www.forbes.com Reuters, 03.21.03, 8:30 AM ET WASHINGTON (Reuters) - U.S. consumer prices posted their biggest gain more than two years in February as food costs rose and energy surged on the march to war with Iraq, the government said on Friday. The Consumer Price Index, the main U.S. inflation gauge, advanced 0.6 percent last month, the Labor Department said, outstripping the 0.5 percent increase expected by Wall Street economists. But outside those categories, prices were mostly well-contained, the report showed. Energy prices shot up 5.9 percent, the largest increase since June 2000 while food costs staged their biggest rise since June 1996, gaining 0.7 percent. The core CPI, which strips out volatile food and energy costs, increased just 0.1 percent, a bit less than the 0.2 percent economists had expected. While consumer prices have risen a strong 3.0 percent over the last 12 months, much of that reflects higher energy costs. The core CPI is up just 1.7 percent over that period, its smallest 12-month gain in nearly 37 years. Oil prices rose sharply through February after a now-ended workers' strike in Venezuela cut into supplies and as the United States prepared for war with Iraq. But in recent days, as war came to appear inevitable and as bombs ultimately began to drop, prices have reversed course, shedding a quarter of their value from recent highs. Crude oil futures were near a three-month low in European trade on Friday. The Labor Department's report showed a 9.9 percent increase in the price of gasoline, the largest monthly gain since June 2000, while the cost of fuel oil spiked up 15.8 percent, the sharpest increase since February of 2000. As for food, prices for beef and veal shot up 3.3 percent, the steepest increase since January 1984. Pork prices rose 1.1 percent, poultry gained 1.2 percent and vegetable prices rose 1.5 percent. Labor said there were no special factors to account for the jump in food costs. Federal Reserve policymakers believe inflation may be set to drift lower this year given a high degree of slack in the economy, minutes from a January rate-setting meeting released on Thursday showed. However, officials spoke about a number of "crosscurrents" in the inflation picture.

www.pantagraph.com Friday, March 21, 2003
By Chris Anderson Pantagraph staff

BLOOMINGTON -- Local consumers should see little impact after the start of war -- gas prices are stable and food prices are not expected to rise.

David Sykuta, director of the Illinois Petroleum Council, promised drivers fuel at reasonable prices as long as consumers don't start panic-buying.

"Drivers don't need to panic" because of the war, said Sykuta. "We get very little crude oil from the Middle East. Most of it comes from Canada, Mexico, Venezuela, Saudi Arabia and Nigeria. And our strategic oil reserve is filled to the tip-top."

Central Illinois grocers said the war should have no effect on food prices, making hoarding unnecessary. Most food consumed in the United States, except some fruits and vegetables, gets produced and processed in America.

"The short-run impact -- if the war goes as planned -- will be minimal on food prices," said Rick Whitacre, Illinois State University agricultural economist. "If the stock market continues to strengthen and oil prices continue going down, it should restore consumer confidence. If you're not paying $2 per gallon to fill up your SUV, maybe you can go to Jim's Steak House for dinner."

Gasoline prices in the Twin Cities Thursday stayed stable at around $1.60 per gallon. Sykuta, driving from Springfield to Chicago, found prices steady to 1 cent lower.

He noted crude oil prices have dropped recently because of anticipation of a short conflict in Iraq. Prices recently fell to about $25 per barrel after hitting $32.49 in December.

Sykuta said, "Fear and rumors are powerful forces. I think owners of all 5,000 service stations in Illinois will be restrained. I'm optimistic it will stay under control."

Whitacre noted farmers facing spring planting duties also could benefit from lower petroleum prices. A drop in diesel prices from $2 per gallon to $1.30 or $1.40 per gallon could result in substantial savings, he said. Lower petroleum-based fertilizer prices also would save farmers money, he said.

The war's impact on grain prices remains less certain. Brian Basting, an economist with Advance Trading Inc. in Bloomington, expects some initial market hesitation while traders determine exactly what's happening.

Grain markets reflected that situation. Traders described Wednesday's trading as "war-subdued" with corn futures prices up about 1 cent per bushel and soybeans down about 3 cents. Thursday's futures prices ended with corn 2 \ cents higher and soybeans 4 cents higher. Solid weekly exports, not the war, fueled the increase.

"Spring weather and acreage reports will be a much more important impact on grain prices as long as the war doesn't interfere with international commerce," said Whitacre.

Pete Manhart, owner of Bates Commodities Inc. in Normal, noted the U.S. doesn't trade grain with Iraq. Egypt, however, buys wheat and other grains from the U.S., a trade route that could become physically disrupted, he said.

Basting and Whitacre said U.S. grain trade could get a significant boost if the war ends quickly. Iraq will need food assistance -- action that would bolster confidence in worldwide grain trade, they said.

www.canada.com MALCOLM MORRISON
CP Thursday, March 20, 2003

As zero-hour for a war in Iraq approached, the closely watched Dow average of blue-chip stocks rose yesterday to close up for a sixth session in a row - something that hasn't happened since August 2000.

Most North American stock markets gained on reports that U.S. planes attacked several artillery batteries in southern Iraq.

Hopes for a short war also fired up the U.S. dollar, in turn driving the Canadian currency lower by 0.37 of a cent to 67.45 cents U.S.

Lowered fears about a shortage of oil as a result of a new war in the Persian Gulf took crude prices beneath $30 U.S. a barrel.

While U.S. crude inventories remain low, OPEC producers other than Iraq and strife-torn Venezuela have been increasing production for weeks.

Generally, the tone on stock markets yesterday was of caution ahead of the expiry of the U.S. ultimatum to Saddam Hussein, even as U.S. forces began moving through the Kuwaiti desert toward Iraq.

"We had a pretty strong move in the last week that needs to be digested," said Arthur Hogan, chief analyst at Jefferies & Co. "We now know war is a matter of hours, not weeks. So this is definitely a wait-and-see day."

In New York, the Dow Jones industrials gained 71.22 points to 8265.45. The Dow has racked up more than 700 points in the last six sessions as investors bet any war will be short.

"It has sort of slowed down in intensity from what we've seen in the last couple of days, but the equity markets are proving remarkably resilient here," said Scott Kinnear, economist with MMS in Toronto.

Toronto's S&P/TSX composite index moved 14.87 points higher to 6453.48.

The Nasdaq lost 3.48 points to 1397.07 while the S&P 500 was ahead 7.57 at 874.02.

Generally, stock markets have been driven higher since the middle of last week as investors looked to the rally that followed the start of the 1991 Persian Gulf War and hoped that history would repeat itself.

"The general feeling out there is that there will be a quick war so you don't necessarily want to wait for the start of the war because by that time it will be too late," Kinnear said.

But there are plenty of reasons for caution, including the possibility of torched oil fields, use of biological weapons and terrorist attacks.

www.whittierdailynews.com By Ben Baeder , Staff Writer

The famed marriage between Southern Californians and their cars is in a rocky spot right now.

As prices for regular gasoline in the area have climbed to an average of $2.16 per gallon, Southern Californians are walking away from their automobiles and crowding onto buses and trains in record numbers, according to officials from the Los Angeles County Metropolitan Transportation Authority.

"We've had an increase of 75,000 riders per day, on average, since early February,' said MTA spokesman Dave Sotero. "Our buses are jampacked.'

Also, ridership on the MTA's buses and light-rail trains has risen to 1.2 million from 1.1 million in less than two months, Sotero added.

Metrolink trains have seen a similar increase in ridership.

Janice England of Cerritos catches the 8:09 a.m. Metrolink train from the Norwalk/Santa Fe Springs station to her job at the Archdiocese of Los Angeles in downtown L.A.

"Last week, I couldn't find a parking spot (at the Santa Fe Springs/Norwalk station),' she said while waiting for her train on Monday. "I got in my car and left.'

England and other commuters won't find parking relief any time soon.

There is no end in sight to the rising price of gasoline, according to the Web site Oil and Gas Investor.com .

Analysts on the site say turmoil in oil-rich Venezuela and the looming war with Iraq will cause gas prices to rise.

According to Jeff Springs of the Southern California Auto Club, gas prices started rising rapidly in January, when the average gas price was about $1.50 per gallon.

Since then, gas prices have steadily increased at a rate of about 6 cents per week, he said.

Spring also said it is impossible to predict how high the prices will go. However, "one thing we are seeing is the price is going up a little more slowly lately,' he said.

Transportation officials say their services offer a cheap, fast alternative to automobile travel.

On Tuesday, the MTA's 720 Metro Rapid bus line from the Montebello/Commerce Metrolink station to downtown Los Angeles which is a 25-minute, $1.35 trip was standing- room only.

The Metro Rapid buses, which send out signals that cause traffic lights to change, are one of the MTA's most popular services.

Shane Rhody, 40, takes the Metro Rapid from his home in Los Angeles to work at the Oroweat baking plant in Montebello.

"I love this bus,' he said. "It definitely hauls butt. These drivers can really move through the traffic.'

Duane Dennis, who lives near Whittwood Mall in Whittier and takes the Metrolink from Santa Fe Springs to his child-care job in Los Angeles, says he has used the train for three years.

The trip is $9, and, since Dennis buys 10 trips at a time, he gets a discount, which ends up costing him $8 per trip. The trip to Union Station in Los Angeles takes about 35 minutes.

Even if gas was cheap, Dennis would still take the train, he said.

"I hate going through all that traffic,' he said while riding the train on Monday as he read a special newspaper section about the upcoming college basketball playoffs. "I do it for peace of mind.'

Pico Rivera Mayor Bea Proo, who sits on the MTA board of directors, said public transportation agencies now face the challenge of keeping their new customers satisfied and coming back for more.

Right now, there are four Metro Rapid lines, but the MTA has plans to add 23 more within the next five years, she said.

She also added that several new Metro Rapid lines will be opened up in Whittier and Pico Rivera soon.

"What our interest is right now is to see how many of these new riders we can retain,' she said. "And we might be seeing a new audience of business people. We have to adjust our service a little while keeping our current riders happy.'

But, as needs increase, funding for public transportation has stalled because politicians are more concerned about funding the potential war with Iraq, Proo said.

She lobbied politicians in Washington, D.C., last week for more federal dollars for area transportation. Proo got a lot of encouragement but not a single promise of transportation money, she said.

In Santa Fe Springs, city officials say they got transportation funds just in time.

The city plans, in cooperation with Norwalk, to spend $1.5 million of federal money to build more parking at the Metrolink station, said Marina Sueiro, the Santa Fe Springs director of intergovernmental relations.

"We will be taking bids in the next few weeks from firms that will make plans for a parking master plan,' she said.

Other agencies are planning on carrying out similar capital-improvement programs, officials said.

In the past, however, ridership gains were lost when gas prices went back down to normal, said Francisco Oaxaca, spokesman for Metrolink.

But with gas prices expected to rise even more, the MTA is gearing up for more riders and just ordered a new round of passenger cars.

"We've never experienced anything like this before,' Oaxaca said of the 10-year-old train company. "We are really in uncharted territory.'

-- Ben Baeder can be reached at (562) 698-0955, Ext. 3024, or by e-mail at ben.baeder@sgvn.com .

www.thestatesman.net By SAUBHIK CHAKRABARTI

Jaswant Singh’s budget bets on consumer spending and private investment to deliver growth. Excise duty reductions on a raft of products from cars to umbrellas, abolition of dividend tax for shareholders and return of some small change from the taxman — the abolition of surcharge and the increase in standard deduction — are aimed at boosting the first. The second depends on leveraging around Rs 2,000 crore public investment on infrastructure to attract more than Rs 50,000 crore in private investment and retaining the tax breaks on housing loans, thus helping the construction industry. Singh should have added to this by giving a big boost to agriculture. Minus the impetus from farm sector capital formation, it is all the more important consumer and entrepreneurial spirits, raised by the budget, be sustained over a period. Will oil price, thrown out of gear by an Iraq war, spoil the planned party?

Supply & demand The answer is a little more complicated than suggested by the scenario of poor, oil-importing India at the mercy of American dogs of war. The possible impact of a war-led oil shock can be analysed in two components. First, the supply and demand scenarios globally. Second, the structure of India’s oil economy. Globally, the supply situation is such that OPEC countries can make up for Iraq’s oil, which will be unavailable for the duration of the war and sometime after it. OPEC is, however, not the force it used to be and should the war affect, say, Kuwait’s supply, the cartel may not be able to compensate for the loss. Oil watchers also point out two oil producing non-West Asian countries, Nigeria and Venezuela, are politically not in the most stable of conditions. Nigeria’s return to some sort of democracy after years of misrule by Sani Abacha will be tested next month in general elections. Venezuela suffered a huge popular protest against President Hugo Chavez’s attempts to reform the economy and oil supplies were disrupted. If the Iraq war gets messy and if Nigerian and Venezuelan politics becomes too exciting, a supply problem may arise. Especially because unlike a decade ago, when George Bush senior, was playing the cowboy in West Asia, global oil companies do not hold too much in reserves, a result of their cutting costs. On the demand side, high seasonal (winter heating) requirements in the northern hemisphere had counteracted weak industrial demand. Had George Bush attacked Iraq when he originally wanted to — late December 2002, early January 2003 — the winter demand for oil would have had a significant impact on prices. France, Germany, Russia and peace marchers everywhere have however delayed Bush. And in the rich industrialised north, winter is giving way to spring. In April and May there is always a big dip in oil demand. That plus the fact that industrial activity in the big economies is yet to pick up, points to relatively less demand side pressure on prices.

India’s oil economy It is possible to argue, therefore, that unless Saddam Hussein decides to go out in a blaze —blowing up Kuwaiti or even Saudi oil fields, for example — and Nigeria and Venezuela are singed by their own home grown fires, the supply demand situation globally may not produce a severe price shock. But remember all three parts of the worst-case scenario are within the range of possibilities. India, however, imports almost 70 per cent of its oil. So, even a modest jump in prices for a relatively short period is something to reckon with. In fact, by the import ratio criterion, India can be said to be distinctly worse off now than during the Gulf War in 1991, when less than a third of domestic oil consumption was imported. But three factors mitigate this. Just before the 1991 Gulf War, India’s paltry foreign exchange reserves would have bought less than half a year’s oil imports, at the then levels of global prices and domestic demand. Now, record levels of reserves — $ 75 billion— can buy four years of oil imports. That, even with an oil price spike, is a big cushion. The second comforting factor is domestic inventory management by the government. India, like many other countries, notably the US, has a better-managed system than a decade back. It is generally thought that the government has an oil inventory large enough to last 45 days of domestic consumption. Third, the oil consumption pattern in India acts and will act as a shock absorber. In rich Western countries, oil is typically the principal fuel meeting the energy needs of the manufacturing sector. In India, more than 50 per cent of industrial energy usage is coal-fired. The share of oil is less than 35 per cent. Transport outruns manufacturing by a long way as the biggest consumer of petroleum products. An oil price hike is therefore felt primarily through higher transportation costs and not through industrial costs going haywire. Economic dislocation is therefore less severe. An added layer on this structural insulation comes from the downturn in economic activity (industrial slump affects the transport sector). Total oil consumption in 2001-2002 was less than that in 2000-2001. As industry has shown signs of revival in 2002-2003, fuel consumption has picked up. But the oil economy is nowhere near breaking point. Hence Indian industry should not really be panicking at this stage and should survive a relatively short war more or less unscathed. Investor sentiment, accordingly, may not take a big beating.

Fuel prices The consumer? He is not really interested in Venezuelan politics, Exxon’s supply strategy and India’s sectoral energy consumption index. The “real” question for him — the one that will determine whether he buys the stuff Singh wants him to buy — is whether retail fuel prices go up to levels where life becomes very difficult. Not if Ram Naik, the oil minister can help it. Naik has already demonstrated that an interventionist minister can make nonsense out of price reform strategies. After the dismantling of the administered pricing regime — jargon for the government fixing prices — Indian oil companies were supposed to be able to fix domestic prices according to import prices. But Naik hasn’t allowed that so far and will not allow it even more as election priorities become sharper for the government. Therefore, domestic price adjustment to war-led global price hikes will be significantly less than proportional as long as war effects are moderate. This will reduce the profitability of oil refineries, which will have to buy at higher import prices but sell at Naik-determined rates. But they are public sector companies, and so will have to lump it. The other government price intervention, less likely but possible in case of significant hardening of oil prices, is that oil import duties are lowered, thus bringing down domestic prices. Naik has been arguing for this and the finance ministry has been resisting. But Singh may give in if popular discontent on the eve of assembly elections becomes a factor. All told, prospects for Jaswant Singh and his compatriots whom he wants to spend and invest are not scary. Now, if only Bush does not make a Texan bull’s breakfast of his silly war!

The author is Resident Editor, The Statesman, New Delhi