www.miami.com on Fri, Jan. 31, 2003 By MELITA MARIE GARZA Chicago Tribune

CHICAGO - The oil price run-up, partly triggered by the threat of war with Iraq, has cut into milk money, and in some cases, the rest of the grocery bill too.

In January, Oberweis Dairy in North Aurora, Ill., increased its home delivery charge by 10 cents to $2.30 to cover increased diesel fuel costs. What's more, the 76-year-old dairy, which has 40,000 home delivery customers, is considering retrofitting trucks to run on gasoline to further cut fuel costs.

"We have been trying to ride out the price swings for the past three years, but this is completely out of control," said Robert Renaut, Oberweis' president. "We haven't passed any of the costs on. This increase just gets us back to even."

Diesel fuel, which sells for an average of $1.66 a gallon in the Chicago area, generally is more expensive than gasoline and supplies are more limited. As a result, Oberweis has looked into converting 54 home-delivery trucks and about a dozen larger vehicles used to haul milk to grocery stores to operate on gasoline.

"There is a time lag involved in ordering the required parts and having the trucks converted," Renaut said. "The other issue is that if supplies are disrupted, neither gasoline nor diesel might be available."

A prolonged war with Iraq likely would cause oil prices to soar further, contributing to a ripple effect of price increases as trucking companies and retailers try to pass off higher energy costs to consumers. The higher prices would be reflected in the bulk of the nation's goods, which primarily are delivered by truck.

The situation could be more serious than the one truckers and motorists confronted during the Persian Gulf War in 1991, when U.S. oil refiners were awash in crude inventory. Since 1999, oil companies have limited the amount of refined fuel kept in storage. As a result of an eight-week strike in Venezuela, one of the top five oil exporters to the United States, oil companies have been tapping stored inventories to keep products flowing.

Such use has reduced the U.S. inventory close to a critical 270-million barrel level that the federal government says could lead to supply disruptions.

The truckers only have to look back to 2000 to get an idea of what could happen. A price spike in diesel fuel essentially stalled truckers in parts of New England.

"Diesel fuel cost between $2.50 and $2.60 a gallon, and trucks would not even go into Maine because there was not enough freight to pick up on the return trip to offset the cost," said Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association in Grain Valley, Mo.

Any disruption in trucking would have an almost immediate impact on consumers and workers.

Businesses ranging from groceries to manufacturers have widely adopted just-in-time inventory practices to reduce costly warehousing and to avoid having money tied up in parts or goods.

"There is more dependence on just-in-time deliveries," said Mark Whitenton, vice president for resources and environmental policy at the National Association of Manufacturers. "Even a couple of days disruption could cause factories to close."

Spencer paints a dire scenario for small or independent truckers, who generally operate under contract and, as a result, cannot impose surcharges to cover fuel price hikes.

"Most small-business truckers don't have an operating cash reserve that would allow them to withstand a long run of increased prices," Spencer said. "We would quickly see repossessions of trucks."

Consider what happened to long-haul trucker Lee Klass in 1990 when crude oil prices nearly doubled to $41 a barrel after Iraq invaded Kuwait.

"The price of diesel fuel jumped 40 cents a gallon," Klass, now 55, recounted. Rather than pay the price at the pump, he parked his truck. "I decided not to take any loads for a couple of days just to see how things shook out. It reaches a point that unless rates are doubled it doesn't make sense to haul any freight."

The quick success of the United States and its allies in the 1991 conflict eased fears of oil supply shortages, and prices plunged as rapidly as they had risen, easing to $21 a barrel by February 1991.

"The war could have a positive effect on the economy," said Sung Won Sohn, chief economist at Wells Fargo Bank. "We have a decisive war in our favor so the price of oil drops dramatically to low teens. That would raise consumer and business confidence significantly. The price of oil could drop by more than half, which would amount to a huge tax cut for us, bigger than anything Bush proposes."

Still, these days, uncertainty, rather than oil, seems more abundant.

"The world oil market is being strained right now and people are trying to guess what's going to happen when we invade Iraq," said Mark Baxter, director of the Maguire Energy Institute at Southern Methodist University in Dallas.

"I believe the market already has counted in the effects of Iraq. But they aren't counting on Iraq, Venezuela, and the effects of any refinery, pipeline or other mishaps on top of that," Baxter said.

Baxter noted that two weeks ago a couple of oil platforms in the North Sea were shut down due to a flaring problem, taking more than 100,000 barrels a day off the market.

Customarily, an event like this would add a couple of cents to the price of a barrel of oil. But in the context of war, these incidents could ratchet up prices more significantly.

Other unknowns about potential supply disruptions loom, including the prospect of terrorist attacks on oil tankers, something that had not been widely contemplated in 1990.

"What will Saddam do with those oil wells and those oil fields?" Baxter asked. "Is this an opportunity for overt actions by terrorists? Disrupting the shipping lanes for these oil tankers would be a major disruption to the oil supply."

Bill O'Grady, vice president, futures research, at A.G. Edwards in St. Louis, asked: "Why were the oil companies holding such huge inventories prior to the Persian Gulf war? You saw a similar buildup prior to the Iran-Iraq war. And why aren't they building them now?"

"It could be that they don't think there is going to be a war. Or, yes, there will be a war, but it will be very short and they don't want to be saddled with a lot of product to sell at low prices. Or it could be that they are relying on the U.S. Strategic Petroleum Reserve, and counting on the government to hold the extra supply for them."

Last May Peapod Inc., the Skokie-based Web grocer, raised its delivery charge in the Chicago area from $2.95 for an order of $100 to more to $4.95, partly to offset rising fuel costs.

In December it went a step further. It spent $15,000 to install its own gasoline storage tanks at its Lake Zurich distribution center. Drivers for its fleet of 70 trucks cover a combined 6,000 miles daily and had been driving off their routes to find gasoline stations that would accept the company's credit cards.

Scott DeGraeve, vice president and general manager for Peapod's Chicago region, explained: "The rising fuel prices spurred us to see what we could do to offset these costs. It saves us a few pennies, but it also saves us labor and time."

www.forbes.com Reuters, 01.31.03, 5:25 PM ET By Elizabeth Lazarowitz

NEW YORK, Jan 31 (Reuters) - The winds of war have been buffeting Wall Street, sending skittish investors to the sidelines, and the storm is only likely to intensify next week as the White House makes its last diplomatic push for Iraqi disarmament.

With U.S. forces massing in the Middle East and the rhetoric from Washington heating up, the United States appears increasingly on the brink of war. The suspense is killing stocks and has plunged key market gauges to their lowest levels in more than three months.

President George W. Bush has said Baghdad has just weeks left to avert war, and Wall Street will be tuned in for anything that might give clues to a timeline for a possible U.S. attack on Iraq.

"Iraq will be the most important issue next week -- period," said Hugh Johnson, chief investment officer at First Albany Asset Management. Ordinarily, investors' focus would be fixed on the outlook for the economy and corporate profits, but "next week is just not going to be an ordinary week."

While brewing geopolitical events will likely shove nearly everything else to the back burner, a flood of economic reports -- particularly data on the manufacturing sector and the labor market -- could help determine Wall Street's mood.

The Institute of Supply Management's closely watched gauge of the factory sector, set for release on Monday, and the U.S. payrolls report on Friday will give investors some early glimpses of the state of the economy in January.

Evidence that the U.S. economy is pulling out of its soggy patch has been spotty, at best, and the increasing possibility of war has whipped up fears growth could stumble as corporate America puts off investment decisions and stubbornly high oil prices bite into corporate profits.

The steady parade of corporate earnings will probably also fade into the background somewhat, but Wall Street will be tuned in for results and, more importantly, forecasts from technology bellwether Cisco Systems Inc. (nasdaq: CSCO - news - people) and No. 4 U.S. long-distance telephone company Sprint Corp. (nyse: CSCO - news - people)

INDEXES DOWN War worries have helped drive the broad Standard & Poor's 500 index <.SPX> down about 8 percent from its high for the year hit on Jan. 14 and into negative ground for the year.

Year-to-date, the S&P 500 and the blue-chip Dow Jones industrial average <.DJI> are both down around 3 percent, and the tech-packed Nasdaq Composite Index <.IXIC> is down about 1 percent. All three finished the week lower after the S&P 500 and Dow posted their lowest closes since mid-October and the Nasdaq ended at its worst level since mid-November on Thursday.

Wall Street will be watching on Wednesday when U.S. Secretary of State Colin Powell goes before the United Nations Security Council to try to persuade doubters Iraq has weapons of mass destruction. Iraq denies it possesses banned arms.

"That stuff is in the way of the market right now. Nobody's going to want to go long in a big way until this Iraq thing gets cleared up," said Michael Vogelzang, president of Boston Advisors Inc. "It's just going dominate headlines. It's going to dominate investor sentiment."

Bush said on Friday at a joint press conference with British Prime Minister Tony Blair that the United States would resist any attempt to drag out the issue for months, but that he would welcome a second U.N. Security Council resolution if it offers a strong signal to Iraqi leader Saddam Hussein.

Bush believes that a U.N. resolution in November gives authority for military force, but he faces opposition from major powers such as France, Russia and Germany.

Worries that a war could disrupt oil supplies, as well as a two-month strike that has crippled oil production in Venezuela, a major U.S. supplier, have helped push the price of crude oil above $33 a barrel.

Those high prices have sparked fears that corporate profits, already tepid, could take another blow as companies and consumers are forced to shell out more for energy costs.

EARNINGS, ECONOMY STILL UNSTEADY The fourth-quarter results pouring in from corporate America have been, for the most part, encouraging. About 67 percent of the companies in the S&P 500 have reported earnings so far, and, of those, 62 percent have beaten Wall Street analysts' expectations and 22 percent have matched them, according to Thomson First Call.

What is troubling, however, is that the outlook for corporate profits in the year ahead remains decidedly murky.

"So far, the guidance continues along the lines of no visibility," said Charles White, president of investment firm Avatar Associates. "Companies don't even want to say anymore that they see things getting better in the second half, because that's what they told us last year."

Results are expected next week from technology bellwether Cisco, Sprint, medical device maker Boston Scientific Corp. (nyse: BSX - news - people), consumer products company Colgate-Palmolive Co. (nyse: BSX - news - people), No. 2 U.S. drugstore chain CVS Corp. (nyse: BSX - news - people), and No. 1 U.S. home appliance maker Whirlpool Corp. (nyse: BSX - news - people).

Beverage and food company Pepsico Inc. (nyse: PEP - news - people) and Anheuser-Busch Cos. Inc. (nyse: PEP - news - people), the maker of Budweiser beer, also have results on tap. But with the peak of earnings season now past, the economic picture is becoming increasingly important, analysts said.

The ISM report for January is expected to slip to 53.7 from 55.2 in December, according to economists in a Reuters survey. It would be the third month in a row above the 50 level that separates expansion from contraction, potentially cementing hopes the manufacturing sector is recovering from its slump.

The report on non-farm payrolls will be the economic highlight of the week. Payrolls are seen rising by 70,000 in January after a 101,000 drop in December, while the jobless rate is expect to remain steady at 6.0 percent.

news.ft.com By Ivar Simensen in London Published: January 31 2003 21:41 | Last Updated: January 31 2003 21:41

Prices of precious metals eased slightly on Friday after hitting new highs this week as investors sought shelter in commodities amid concerns about war in Iraq.

The recent weakness of the dollar has also helped make prices more attractive for non-US investors.

Spot gold rose to $371.50 per troy ounce in London on Friday, in sight of the six-year high of $372.60 from earlier in January, before easing back in afternoon trade to $367.50 as the dollar recouped some lost ground. Over the week, gold prices were $1.50 higher, adding to the $9 gain in the previous week.

Silver also fixed higher in the morning in London, hitting 487.25 an ounce, up from 478.50 cents in the previous morning fix, before sliding back to 484 cents by the afternoon.

Platinum slipped from Thursday's 17-year high, fixing at $667 an ounce. Traders said buying was boosted by US president George W. Bush's call for more research into fuel cell technology in his State of the Union speech on Tuesday. Fuel cells rely on platinum as a catalyst to produce electricity without pollution. The metal hit $673 an ounce on Thursday, its highest level since September 1986.

Crude oil prices firmed over the week after comments from President Bush and UN weapons inspector Hans Blix increased the likelihood of a war against Baghdad. Iraqi president Saddam Hussein replied by saying he would attack oil-rich Kuwait in case of an attack on Iraq.

In Venezuela, president Chavez continued his battle with striking oil workers. The Venezuelan government claimed daily oil production had risen to 1.4m barrels while the opposition said it remained at just above 1m. Venezuela produced more than 2.5m barrels a day before the general strike started in early December.

Brent crude futures slipped 11 cents to $31.10 per barrel on Friday but firmed 4.4 per cent over the week from last Friday's close of $29.65.

In New York, WTI settled 34 cents lower at $33.51 by the close.

triangle.bizjournals.com 17:40 EST Friday 

Research Triangle Park-based Reichhold on Friday announced three organizational changes with the naming of Ashok Mendiratta as vice president of global technology, Eric Carlier as director of technology, Europe and Alberto Piccinotti as director of European sales.

Based at RTP, Mendiratta will have global responsibility for all of Reichhold's technology functions and will report to Senior Vice President Julia Harp. He comes to Reichhold from PolyOne, the $3.5 billion plastics compounder that was formed following the merger of Geon and M.A. Hanna. At PolyOne, Ashok had served as director of corporate business development.

Carlier will replace Raj Patel as Reichhold's director of technology of Europe. Patel will retire March 31 after 35 years of service to Reichhold. Carlier will move into his new job March 24.

Carlier comes to Reichhold from Owens Corning in Belgium, where he served as European research and development director.

Effective Feb. 15, Piccinotti will become director of European sales for Reichhold. Piccinotti has been with Reichhold one year, serving as director of master planning for Europe. Prior to joining Reichhold, Piccinotti was with Owens Corning for more than 15 years.

Also Friday, Reichhold said that a recently announced price increase on its unsaturated polyester resins in North America has been revised to 4 cents per pound instead of the 3 cents per pound increase that was announced earlier in January.

This revised pricing increase is effective for all North American orders placed on or after Feb. 7.

"This upward adjustment of the increase we announced earlier this month is necessary due to the continuing strength in styrene, benzene and natural gas prices," said Reichhold VP Harp. "The uncertainty in oil-producing nations such as Venezuela and in the Middle East is generating increased market volatility and driving an increase in styrene monomer costs."

"The price of natural gas has doubled since March 2002, and crude oil has traded above $ 25 per barrel since March as well, and is currently about $ 30 per barrel. As a result of these significant and continuing conditions, we are required to take this action."

Reichhold is the world's largest manufacturer of unsaturated polyester resins and a leading coating and performance resins for the automotive, appliances, coatings, plastics, textile, construction, transportation, marine and graphic arts markets.

Reichhold has manufacturing operations throughout North America, Latin America and Europe. Founded in 1927, Reichhold is owned by Tokyo-based Dainippon Ink & Chemicals, the world's largest producer of printing inks and polyester resins.

ogj.pennnet.com By OGJ editors

HOUSTON, Jan. 31 -- Futures prices for crude oil and refined products rose on the New York Mercantile Exchange Thursday while natural gas slipped slightly but still remained strong at $5.58/Mcf.

Traders said the market benefited from the momentum of the previous session and also from indications that the US appeared to be edging closer to a military strike in Iraq.

European opposition to the US-led effort seemingly abated somewhat Thursday because the leaders of eight European countries signed a letter declaring their support for the US position.

US President George W. Bush and British Prime Minister Tony Blair met Friday to discuss Iraq.

Traders, worried about the war possibility, confirmed that the market awaits US Secretary of State Colin Powell's speech to the United Nations Security Council on Wednesday. Traders also await news regarding a possible resolution of the general strike in Venezuela.

Futures prices The March NYMEX contract for benchmark US light, sweet crude rose by 22¢ to $33.85/bbl Thursday, while the April position gained 25¢ to $32.96/bbl for the same day.

Heating oil for March delivery jumped by 0.92¢ to 98.05¢/gal. Unleaded gasoline for the same month rose by 1.56¢ to 98.69¢/gal.

The March natural gas contract slipped by 4.6¢ to $5.58/Mcf Thursday.

Meanwhile, in London Thursday, North Sea Brent crude oil futures prices also settled higher on the International Petroleum Exchange. IPE March Brent futures settled at $31.21/bbl, up 19¢. The natural gas contract dropped 4.4¢ to the equivalent of $3.22/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes gained 28¢ Thursday to $30.58/bbl.