to foreign investors," said Fadhil Chalabi, executive director of the Center for Global Energy Studies, a think tank in London.

Chalabi's career includes stints as secretary-general of the Organization of Petroleum Exporting Countries and Iraqi deputy minister of petroleum. He is considered a leading candidate to be installed as czar of Iraq's energy industry in a postwar administration that is certain to be heavily influenced, if not directly run, by the U.S. government.

Chalabi also is a leading proponent of selling off the state-owned Iraqi oil industry to foreign investors. "Without privatization, there is no hope for the oil industry to solve the country's dire economic and social situation, " he said in an interview with The Chronicle.

Chalabi points out that the new government will desperately need quick cash.

The cost of rebuilding the country will be sky-high, as much as $100 billion, according to some estimates.

So far, there's little American public support for spending U.S. tax dollars on Iraq's reconstruction, and it's unlikely that Arab and European nations will foot the bill, as they did in the 1991 Gulf War, particularly if a new war is not backed by another U.N. Security Council resolution.

As a result, analysts say, most of the cost will have to be borne from Iraqi oil revenues.

When added to Iraq's $120 billion foreign debt -- much of it left over from the 1980-88 war against Iran -- the result is a huge burden.

Chalabi estimates that if the best-case scenario holds -- a quick victory by U.S. forces and little damage to the country's oil fields -- Iraq could raise its production from the current level of 2.8 million barrels per day to 7 million barrels per day by 2008. Eventually, he says, Iraqi output will top 10 million barrels per day, more than Saudi Arabia's.

'A LOT OF FANTASY'

But Robert Mabro, director of the Oxford Institute for Energy Studies, cautions that "there is a lot of fantasy going around" about Iraq's oil future.

"It depends on many factors. Will Saddam blow up the oil fields in the first days of the invasion? Will he shoot missiles at Kuwait's oil installations? How much damage will be done during the war, and how long will it last? It's too speculative."

In part because of these uncertainties, accusations that oil is a leading motive behind the Bush administration's drive toward war are wrong, in the view of many analysts.

"If we just wanted to grab Iraq's oil, we would just get rid of the sanctions and do business with Saddam, who would be more than willing to sell his oil to us," said Gaffney. "And if we just wanted cheap oil, we'd invade Venezuela."

What seems more certain is that in the short term, a war with Iraq will cause at least a moderate jump in oil prices -- although less of a jump than expected only a month ago. At that time, Venezuela was paralyzed by anti- government protests that shut down its oil exports, the fifth highest in the world. If Iraq's production had been taken off the world market at the same time as the Venezuela shutdown, prices could have spiked to $50 per barrel or more, driving American gasoline prices well above $2 per gallon.

Now, with Venezuela's production expected to be back near normal next month -- assuming there are no further political disruptions -- the "Iraq effect" will be more moderate, oil experts say, perhaps a rise to $40 per barrel, unless Kuwait's exports are affected.

PRICE WARS

In the long run, as increased Iraqi production enters the market, prices could be driven down as far as the low teens by a price war between Iraq and Saudi Arabia, according to Fareed Mohamedi, chief economist of Petroleum Finance Co., a Washington consulting firm.

"Rather than sticking within their quota and give up their market share to the Iraqis and others, the Saudis are likely to increase production to drive down prices to push other high-cost producers off the market," Mohamedi said.

However, such a price war is likely to result in decreased revenues for the Saudis, which could lead to social instability in a country that has already experienced sharp drops in living standards since the highs of the 1980s, along with increasing levels of joblessness. Unemployment is likely to grow further because of the country's high birth rate and its reliance on low-wage laborers from Pakistan, Bangladesh, India and Yemen.

"An oil price crash would be painful here, no matter how much the government has in foreign assets," said Brad Bourland, chief economist at the Saudi American Bank in Riyadh.

Still, Saudi Arabia may be better positioned to weather an oil price war than almost any oil-producing nation, including Iraq, say energy analysts. Its cost of production is believed to be less than $1 per barrel, and Saudi Aramco enjoys a sterling reputation among buyers worldwide as reliable and quality conscious.

"For those advocating a rapid restructuring of the Iraqi oil sector with massive foreign investment resulting in rapidly growing output levels, the unintended consequences could be much lower oil prices, lower oil revenues for the new government in Baghdad and a host of political problems around the world," said Mohamedi.

Ironically, Saudi Arabia and its neighbors could emerge stronger than ever from "regime change" in Iraq. Many analysts say that because of price wars and dwindling oil reserves in other regions, the Persian Gulf's share of the world's crude oil supply -- currently about 25 percent -- could rise to as much as 40 percent over the next decade.

"For those who see Iraq as a means to lessen dependence on the Saudis, in the end the world might become more dependent on Saudi oil," Mohamedi said. "So much for supply diversity as a policy."

E-mail Robert Collier at rcollier@sfchronicle.com.

www.newsday.com February 16, 2003 Eleven days ago, on a Wednesday, regular was a cool $1.65.9 a gallon at Pequa Getty on Hicksville Road in Massapequa. The next day it was $1.67.9 - and two days later, $1.69.9. By Monday, it was selling for $1.71.9. By tomorrow, who knows? Inside the office, Tom Lipera, who runs the franchised station, was talking about how he had no say in the matter - prices are set at the corporate level - and how he had no idea where it would end. "Customers used to come in and say, 'Prices aren't going to go up again, are they?'" he said. "Now, their reaction is 'We know it's going up. How much?'" How much, indeed? Just last week, oil prices set a new 26-month benchmark, the highest price ever for the month of February. A barrel of U.S. light crude, used to refine gasoline, reached $35.60, the highest since November 2000. That is about $5 less a barrel than it was before the start of the Persian Gulf War in 1991. The average price for regular was $1.73.9 on Long Island. To think there once was a commercial where a kid and his girlfriend drove to a Gulf station and asked for a quarter's worth of Good Gulf. But while analysts blamed the rise on fears over oil supplies should war break out in the Middle East, the American Automobile Association announced it believes there is no legitimate reason for the price hikes - that it looked "uncomfortably close" to price gouging. As American Automobile Association spokesman Geoff Sundstrom said last week: "The fundamentals do not justify U.S. drivers paying the highest price on record for the month of February." Problem is, out on the street, we are. We are paying for it at the pump. Sometimes, several times a week. "Unbelievable," Ethel Bogdanowich of Amityville said as she topped her tank last Thursday morning at Pequa Getty. The damage? Try 5.815 gallons of regular - for $10. "I have to go to work, so I have to get gas. I don't have much of a choice. It's beyond ridiculous, these prices. Where is it going to end?" At another pump, Massapequa resident Maureen Zinkiewicz sat behind the wheel of her maroon Infiniti G35 as the station attendant filled her tank with regular. A sales representative for A.J. Bart & Son, a printing company in the Williamsburg section of Brooklyn, she has clients throughout the city - and drives a minimum of 70 miles a day. She was holding a $50 bill in her hand. Her car took 18.488 gallons. Her charge was $34. "I know everybody is thinking that there is going to be a war with Iraq - and that the prices are going up because of that," she said. "But, you also hear that isn't the reason. That there is no shortage. That the oil companies don't have to raise the prices as much as they are. ... All I know is I drive at least 70 miles a day. My husband drives at least 70 miles a day. I need the car. I need to get gas. So does he. We have no choice." Behind the counter at the Sunoco station on Montauk Highway and Bayview Avenue in Amityville, the manager, who is from Turkey and asked he be identified only as Okan, said the prices might be going up because of the oil crisis in Venezuela, because of the threat of war with Iraq - or simply because these are the prices the market will bear. Outside, his station had 87-octane regular selling for $1.77.9 a gallon, 89-octane for $1.89.9, 93-octane for $1.95.9 and its 94-octane gasoline, Sunoco Ultra, at an obscene $2.15.9. I wish they weren't so high," Kristin Dascole of Amityville said as she filled the tank on her black VW Jetta: 12.327 gallons, $21.93. "But, I'm not going to worry about it because there are so many more important things to be worried about now." Like the renewed threat of terrorist attacks on New York. Like possible war in the Middle East. "Like what's going on in the world," she said. For now, we all remain at the mercy of the pump prices. As long as we need to drive. Sure, we could take the train. Or a bus. Or ride a bike or walk. But, some of those alternatives will not get us where we need to go when we need to get there. And the bottom line is we are a car culture here on Long Island with about 2 million drivers. Our communities are arranged so we must drive. Still, despite the rising prices, veterans of the gas wars - guys like Lipera, who was pumping gas at a Mobil station in Rockaway Beach during the gas crisis of 1973 - said we shouldn't fear it will ever get that bad again. Where we had lines that ran on for blocks. Where we were only able to buy gasoline on odd or even days, depending on our license plate numbers. All the suppliers tell you there is plenty of gas in reserve, that the oil companies have more than they need," he said. "For years, that is all I've been hearing - and, I've never heard anything else." So, why do the big oil companies continue to raise the price of a gallon of gas then, he was asked. "I guess," he said, "because they can."

www.gulf-daily-news.com NICOSIA:

Opec oil production rose 2.2 per cent to 25.663 million barrels per day (bpd) in January from December despite the turmoil in Venezuela, the Middle East Economic Survey (MEES) reports.

Output from the cartel's 10 members without Iraq increased 1.2pc or 263,000 bpd to 23.11m bpd from 22.85m bpd in December.

Baghdad accounted for just over half of Opec's overall increase in January, the industry newsletter says in its tomorrow's edition.

Gulf states Kuwait, Saudi Arabia and the UAE together lifted production by 580,000 bpd while Iraq pumped 2.55m bpd, a level not seen since since the first quarter of 2002, MEES notes.

"High Iraqi production is only being achieved at the price of damage to reservoirs - particularly in the north," MEES says.

Iranian production fell slightly on lower exports at 2.263m bpd as domestic consumption remained steady on 1.45m bpd.

MEES says the general strike in Venezuela saw average production drop to 620,000 bpd in January from 1m bpd in December and 3m bpd before the strike began at the end of 2002.

Meanwhile, Kuwait is removing some oil rigs and workers from its northern oil fields in response to increasing tensions with Iraq, its northern neighbour, an official said yesterday.

However, production at the fields will not be reduced, said Bader Al Zuwayyer, spokesman for the state-owned Kuwait Oil Company.

"Because of the security circumstances, we are moving equipment and cutting on manpower, but production will not be affected," he said.

Non-essential equipment and workers were being removed from the northern Ratqa, Abdali and Rawdatain fields near the Iraqi border "until things go back to normal," Al Zuwayyer said.

Tensions between the United States and Iraq have been increasing in recent months, with the US demanding that Iraq dismantle all chemical, biological and nuclear weapons or face possible attack. Iraq has denied it has such weapons, and UN weapons inspectors said Friday they had yet to find evidence of those weapons.

Yesterday, the northern half of Kuwait officially became an exclusion zone where civilians were forbidden to travel without special military permits. Only those with business in the area will be granted the permits.

In recent days, Kuwaiti authorities forced Bedouins living in the north to break their camps and head south in long camel caravans.

Kuwait currently pumps about 1.8m bpd from its fields. Its 96.5bn barrels in proven reserves are the world's fourth-largest.

World oil prices climbed to their highest level in more than two years on Friday as traders bet on a war in Iraq despite diplomatic efforts at the UN.

New York's reference light sweet crude contract for March delivery rose 44 cents to $36.80 a barrel, the highest level since September 2000.

www.bayarea.com Posted on Sat, Feb. 15, 2003 DULUE MBACHU Associated Press

LAGOS, Nigeria - Nigerian oil workers on Saturday launched an indefinite strike that could shut down crude exports in the world's sixth largest oil exporter.

The strike over pay and working conditions comes as the threat of war in Iraq and a prolonged strike in Venezuela have pushed oil prices to two-year highs. Half of Nigerian exports go to the United States.

The action was launched by workers of the Department of Petroleum Resources, a key government unit overseeing operations of oil multinationals like ExxonMobil, ChevronTexaco, Royal Dutch/Shell and TotalFinaElf. It is backed by the country's powerful Petroleum and Natural Gas Senior Staff Association of Nigeria, or PENGASSAN.

The strike aims to paralyze the loading of crude oil at export terminals, but PENGASSAN is threatening to shut down operations across the industry, if the government does not meet its demands by the middle of next week.

"We started shutting down today," PENGASSAN spokesman Femi Familoni said, but added the effect would likely not be felt until Monday.

A Shell spokesman, speaking on customary condition of anonymity, said the company was taking steps to minimize the impact of the strike. He declined to elaborate. Officials at other companies could not immediately be reached for comment.

Strikers are demanding more than a year's worth of back pay, including unpaid overtime, expenses and travel allowances. They are also demanding greater autonomy and better financing for the department, which they say is crippled by inefficient government bureaucracy.

"As things stand, most of the time we rely on ... oil companies to perform our duties, which is not how it should be," Familoni said.

President Olusegun Obasanjo's energy adviser, Rilwanu Lukman, offered to meet with the strikers Feb. 25, according to union officials. But strikers rejected the proposal, saying it did not reflect the urgency of their demands.

Government officials could not immediately be reached for comment.

The government can ill-afford a prolonged strike as it seeks to tackle widespread poverty and repair infrastructure left to decay during decades of corrupt rule.

Nigeria produces close to 2 million barrels of oil a day, more than 95 percent of which is pumped by joint ventures between the government and major oil companies.