327 Cm Energy Prices Uniqueness File
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FILE NAME DDI 2008 Your Name
Energy Prices uniqueness file Economy Bad Frontline.........................................................................................................................................4 Economy Bad Frontline.........................................................................................................................................5 Economy Bad Frontline.........................................................................................................................................6 Economy Bad Frontline.........................................................................................................................................7 Economy bad cars ext............................................................................................................................................8 Economy Bad Car ext............................................................................................................................................9 Economy Bad stocks ext......................................................................................................................................10 Economy Bad banks ext......................................................................................................................................11 Economy Bad Jobs ext.........................................................................................................................................12 Economy Bad mortgages ext...............................................................................................................................13 AT: Economy recovering, trade and tax rebates prove....................................................................................14 ...............................................................................................................................................................................14 Economy Good Frontline....................................................................................................................................15 Economy Good Frontline....................................................................................................................................16 Economy Good Frontline....................................................................................................................................17 Economy Good banks ext....................................................................................................................................18 Economy Good jobs ext.......................................................................................................................................19 Economy Good pc markets ext...........................................................................................................................20 Economy Good housing bill ext..........................................................................................................................21 U.S. President George W. Bush on Wednesday signed into law a sweeping rescue package aimed at resurrecting the housing market from its worst slump since the Great Depression and stabilizing the two largest mortgage finance companies. The new law launches a $300 billion government initiative to refinance troubled mortgages, and boosts oversight of Fannie Mae and Freddie Mac, which own or guarantee almost half the country's $12 trillion in home mortgage debt. It expands a line of U.S. Treasury credit for the companies, and gives the government the option to take equity stakes if they ran into trouble. Lawmakers ironed out the law over the past month to stem a crisis in investor confidence over the two companies, which were created by Congress to keep mortgage money flowing. The companies are trying to strike a balance between expanding earning power and providing finance for the mortgage market against containing losses that have eroded their capital. "We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. Bush signed the legislation into law because it included numerous key housing reforms, including a stronger regulator of the two mortgage giants. The White House had originally opposed a provision that offers $4 billion in grants to states to buy and repair foreclosed homes. The Bush administration for years advocated a smaller role for the 1
FILE NAME DDI 2008 Your Name companies, asserting that their management of trillions in assets placed too much risk on the U.S. financial system. The bill underscores the importance of the companies, long criticized as private companies with an implicit guarantee from the U.S. government. The more explicit taxpayer backing put in place by legislation benefits holders of their $1.6 trillion in combined debt used to fund mortgage purchases. "The oddity of the situation is if the debt is backed by the government, then it might be impossible to imagine how the companies might ever fail," said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, New Jersey. The companies' mortgage holdings have ballooned this year, and their regulator and the Treasury have pressured them to raise capital needed to fill a huge void left by the crippled Wall Street mortgage funding machine. They have plowed some capital into buying mortgages from lenders, which helps hold down home loan rates and provides banks with fresh money to continue lending. The capital also helps offset expected losses. Fannie Mae on Wednesday said its investment portfolio in June increased at the fastest annualized rate in nearly five years, though it slightly slowed planned future purchases. The portfolio, which is the company's top revenue source, increased to $749.6 billion. Solid demand for $4 billion of bills sold by Fannie Mae and Freddie Mac on Wednesday also suggested growing confidence among investors in the two. The housing legislation comes amid signs that real estate is continuing a nearly two-year descent that many economists say will hamper U.S. economic growth through 2009. Prices for U.S. single-family homes plunged 15.8 percent in May from a year earlier, a record pace, according to the Standard & Poor's/Case Shiller Home Price Index released on Tuesday. Applications for new mortgages dropped last week to the slowest rate since 2000, the Mortgage Bankers Association said on Wednesday. The new law also sets up a $300 billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under risky mortgages they cannot afford. The bill also offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that the Fannie Mae and Freddie Mac can guarantee. Shares of Fannie Mae and Freddie Mac initially rose after Bush signed the legislation early on Wednesday, and as U.S. securities regulators extended an emergency rule aimed at curbing bets against the stocks of 19 major financial firms, including Fannie Mae and Freddie Mac, known as short selling. Stock and bond investors were also heartened by a ruling by the Financial Accounting Standards Board to delay a change that could have put $4 trillion of mortgage bond guarantees onto the balance sheets of Fannie Mae and Freddie Mac, making them fall severely short of capital. Fannie Mae shares rose 5.3 percent to $12.21 and Freddie Mac's stock increased 3.3 percent to $8.70, according to preliminary closing figures. .....................................................................................................................................................21 Economy Brink.....................................................................................................................................................22 Oil low frontline...................................................................................................................................................23 Oil prices low frontline........................................................................................................................................24 Oil prices low Frontline.......................................................................................................................................25 Oil low economy ext./Iran link............................................................................................................................26 Oil low commodities market ext.........................................................................................................................27 Oil prices low, analysts and economy ext...........................................................................................................28 Oil prices low economy/analysts/opec ext..........................................................................................................29 Oil prices high Frontline.....................................................................................................................................30 Oil Prices high Frontline.....................................................................................................................................31 2
FILE NAME DDI 2008 Your Name Oil prices high Exxon ext....................................................................................................................................32 Oil prices high multiple warrants ext.................................................................................................................33 Oil prices high production ext............................................................................................................................34 Oil prices high Iran ext........................................................................................................................................35 Oil prices high, Iran ext.......................................................................................................................................36 Oil prices high, tropical storm/Iran ext. ................................................................................................................................................................................37 Energy costs low frontline...................................................................................................................................38 Energy costs high.................................................................................................................................................39 Energy Costs high oil ext.....................................................................................................................................40 Energy prices low ext...........................................................................................................................................41 Natural gas low frontline.....................................................................................................................................43 Natural gas prices high........................................................................................................................................44 AT: natural gas prices low because of production............................................................................................45
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Economy Bad Frontline The economy is doomed, stock prices, unemployment and car sales prove GLENN SOMERVILLE, Economic Correspondent Reuters, 8/1/08 http://www.reuters.com/article/topNews/idUSN3133083420080801?feedType=nl&feedName=ustopnewsearly&sp=true The U.S. unemployment rate hit its highest in four years during July as employers cut jobs for a seventh straight month, though less severely than predicted, a Labor Department report showed on Friday. The rising toll of job losses and plunging new-car sales in July fueled worry that a recession may be unavoidable and helped drive stock prices lower again. The jobless rate climbed to 5.7 percent from 5.5 percent in June as 51,000 jobs were eliminated in July, bringing losses for the year to 463,000. Economists had expected 75,000 jobs would be cut last month but had forecast the unemployment rate would rise only to 5.6 percent. In a separate report, the Institute for Supply Management said manufacturing activity held steady in July and noted some moderation in inflation pressures. Its index of national factory activity slipped a bit to 50 from 50.2 in June -- with 50 being the dividing line between expansion and contraction. "If you look at ISM and the unemployment number together, it suggests an economy that is, at best, stuck in neutral," said Subodh Kumar, chief investment strategist with Subodh Kumar & Associates in Toronto. Stock prices dropped, with the Dow Jones industrial average off 51 points to end at 11,326 and the Nasdaq Composite Index down 14 points to 2,310.
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FILE NAME DDI 2008 Your Name
Economy Bad Frontline The economy is in a recession, housing jobs and prices prove GLENN SOMERVILLE, Economic Correspondent Reuters, 8/1/08 http://www.reuters.com/article/topNews/idUSN3133083420080801?feedType=nl&feedName=ustopnewsearly&sp=true Policy-makers at the Federal Reserve meet next week and are expected to keep official interest rates unchanged as they weigh concerns about economic weakness against worries about bubbling price pressures. Brian Gendreau, an investment strategist with ING Investment Management Americas in New York, described monthly job losses as "painful" and consistent with a weak economy. "We are clearly in a growth recession and my fear is that we are in a mild, but longer recession than the one we experienced in 2001-2002," Gendreau said. HOUSING SLIDE CONTINUES The unexpectedly steep climb in the unemployment rate underlines how a deterioration in the housing sector continues to chill economic growth. The last time the jobless rate was higher was in March 2004, when it hit 5.8 percent. While July's job loss was not as bad as feared, it did not change the picture of an economy that is basically treading water, analysts said. "Overall the report looks to be broadly consistent with other data that show the economy quite soft, basically stalled, not growing very much, but not contracting very much either," said David Resler, chief economist for Nomura Securities International in New York. The report showed 16-to-24 year olds facing particular difficulty in trying to nail down summer jobs, a factor that helped push up the overall unemployment rate. In addition, the average workweek slipped to 33.6 hours, the lowest since November 2004, from 33.7 hours in June, a further suggestion of economic weakness. July job losses were widespread. The only major sectors showing any gains were government, hospitality, and education and health services. Construction industries shed another 22,000 employees and factories cut 35,000 jobs. A Commerce Department report on June construction spending underlined the continuing slide in building that is dragging employment lower in the construction sector, with spending falling a steeper-than-expected 0.4 percent.
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FILE NAME DDI 2008 Your Name
Economy Bad Frontline The economy is in a recession PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 The American economy expanded more slowly than expected from April to June, the government reported Thursday, while numbers for the last three months of 2007 were revised downward to show a contraction — the first official slide backward since the last recession in 2001. Economists construed the tepid growth in the second quarter, combined with a surge in claims for unemployment benefits, as a clear indication that the economy remains mired in the weeds of a downturn. Many said the data increased the likelihood that a recession began late last year. The next major piece of data comes Friday, when the government is to release its monthly snapshot of the job market. Analysts expect the report to show a loss of 75,000 jobs, signifying the seventh straight month of declines. “We already knew the economy was weak, and now you have both a negative growth number coupled with job losses,” said Dean Baker, a director of the liberal Center for Economic and Policy Research. “There’s a lot of real bad times to come.” President Bush zeroed in on the positive growth in the second quarter — a 1.9 percent annual rate of expansion, compared with an anticipated 2.3 percent rate. That follows growth of 0.9 percent in the first quarter. He claimed success for the $100 billion in tax rebates sent out by the government this year in a bid to spur spending, along with $52 billion in tax cuts for businesses. “We got some positive news today,” the president said in West Virginia, addressing a coal industry trade association. “It’s not as good as we’d like it to be but I want to remind you a few months ago, there were predictions, and — that the economy would shrink this quarter, not grow.” But the snapshot of disappointing economic growth released by the Bureau of Economic Analysis on Thursday morning provided no comfort to Wall Street, where a broad sell-off commenced. By the end of business, the Dow Jones industrial average was down 206 points to close at 11,378, a drop of nearly 2 percent.
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FILE NAME DDI 2008 Your Name
Economy Bad Frontline The economy already in a recession, multiple warrants and 07 decline prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 “Looking forward, I don’t think there’s anything to change the lousy trend for the domestic economy,” said Joshua Shapiro, chief domestic economist at MFR, a research firm. With the last three months of 2007 now officially revised down — from an initial 0.6 percent annual rate of growth to a 0.2 percent decline — many economists expect that these tough times will officially be declared a recession. That label is affixed by a panel of economists at a private research institution, the National Bureau of Economic Research, though typically well after the fact. President Bush derided such characterizations, along with the academic discipline known as the dismal science. “You can listen to these economists,” Mr. Bush said in West Virginia. “On the one hand, they’ll say, and then on the other hand. If they had three hands, it would be on the one hand, the second hand and the third hand.” But for many, the old debate about whether this is a recession has become purely academic, and eclipsed by the troubles at hand. “All my cousins already know it’s a recession,” said Mr. Barbera, the ITG economist. “They have the luxury of not having Ph.D.’s. The auto companies are in dire straits, the airlines have been shutting down flights and firing pilots. The truckers are in near hysteria because of the price of diesel. If you round up the usual suspects, this is a bad circumstance. And the word we usually use for a bad circumstance is a recession.”
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FILE NAME DDI 2008 Your Name
Economy bad cars ext. The economy is failing, multiple car manufacturers prove Christiaan Hetzner and David Bailey, 8/1/08 http://www.reuters.com/article/businessNews/idUSL166453420080801?feedType=nl&feedName=usbusinessearly&sp=true The meltdown in the global car industry claimed more victims on Friday as General Motors lost another $15.5 billion, BMW warned on profits and Nissan earnings missed expectations by a wide margin. General Motor Corp's (GM.N: Quote, Profile, Research, Stock Buzz) quarterly loss -- the third largest in its 100-year history -came as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business. The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter, refocusing investor attention on whether GM can complete a rushed restructuring before its cash and available credit runs down. nN01288721 Germany's BMW AG (BMWG.DE: Quote, Profile, Research, Stock Buzz), the world's biggest premium carmaker, said it would miss its 2008 targets after a 44 percent plunge in quarterly pretax profit. "Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the U.S. dollar, the impact of the international financial crisis and a weaker U.S. economy," BMW said. Nissan Motor Co (7201.T: Quote, Profile, Research, Stock Buzz), Japan's No.3 automaker controlled by Renault SA (RENA.PA: Quote, Profile, Research, Stock Buzz), posted a much worse-than-expected 46 percent drop in quarterly operating profit. It stuck to annual forecasts for its lowest operating profit in seven years. On Friday, the world's automakers reported a 13.2 percent drop in U.S. auto sales in July as an uncertain U.S. economy bludgeoned manufacturers in the largest and most lucrative auto market. It was the ninth consecutive month of declining sales in the U.S. market -- the first time that has happened since the last U.S. recession seven years ago -- and the worst showing since April 1992. nN01496226 The roiling U.S. market has also made leasing an issue for U.S.-based automakers. Chrysler's financial arm has stopped supporting leasing in the United States, while GM and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) have pared those programs in favor of adding retail incentives. MORE RISK AHEAD Because of that pullback and tighter credit, auto executives and analysts say the industry may be battered by double-digit sales declines in coming months and cannot forecast an end to the slide. The economic contagion is spreading to other markets, leading to a decline in Europe of nearly 8 percent last month. U.S.-based GM, Ford and Chrysler have taken a deeper hit from the shift toward cars than transplant automakers have in the United States because of their greater focus on trucks. However, few have been spared. Ford reported a record $8.7 billion quarterly loss in late July and even reliable outperformer Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) has slashed sales targets. Renault has backed away from its 2009 profit forecast, Honda Motor Co Ltd (7267.T: Quote, Profile, Research, Stock Buzz) trimmed its expectations and Daimler AG (DAIGn.DE: Quote, Profile, Research, Stock Buzz) sharply marked down its 2008 guidance.
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FILE NAME DDI 2008 Your Name
Economy Bad Car ext. The economy is poor, cars prove Chang-Ran Kim, Asia Autos 8/1/08 http://www.reuters.com/article/businessNews/idUST16709820080801?feedType=nl&feedName=usbusinessearly&sp=true In the past few months, the resale value of big, used cars has fallen as consumers seek fuel efficiency, dropping by as much as 30 percent in the latest quarter from the year before. About 30 percent of Nissan's U.S. sales are in light trucks. Even rival Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz), whose model line-up is dominated by smaller cars, last week set aside an additional allowance of 25 billion yen this year on such writedowns. "A further decline of used vehicle values in the United States remains a risk, but so far a weaker-than-assumed yen exceeds that comfortably so we're keeping our forecasts intact," Corporate Vice President Joji Tagawa told a news conference. Plunging resale prices for light trucks such as SUVs prompted Chrysler LLC's CBS.UL decision last week to stop offering vehicle leases -- which rely on a healthy resale value for a vehicle when a lease ends to make a profit. Bigger rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) took a $2.1 billion charge for its finance company when it reported second-quarter results, while General Motors Corp's (GM.N: Quote, Profile, Research, Stock Buzz) finance arm took a $716 million write-down on North American vehicle leases. Chief Executive Carlos Ghosn last week forecast U.S. industry sales of 14.3 million vehicles in 2008, the lowest level in more than a decade. Global vehicle sales grew 6.9 percent in the first quarter thanks to brisk sales of the Qashqai compact SUV, known as the Dualis in some markets, and the launch of new models, including the Livina series. But Nissan, like many of its rivals, faces falling demand for gas-guzzling vehicles and has been forced to significantly reduce production of light trucks. Underscoring the severity of the U.S. market, Nissan this week said it would seek to axe 1,200 workers at two plants in Tennessee, about one-fifth of its headcount. It is operating far below capacity in North America as sales of pickups and other big vehicles slump. Shares of Nissan have fallen 32 percent in the year to date, worse than Tokyo's transport sub-index , which has lost 21 percent. Before the results, Nissan ended down 1.4 percent at 828 yen.
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FILE NAME DDI 2008 Your Name
Economy Bad stocks ext The economy is failing, stocks prove Steven C. Johnson Reuters 8/1/08 http://www.reuters.com/article/businessNews/idUSL2219159120080801?feedType=nl&feedName=usbusinessearly&sp=true U.S. stocks fell on Friday as a $15.5 billion quarterly loss from General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and a rise in oil prices added to fears the economy could slip into recession and concerns about corporate earnings. A government report showing U.S. employers cut jobs for the seventh straight month in July added to market worries, though the decline in payrolls was not as severe as had been feared. The report also showed the jobless rate jumped to its highest level in four years. General Motors' (GM.N: Quote, Profile, Research, Stock Buzz) second-quarter loss was the latest example of how rising oil prices are hurting consumer spending. Its shares slumped 7.6 percent to $10.23 and weighed on the Dow and S&P. Sliding global metal prices and weak manufacturing data around the world knocked the shares of aluminum maker Alcoa (AA.N: Quote, Profile, Research, Stock Buzz) nearly 5 percent lower. Shares of Caterpillar (CAT.N: Quote, Profile, Research, Stock Buzz), the mining and heavy equipment maker, fell 2 percent. The two were the top drags on the Dow. Crude oil CLc1> settled up $1.02 at $125.10 a barrel in New York after Israeli Deputy Prime Minister Shaul Mofaz said Iran was heading toward a major breakthrough in its nuclear program, fanning concerns of a potential confrontation that could disrupt supply from the OPEC nation. "The stock market is down because oil went back up," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We have more market tension with oil than with the employment report."
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FILE NAME DDI 2008 Your Name
Economy Bad banks ext The economy is doing poorly, the cautiousness of banks prove Jonathan Gould and Philipp Halstrick, Reuters, 8/1/08 http://www.reuters.com/article/businessNews/idUSL137297220080801?feedType=nl&feedName=usbusinessearly Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) Chief Executive Josef Ackermann thinks difficult market conditions have made it harder for banks to do large acquisitions, he said in a New York Times interview published on Friday. While he would not comment directly on a possible takeover bid for Deutsche Postbank (DPBGn.DE: Quote, Profile, Research, Stock Buzz), Germany's largest retail bank, the newspaper said he seemed to signal that this was unlikely. "The current environment is not particularly intriguing. It's more challenging to make a deal and explain it to our shareholders," he was quoted as saying.
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FILE NAME DDI 2008 Your Name
Economy Bad Jobs ext. The economy is crashing, jobs prove LOUIS UCHITELLE ( a visiting scholar at the Russell Sage Foundation in New York in 2002-03 and taught journalism for many years at Columbia University’s School of General Studies. worked for The Associated Press as a reporter, an editor and a foreign correspondent) 8/2/08 http://www.nytimes.com/2008/08/02/business/02econ.html?scp=1&sq=Jobless%20Rate%20Rises%20to%205.7%%20in%20July&st= cse The unemployment rate spiked again in July, to 5.7 percent, its highest level in more than four years and a strong signal that come Election Day millions of Americans will still be hunting for work. “We are not seeing a catastrophic collapse in the job market, like you often see in recessions,” said James Glassman, senior domestic economist for JPMorgan Chase. “What we are seeing instead is a steady hemorrhaging of jobs, and that is going to continue until housing stabilizes and stops dragging down the rest of the economy.” The nation’s employers cut their payrolls for the seventh consecutive month, this time by 51,000 jobs, the government reported Friday. For millions still at work, hours were reduced, a hidden form of unemployment, and the average raise was less than enough to keep up with inflation. The steady erosion in payrolls — 463,000 jobs have disappeared since January — cut across nearly every sector in July. Teenagers, 16 to 19, trying to land work, were particularly hard hit. Their unemployment rate, 20.3 percent, up 2.2 percentage points in just a month, was the highest since 1992, contributing significantly to the jump in the overall unemployment rate. That rate jumped from 5.5 percent in June and 5 percent in April. “Parents don’t push their kids to go to work in good times,” Mr. Glassman said, “but they probably are doing so now with gasoline and food prices squeezing family budgets.” The weak jobs report and the Commerce Department’s finding on Thursday that the economy was growing sluggishly, at best, led Senator Barack Obama, the presumptive Democratic presidential candidate, to declare in a stump speech in Florida that “anxieties are getting worse, not better,” for many families. Senator John McCain, the presumptive Republican candidate, said the latest jobs report was “a reminder of the economic challenges we face.” The Bush administration offered a more upbeat assessment. “We are concerned about continued job losses,” Elaine L. Chao, the labor secretary, said in a statement, but “the long-term fundamentals of the economy remain solid.” The Federal Reserve’s policy makers, who have cut the key short-term interest rate they control to a low 2 percent, in an effort to stimulate the economy, are almost certain to leave the rate at that level when they meet in Washington on Tuesday. Neither the jobs report nor the persistently weak economic growth suggests that the surge in fuel and food prices will spread soon to a multitude of other items — a prospect that would push the Fed to raise rates to suppress inflation. “If you are the Federal Reserve, this jobs report might even be enough to convince you to cut rates again,” said Jared Bernstein, a senior economist at the labor-oriented Economic Policy Institute. The weak economy coincides with a sharp increase in labor productivity in the second quarter, which helps to explain why employers have been shedding workers. The latter are increasingly producing more in a day’s work than their employers can sell. That is partly because their employers prod them to do so, or introduce labor-saving devices. In either case, employers are laying off excess staff or reducing their hours or holding back on weekly raises, which rose at an annual rate of only 2.8 percent in July for the typical white-collar or blue-collar worker. That is well below the inflation rate of more than 4 percent.
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FILE NAME DDI 2008 Your Name
Economy Bad mortgages ext. The economy is falling, mortagages prove Al Yoon, Reuters 7/30/08 http://www.reuters.com/article/businessNews/idUSN2938021420080730?feedType=nl&feedName=usbusinessearly Applications for U.S. home mortgages dropped to their slowest pace since December 2000 as loan rates hovering near one-year highs compounded the housing market's woes, according to data from an industry group on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity declined 14.1 percent to 420.8 in the week ended July 25. The decline was the most severe move in percentage terms since May. The MBA's seasonally adjusted index of refinancing applications plunged 22.9 percent to 1,074.4 last week. The MBA's gauge of loan requests for home purchases fell 7.8 percent to 309.5. Fixed 30-year mortgage rates averaged 6.46 percent in the week, compared with a one year-high of 6.59 percent in the prior week, the MBA said. While concerns of faster inflation have boosted the market rates that influence mortgages, the credit crisis has hurt banks' ability to support the market for mortgage-backed securities, applying upward pressure to the rates that lenders charge to consumers. A slowing rate of applications suggests potential homebuyers may be expecting better deals in the future as rising foreclosures and a softening economy nudge home prices lower. Prices of U.S. single-family homes measured in 20 major metropolitan areas have dropped about 16 percent in the past year, with few signs of recovery, according to S&P/Case Shiller Home Price Index on Tuesday. Sales of existing homes in June also dropped to their slowest pace in 10 years, the National Association of Realtors said last week.
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FILE NAME DDI 2008 Your Name
AT: Economy recovering, trade and tax rebates prove The economy is failing, multiple warrants prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 But many economists are dubious that consumer spending and exports can keep growing robustly in the face of substantial challenges that are now entrenched in the United States and are gathering force in many other major economies. Japan and much of Europe appear headed into downturns, damping demand for American-made products. “The trade improvement doesn’t look sustainable,” said Jan Hatzius, an economist at Goldman Sachs in New York. “In an environment where the global economy is clearly slowing, you’re not being able to get that export growth in future quarters.” Economists said the sharp drop in imports was largely a function of retailers delaying wholesale purchases in the midst of acute fears about declining American spending power — a dynamic that will eventually give way to new spending. The tax rebates have mostly been distributed. While the checks appear to have bolstered spending, they have failed to generate activity that is likely to carry on even after the cash has cycled through the economy, say economists. “They slowed the downturn, but it’s clear they didn’t really provide any spark,” Mr. Baker said. Employers have not hired much, even as shopping has picked up, cognizant that the rebate checks are a one-time event. Businesses have not shelled out for new machinery. Indeed, investment for equipment fell 3.4 percent in the spring months, dropping for the second consecutive quarter. Rather than stockpile more goods, businesses generally tried to sell what they already had on hand. Business inventories declined in the second quarter by $62 billion, a factor that shaved nearly 2 percent off the overall rate of economic growth. As the impact of the rebate checks continues to wear off in the coming weeks, households will be left confronting the same set of troubles that have been dragging on the economy for many months: a deteriorating job market, rising prices for food and gas and plummeting housing values. Tens of millions of Americans have in recent years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations and new cars. As housing values continue to fall, that artery of finance is rapidly constricting. Since last summer, when the mortgage crisis provoked panic on Wall Street and many Americans saw access to credit diminish, consumer spending on so-called durable goods like appliances, cars and furniture has been sliding. This spending barely grew in the last three months of 2007, fell at a 4.3 percent clip in the first three months of this year and dropped at a 3 percent pace in the second quarter. Meanwhile, joblessness is growing, with new unemployment claims filed in the week that ended July 26 swelling to 448,000 — up 44,000 from the previous week. And the purchasing power of wages is being eroded by higher prices for food and energy. Prices paid for goods by Americans surged at a 4.2 percent annual rate in the second quarter, after climbing at a 3.5 percent annual clip over the first three months of the year, according to the report on Thursday. Higher prices, fewer paychecks and less household wealth: It is not a recipe for free-spending abandon. “Now, consumers have to sing for their supper,” said Alan D. Levenson, chief economist at T. Rowe Price Associates in Baltimore. “Spending growth is slowing and income growth is slowing.”
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FILE NAME DDI 2008 Your Name
Economy Good Frontline The Economy is recovering, stock market and businesses prove Steven C. Johnson, Reuters, 7/30/08 http://www.reuters.com/article/businessNews/idUSL2219159120080730?feedType=nl&feedName=usbusinessearly&sp=true The Dow industrials and S&P 500 rose on Wednesday as a surprising increase in private-sector employment and central bank efforts to boost liquidity in stormy financial markets offset a surge in oil prices. Bank stocks rose after the Federal Reserve and other central banks said they would boost measures to stabilize financial companies struggling with credit losses. The price of oil rose nearly 4 percent after weekly inventory data showed a decline in gasoline stockpiles, sparking supply concerns. While higher oil prices crimp consumer and business spending, they also boost shares of energy companies, which lifted the Dow and S&P. Shares of Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) climbed 4 percent and Chevron jumped 5 percent. A private-sector employment report showing employers added 9,000 jobs in July set the tone early in the day. The data surprised economists, who had expected another month of job losses and raised hopes for a stronger-than-expected government jobs report on Friday. "The ADP was encouraging. If they're on the right track and Friday's payroll number comes in better than expected, then that would be very positive," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston. The Dow Jones industrial average .DJI shot up 186.13 points, or 1.63 percent, to 11,583.69. The Standard & Poor's 500 Index .SPX advanced 21.06 points, or 1.67 percent, to 1,284.26. The Nasdaq Composite Index .IXIC gained 10.10 points, or 0.44 percent, to 2,329.72. The rally accelerated in the last half hour of trading as traders reversed bets that stocks would fall, known as covering short positions. The late gains helped pull the Nasdaq out of negative territory. Avon Products Inc (AVP.N: Quote, Profile, Research, Stock Buzz) and diversified U.S. manufacturer SPX Corp (SPW.N: Quote, Profile, Research, Stock Buzz) posted better-than-expected profits, providing bright spots among otherwise dismal second-quarter results. Avon's stock surged 17.4 percent to $44.11 on the New York Stock Exchange, while shares of SPX gained 10.7 percent to $133.52. Financial shares advanced after U.S. securities regulators extended through August 12 an emergency rule aimed at curbing abusive short selling in the stocks of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz), Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and 17 other major financial firms. That, coupled with the Fed's move to extend liquidity to stressed banks shows officials "are doing their best to calm individual investors' fears that are still out there," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati. Bank of America's (BAC.N: Quote, Profile, Research, Stock Buzz) shares rose 4.3 percent to $33.61 while Citigroup (C.N: Quote, Profile, Research, Stock Buzz) climbed 2 percent to $18.81. Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) rose 2.5 percent to $26.91 as investors wondered whether the investment bank and brokerage has finished cleaning its balance sheet after saying it will write down $5.7 billion in credit losses and raise $8.55 billion by selling new stock. Shares of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) rose 5.3 percent to $12.21 on the SEC's emergency extension of its short-sale rule as well as on news that President George W. Bush had signed into law a housing rescue plan passed by Congress, which includes a government lifeline to the two housing finance companies. In the energy sector, Exxon Mobil shares gained 4.3 percent to $84.38, while Chevron surged 5.3 percent to $87.26. Their advance was in sync with the rebound in oil futures prices. U.S. crude oil for September delivery CLc1 gained $4.58, or 3.8 percent, to settle at $126.77 a barrel. Laggards included Irish drugmaker Elan Corp (ELN.I: Quote, Profile, Research, Stock Buzz)(ELN.N: Quote, Profile, Research, Stock Buzz), whose U.S.-listed shares plunged 41.8 percent to $19.63 on the NYSE while the stock of U.S. pharmaceutical company Wyeth (WYE.N: Quote, Profile, Research, Stock Buzz) dropped 11.9 percent to $39.74 after a drug trial showed the risk of a potentially serious side effect in a new Alzheimer's drug jointly developed by the companies. Trading volume was light on the New York Stock Exchange, with about 1.47 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion. Volume was high on the Nasdaq, where about 2.27 billion shares traded, above last year's daily average of 2.17 billion. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 2 to 1 and about 4 to 3 on the Nasdaq.
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FILE NAME DDI 2008 Your Name
Economy Good Frontline The Economy is recovering, tax rebates and housing prove ` Somerville, Economic Correspondent Reuters, 7/31/08 http://www.reuters.com/article/businessNews/idUSN3043337220080731?feedType=nl&feedName=usbusinessearly&sp=true An emergency dose of government stimulus helped the economy grow at a 1.9 percent annual rate in the second quarter, a soft pace but enough to take it off a path perilously close to recession. Revised data from the Commerce Department released with the second-quarter figures on Thursday showed national output shrank in the final quarter of 2007 before barely edging up at the start of this year. "With the boost from tax rebates now fading, lower interest rates having little positive impact and signs emerging that overseas demand is weakening, we expect the economy to contract outright in the second half of this year," said Paul Ashworth, senior U.S. economist for Capital Economics of London. As the countdown to the November 4 presidential elections continues, Bush administration officials insisted the economy could keep growing and dismissed calls from prominent Democrats on Capitol Hill for a second economic stimulus program, saying it was not warranted by recent economic reports. "I think the politicians are much more concerned about the polls than the economic data," White House budget chief Jim Nussle said during a CNBC television interview. President George W. Bush told a coal producers meeting he considered the economy on a sound footing. "Exports are on the rise. Durable goods orders are strong. That suggests that businesses are anticipating a better second half of the year," Bush said. The second-quarter advance in gross domestic product followed a slim revised growth rate of 0.9 percent rate in the first quarter, previously reported as 1 percent. That followed a 0.2 percent contraction in GDP during the final quarter of last year and skirted the popular definition of recession, which is back-to-back quarters of declining output, but it provided no comfort to financial markets. Stocks fell and Treasury debt prices gained as investors sought safer haven. The dollar held steady against other major currencies. Adding to a sense of foreboding about the economy, new claims for jobless benefits unexpectedly jumped 44,000 last week. Though Labor Department officials said special factors were at play, the jump in claims just before Friday's unemployment report for July reinforced worry about a deeper downturn if consumers retrench on spending for fear of losing their jobs. Payrolls have declined for six straight months, and analysts expect a drop of 75,000 to be reported for non-farm payrolls in July. Economists surveyed by Reuters had expected GDP to advance by a slightly more robust 2 percent in the second quarter. The Commerce Department said businesses reduced inventories at the sharpest rate since the end of 2001, a possible sign they anticipate restrained growth ahead. A key reading on core inflation -- personal consumption expenditures excluding food and energy -- rose at a 2.1 percent annual rate in the second quarter after gaining 2.3 percent in the first quarter. The moderation in core prices came despite a jump in overall prices of 4.2 percent from 3.6 percent in the first quarter. Consumer spending, which fuels two-thirds of U.S. economic activity, grew at a 1.5 percent annual rate in the second quarter, up from 0.9 percent in the first quarter and 1 percent in the fourth quarter last year. The department noted that personal incomes had risen more sharply in the second quarter and attributed it primarily to the stimulus payments the government was issuing to qualifying consumers. The economy continues to be hobbled by a severe downturn in the housing sector but the drag from it was less severe in the second quarter. Spending on home building contracted at a 15.6 percent annual rate in the second quarter, down from rates of 25.1 percent in the first quarter and 27 percent in last year's fourth quarter.
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FILE NAME DDI 2008 Your Name
Economy Good Frontline The economy is recovering, trade and tax rebates prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 That the economy grew at all this spring is a testament to two bright spots — increased consumer spending fueled by the tax rebates, and the continuing expansion of American exports. Consumer spending, which amounts to 70 percent of the economy, grew at a 1.5 percent annual rate between April and June, after growing at a meager 0.9 percent clip in the previous quarter. “Clearly the tax rebates did give some oomph to the economy,” said Robert Barbera, chief economist at the research and trading firm ITG. Exports expanded at a 9.2 percent annual pace in the second quarter, up from 5.1 percent in the first three months of the year. Foreign sales have been lubricated by the weak dollar, which makes American-made goods cheaper on world markets. Adding to the improving trade picture, imports dropped by 6.6 percent, as Americans tightened their spending. Imports are subtracted from economic growth, so the effect was positive. Over all, trade added 2.42 percentage points to the growth rate from April to June. Without that contribution, the economy would have contracted.
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FILE NAME DDI 2008 Your Name
Economy Good banks ext. The economy is recovering, banks prove Glenn Somerville, Economic Correspondent Reuters, 7/28/08 http://www.reuters.com/article/businessNews/idUSWEQ00007020080728?feedType=nl&feedName=usbusinessearly&sp=true The Treasury and the nation's four biggest banks on Monday said they will kick-start a market for an investment product to support home financing in the latest effort to spur a slumping housing market. Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup (C.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) said they planned to begin issuing covered bonds, which are secured by pools of assets like home loans. And the Treasury released a set of "best practices" for covered bonds, in a move designed to help develop the market for the investment instrument. "The key to the U.S. economy making a major improvement will be turning the corner on housing finance and on the housing correction," Treasury Secretary Henry Paulson told a news conference. "We're not going to be able to do that unless we have availability of mortgage financing, and this is an attractive resource for mortgage financing." The U.S. housing market has traditionally been supported by mortgage-backed securities, which involves bundling loans into securities and selling them to investors worldwide. Financing, however, has dried up since the wave of foreclosures spawned by the collapse of the subprime mortgage market last year. Unlike mortgage securities, which pass all the risk to investors, covered bonds collateralized with mortgages would continue to perform even if the mortgages backing them default -- as long as the bank remains solvent. Covered bonds are widely used in Europe but have only become attractive in the United States since the segment of the mortgage securitization market driven by investment banks dried up last year. "I think there'll be some issuance very soon," Paulson said. "There's not 100 percent certainty that it ever will become very significant but this is an innovative tool and we think it's one that we think is very promising." Officials from the four banks, said in a statement, "We look forward to being leading issuers as the U.S. covered bond market develops." Covered bond loans stay on the balance sheet of the bank that issues the bond, so they are obligations on the bank. The issuer retains control of the assets that back the loans, which will be high-quality home mortgages in good standing. Covered bonds are not totally new in the United States, but have been a small factor in the nation's $11 trillion home mortgage market that Paulson thinks can become bigger with the backing of the four big banks. A Bank of America official said that, given time, covered bond issuance might reach $1 trillion, enough to be considered significant part of the mortgage market. Whatever it amounts to, Paulson made clear that any new source of mortgage financing was welcomed given the seriousness of a housing downturn that is rated the worst since the Great Depression. Two weeks ago, the Federal Deposit Insurance Corp. had offered guidance specifying how investors would get their collateral if an issuing bank failed, and the Treasury put together the set of best practices in the hope of further encouraging the market's development. Federal Reserve Governor Kevin Warsh told the news conference the U.S. central bank was willing to consider highly rated, highquality covered bonds as collateral for banks seeking emergency funds from the Fed. "A covered bond framework may attract investor interest and facilitate greater access to mortgage credit," he said. Some analysts, however, were skeptical covered bonds would be the answer to the housing market's woes. "Absent of (lowering) the capital requirement on covered bonds, which would put them on the same footing as agency mortgagebacked securities, this is like exercising on a stationary bike," said Michael Youngblood, principal and portfolio manager at Five Bridges Capital in Washington. The Securities Industry and Financial Markets Association, a bond market industry group, said a dedicated U.S. covered bond trader would be appointed within each of its member firms and those institutions would provide price information to electronic platforms for covered bonds -- steps that could help the market develop. In another move to jump-start this market, Bank of New York Mellon (BK.N: Quote, Profile, Research, Stock Buzz) said banks can use covered bonds as collateral for its repurchase program.
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FILE NAME DDI 2008 Your Name
Economy Good jobs ext. The economy is recovering, jobs prove Burton Frierson 7/30/08 http://www.reuters.com/article/businessNews/idUSWEN706720080730?feedType=nl&feedName=usbusinessearly Private employers added 9,000 jobs in July, according to a private report by ADP Employer Services released on Wednesday. In June, the private sector slashed 77,000, according to revised data. June was originally reported as 79,000 jobs lost. The median of estimates from economists surveyed by Reuters was for the ADP report to show a drop of 60,000 private-sector jobs in July. The 32 forecasts ranged widely from a decline of 110,000 to a fall of 4,000.
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FILE NAME DDI 2008 Your Name
Economy Good pc markets ext The economy is recovering, PC markets prove Ruben Bicho, Reuters, 7/30/08 http://www.reuters.com/article/technologyNews/idUSB21466920080730?feedType=nl&feedName=ustechnology&sp=true Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz), the world's biggest microchip producer, expects no slowdown in global demand for personal computers despite economic problems in the United States and in other countries, Intel Chairman Craig Barrett said on Wednesday. He also told reporters in Lisbon, where he was to sign a draft deal with the Portuguese government to make 500,000 cheap portable computers for schools, that the company was upbeat on demand prospects for low-cost computers and broadband wireless systems. "We gave a relatively upbeat business forecast, saying that despite the economic problems in the United States our business is so international that we didn't see any slowdown in the PC market," he said. Barrett said a range of economies have not been seriously affected by the U.S. slowdown, providing hope that the crisis will have limited implications. "We are seeing ... that the slowdown in the U.S. hasn't spilled everywhere else. The world's economy is not as robust as it could be, but it's not a disaster." Apart from broadband wireless, and the next generation of low-cost computers, Intel also remains bullish about the introduction of more digital capability in health care. "There's a huge opportunity to use it not just in the back-office but in remote diagnostics," he added. Referring to the European Union's recent antitrust charges against Intel, Barrett said price reductions for microprocessors and computers have an "anti-inflationary nature" while prices are rising globally and also said that was a testimony to high competition in the sector. "It looks as the market is functioning as it should, because every year consumers are getting more for less. We continue to say that, please just look at the facts, don't just listen to a competitor complaint," he said.
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FILE NAME DDI 2008 Your Name
Economy Good housing bill ext. Economy good, housing bill proves Jeremy Pelofsky, White House Correspondent for Reuters, 7/30/08 http://www.reuters.com/article/topNews/idUSN3042756820080730?feedType=nl&feedName=ustopnewsearly&sp=true U.S. President George W. Bush on Wednesday signed into law a sweeping rescue package aimed at resurrecting the housing market from its worst slump since the Great Depression and stabilizing the two largest mortgage finance companies. The new law launches a $300 billion government initiative to refinance troubled mortgages, and boosts oversight of Fannie Mae and Freddie Mac, which own or guarantee almost half the country's $12 trillion in home mortgage debt. It expands a line of U.S. Treasury credit for the companies, and gives the government the option to take equity stakes if they ran into trouble. Lawmakers ironed out the law over the past month to stem a crisis in investor confidence over the two companies, which were created by Congress to keep mortgage money flowing. The companies are trying to strike a balance between expanding earning power and providing finance for the mortgage market against containing losses that have eroded their capital. "We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. Bush signed the legislation into law because it included numerous key housing reforms, including a stronger regulator of the two mortgage giants. The White House had originally opposed a provision that offers $4 billion in grants to states to buy and repair foreclosed homes. The Bush administration for years advocated a smaller role for the companies, asserting that their management of trillions in assets placed too much risk on the U.S. financial system. The bill underscores the importance of the companies, long criticized as private companies with an implicit guarantee from the U.S. government. The more explicit taxpayer backing put in place by legislation benefits holders of their $1.6 trillion in combined debt used to fund mortgage purchases. "The oddity of the situation is if the debt is backed by the government, then it might be impossible to imagine how the companies might ever fail," said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, New Jersey. The companies' mortgage holdings have ballooned this year, and their regulator and the Treasury have pressured them to raise capital needed to fill a huge void left by the crippled Wall Street mortgage funding machine. They have plowed some capital into buying mortgages from lenders, which helps hold down home loan rates and provides banks with fresh money to continue lending. The capital also helps offset expected losses. Fannie Mae on Wednesday said its investment portfolio in June increased at the fastest annualized rate in nearly five years, though it slightly slowed planned future purchases. The portfolio, which is the company's top revenue source, increased to $749.6 billion. Solid demand for $4 billion of bills sold by Fannie Mae and Freddie Mac on Wednesday also suggested growing confidence among investors in the two. The housing legislation comes amid signs that real estate is continuing a nearly two-year descent that many economists say will hamper U.S. economic growth through 2009. Prices for U.S. single-family homes plunged 15.8 percent in May from a year earlier, a record pace, according to the Standard & Poor's/Case Shiller Home Price Index released on Tuesday. Applications for new mortgages dropped last week to the slowest rate since 2000, the Mortgage Bankers Association said on Wednesday. The new law also sets up a $300 billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under risky mortgages they cannot afford. The bill also offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that the Fannie Mae and Freddie Mac can guarantee. Shares of Fannie Mae and Freddie Mac initially rose after Bush signed the legislation early on Wednesday, and as U.S. securities regulators extended an emergency rule aimed at curbing bets against the stocks of 19 major financial firms, including Fannie Mae and Freddie Mac, known as short selling. Stock and bond investors were also heartened by a ruling by the Financial Accounting Standards Board to delay a change that could have put $4 trillion of mortgage bond guarantees onto the balance sheets of Fannie Mae and Freddie Mac, making them fall severely short of capital. Fannie Mae shares rose 5.3 percent to $12.21 and Freddie Mac's stock increased 3.3 percent to $8.70, according to preliminary closing figures.
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FILE NAME DDI 2008 Your Name
Economy Brink The economy on the brink Steven C. Johnson Reuters 8/1/08 http://www.reuters.com/article/businessNews/idUSL2219159120080801?feedType=nl&feedName=usbusinessearly&sp=true The Dow Jones industrial average .DJI was down 51.70 points, or 0.45 percent, at 11,326.32. The Standard & Poor's 500 Index .SPX was down 7.07 points, or 0.56 percent, at 1,260.31. The Nasdaq Composite Index .IXIC was down 14.59 points, or 0.63 percent, at 2,310.96. For the week, the Dow ended down 0.4 percent, the S&P closed up 0.2 percent and the Nasdaq ended flat. "Add up the scorecard and it says the economy is neither collapsing nor recovering rapidly," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.
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FILE NAME DDI 2008 Your Name
Oil low frontline Oil prices are dropping Steven C. Johnson, Reuters, 7/29/08 http://www.reuters.com/article/businessNews/idUSL2219159120080729?feedType=nl&feedName=usbusinessearly&sp=true Stocks rebounded on Tuesday, rising more than 2 percent on another sharp slide in oil prices and after Merrill Lynch's (MER.N: Quote, Profile, Research, Stock Buzz) latest write-down and share sale hinted at a possible turning point in the credit crisis. Stocks were also helped by data showing the rate of monthly price declines in the U.S. housing market is slowing and a separate report showing the mood of American consumers improved for the first time in six months in July. U.S. crude prices dropped more than 2 percent, relieving some concern about inflation and consumer spending and brightening the outlook for a wide range of companies, including retailers and airlines. An index of airlines .XAL rose 11.4 percent while the S&P Retail Index .RLX gained 4.0 percent. Merrill Lynch jumped nearly 8 percent after coming into trade on the defensive after the brokerage said late on Monday it will write down $5.7 billion and raise $8.5 billion by selling new stock. After the share sale, sentiment on financial stocks began to shift, with investors saying Merrill's latest write-down may be a sign that banks are nearly through purging their balance sheets of bad mortgage debt. "There's always the hope that this might be the last big financial blowup," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York. "Some people think we may be getting toward the end in terms of large write-downs." The Dow Jones industrial average .DJI rose 266.48 points, or 2.39 percent, at 11,397.56. The Standard & Poor's 500 Index .SPX gained 28.82 points, or 2.33 percent, at 1,263.19. The Nasdaq Composite Index .IXIC rose 55.40 points, or 2.45 percent, at 2,319.62. Crude oil for September delivery settled down $2.54, or 2.04 percent, at $122.19 a barrel. That was about $25 below an all-time high set earlier this month and helped stocks reverse the prior session's losses. "I think with oil at around the $120 area, that is giving the market a psychological uplift today" said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas. Financial shares rose broadly. Merrill Lynch shares rose 7.9 percent to $26.25 after falling about 11 percent in the prior session. Several analysts had widened their loss view for the brokerage after Monday's write-down news. But on Tuesday analysts were taking a "glass half-full" view. Jim Awad, chairman of W.P. Stewart Asset Management in New York, called it "a feeling that Merrill is working its way through its problems." The KBW bank index .BKX, which tracks stocks of 24 major banks, gained 8.7 percent as Citigroup shares erased early losses to rise 5.9 percent to $18.45 and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) rose 14.8 percent to $32.22.
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FILE NAME DDI 2008 Your Name
Oil prices low frontline Oil prices are falling JAD MOUAWAD, Brown University in political science, energy correspondent 7/30/08 http://www.nytimes.com/2008/07/30/business/30crude.html&OQ=_rQ3D1&OP=68aedc82Q2FQ25lQ7DEQ25GQ20HBMQ20Q20.Q 2BQ25Q2BPPDQ25PhQ25Q3BPQ25EQ3DB!-Q7DBBQ25Q3BPHMQ3DGQ7Dim.g1 Oil has fallen more than $23 a barrel, or 16 percent, since peaking on July 3. Gasoline has slipped below $4 a gallon and is dropping fast as Americans drive less. Natural gas prices, which had risen the fastest this year as traders anticipated a hot summer, have fallen 33 percent since the beginning of the month. Crude oil prices extended their decline on Tuesday, falling 2.5 percent, to $122.19 a barrel, their lowest level since the beginning of May. This helped spur a broad rally in the stock market, with all major indexes rising more than 2 percent. But stock markets still remain close to the lows of earlier this month, when they officially entered bear-market territory. The declines in energy costs come after an equally sharp correction in the prices of many agricultural commodities like corn, wheat and rice, which took place a few weeks ago. These moves suggest to economists that global markets, in a near-panic early this year to find prices high enough to allocate scarce supplies, overshot the mark and bid prices too high. Commodity prices remain extraordinarily high by historical standards. Gasoline and particularly diesel remain especially costly despite the recent fall in crude oil prices, partly because of strong demand from emerging markets that continue to subsidize the retail sale of these fuels to consumers. But with the economy weakening amid a housing crisis and a credit squeeze that show few signs of improving, many traders have begun to believe demand for oil and other commodities will soften worldwide. Investors became net sellers in the oil market last week for the first time since mid-February 2007, according to Barclays Capital. “The market’s expectations have changed very rapidly and unexpectedly,” said Edward Morse, the chief energy economist at Lehman Brothers. “The market went out of control on the upside. But market participants realized there was much more demand destruction than had been thought even a month ago, that inventories are building up quickly, and that, in fact, more supplies are coming onto the market.” As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel. Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand? Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Persian Gulf could easily push prices back up again, quickly. Only a few weeks ago, Israel conducted war games and Iran tested new missiles, renewing fears of a flare-up in the Middle East, and pushing oil prices to a record of $145.29 a barrel. The recent shift in American policy regarding Iran, with an emphasis on diplomacy, helped deflate some of the geopolitical risk premium that had been built into oil prices. “The one piece of good news we’ve had recently has been the drop in oil prices,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group. “But there is nothing that tells us with any certainty that this decline can be sustained. Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors.” Gasoline peaked at a nationwide average of $4.11 a gallon on July 17. Since then, retail gasoline prices have been falling briskly, to a nationwide average of $3.94 on Tuesday, according to AAA, the automobile group. Still, that is $1.05 a gallon higher than at the same time last year, when gasoline sold for $2.89 a gallon. Natural gas settled at $9.22 a thousand cubic feet on Tuesday, down from a high of about $13.58 at the beginning of the month, as a coolerthan-expected summer helped curb the use of gas to generate electricity. That has led to a build-up of commercial inventories. The drop in oil prices has come as gasoline demand in the United States fell sharply in recent months, thanks to Americans cutting back on their driving. Gasoline consumption fell 3.6 percent in the week ending July 18, compared with the year-earlier period, according to the Energy Department. Americans drove 9.6 billion fewer miles in May compared with the same period last year, a 3.7 percent decline and the biggest-ever drop at that time of year, the Transportation Department said on Monday. “People are waking up to the fact that prices have an impact on demand and that what happens in the U.S. gasoline market has a worldwide impact,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates, a consulting firm. The United States is the world’s largest oil consumer, and its gas market alone is bigger than the entire Chinese oil market, he said. “As a result of the economic slowdown and high prices, we’ve probably seen the peak in American gasoline demand, at least for some years,” he said.
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FILE NAME DDI 2008 Your Name
Oil prices low Frontline Oil prices are falling, economy and gas shocks prove Elliott H Gue, semimonthly newsletter, The Energy Strategist, bachelor’s degree in economics and management and a master’s degree in finance at the University of London, 8/1/08 http://www.kciinvesting.com/articles/9196/1/Defining-Demand-Destruction/Page1.html If there’s one factor that’s catalyzed the recent selloff in crude oil prices, it’s declining oil consumption from developed-market economies. The US consumes more than 20 million barrels of oil per day, making it far and away the largest oil consumer in the world. To put that into context, the second-largest consumer of crude in the world is China; in 2007, China used about 7.9 million barrels of oil per day, less than half the US total. Or to put it another way, the US uses almost four times as much oil as the entirety of South and Central America combined. The US is also behind most of the developed-world decline in oil consumption over the past year. According to the most recent data from the Energy Information Administration (EIA), US gasoline demand is down about 2.4 percent year-over-year. In total, the drop in demand equates to about 500,000 to 600,000 barrels of oil per day. There are two main culprits for the US demand slump. First, the weakening US economy is quite likely to get worse before it gets better. And second, high gasoline prices have finally shocked US consumers into cutting back on their driving; according to the Federal Highway Administration, total vehicle miles driven in May of this year were down about 10 billion miles, or 3.7 percent, year-over-year. These points are undeniable; however, none of this adds up to a crash in energy demand or an end to the bull market in energy-related stocks. A further drop in oil prices from current levels is possible, perhaps to the $110-per-barrel area.
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Oil low economy ext./Iran link Oil prices are low, economy proves TOM INCANTALUPO, autos, energy and related personal finance and consumer issues analyst 8/1/08 http://www.newsday.com/classified/automotive/ny-bzoil015784610aug01,0,2214590.story For drivers who've spent the summer feeding $20 bills into seemingly bottomless gasoline tanks and for homeowners dreading the cost of heat this winter, there was more good news yesterday: The price of crude oil dropped again and heating oil fell for the first time since March. Crude oil fell by $2.69, to settle at $124.08 a barrel in trading on the New York Mercantile Exchange, mostly on lower demand in the United States and Europe because of high prices and weakened economies. "The reason we're getting this good news in the form of lower oil prices is because we've got bad news on the economic front," said James Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., an oil trading advisory firm. Crude oil had traded as high as $147 a barrel on July 11. A state survey of fuel dealers found the average price of heating oil Monday on Long Island was down by 27 cents in the past two weeks to $4.65 a gallon. That's still $1.82 a gallon higher than a year earlier but is down from the record $4.93 on July 14. Ritterbusch said it's headed lower, though it's too soon to predict prices next winter. "Terrific, it's about time," said Dix Hills homeowner Todd Baker, 45, president of a nonfiction film production company in East Northport. But, he said, he'd still like to convert to gas heat if he can get National Grid to give him service. "Our economy has taken a toll this year because of the cost of oil." Regular gasoline averaged $4.198 a gallon on Long Island yesterday, according to the AAA - down from the record average of $4.346 on July 8. Web sites based on motorists' reports indicated pump prices as low as $3.95 yesterday at a few stations on the Island. But the average still is $1.08 a gallon higher than a year earlier. Ritterbusch said that, if crude oil stays in the low $120s, gasoline prices probably would fall about 20 cents more. But he expects oil futures to slide about $7 lower in coming weeks and for pump prices to drop an additional 15 or 20 cents as a result. He also expects the usual seasonal decline in prices after Labor Day, when the summer vacation season ends, but adds, "The wild card in this whole thing is geopolitical factors. If Israel takes a shot at Iran or vice versa, all bets are off."
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Oil low commodities market ext. Oil prices are falling now trading prices prove Jonathan Leff, Reuters, 7/30/08 http://www.reuters.com/article/businessNews/idUSSP30525320080730?feedType=nl&feedName=usbusinessearly&sp=true As the rout in oil prices nears the 20 percent mark that for stocks would signal a bear market, many analysts offer a word of caution -don't mistake a healthy correction for the end of a multi-year bull trend. The 16 percent slump since its record-high close of $145.18 a barrel on July 14 could yet deepen to $100 a barrel, many analysts say, but equally many remain convinced that another surge to as-yet unconquered peaks may lie just months ahead. "Maybe in financial markets 20 percent means the trend has changed, but in the case of commodities we are not really looking at it like that, commodities are based more on fundamentals," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo who regularly analyses charts for price direction. The U.S. Dow Jones industrial average entered bear market territory -- marked by a 20 percent fall from a closing peak -- in late June, but similar setbacks in commodity markets have proven less prescient. Those who might have mistaken oil's last deep fall -- a near 21 percent decline over four weeks to mid-January 2007 -- for a sustained pull-back paid dearly. Prices hit a low of $49.90 a barrel before nearly trebling over the next 18 months. Dealers who trade on the basis of technical indicators are looking at more crucial figures, such as the 100-day moving average. Prices fell below that level on Tuesday for the first time since early February, hinting at more to come. "The 20 percent retracement being an indicator of a bear market doesn't have quite the impact as pushing through the 100-day moving average at $122. That's what analysts and traders were really looking at," said Jonathan Kornafel, Asia director at U.S.-based options trader Hudson Capital Energy. For Emori, a break below $117 to $119 could trigger a slide to around $100, but "even if that happens I don't think it will mean that the long-term bull trend will be finished." Bullish long-term structural issues such as growing Asian demand and lackluster non-OPEC supply growth remain unresolved, market bulls argue, suggesting the market may have yet to see the highs, regardless of indicators on candlestick charts. "We've seen a spectacular rise, so 20 percent is not a bear market at all," said Mark Pervan, commodities analyst at ANZ Bank. "This is really steam coming out of the market." "We can't realistically expect it to remain around these levels with new demand coming into the market." Crude oil is no stranger to some deep corrections during a six-year price boom that has lifted U.S. crude from around $20 a barrel at the start of 2002. In early 2003, before the rally even hit its stride, prices collapsed from a pre-Iraq war peak of nearly $40 to below $25 a barrel. They hit the skids again in mid-2006, falling from a high above $78 to a January low of $49.90. The market didn't make a new record high until August 1, just over 12 months after the previous peak. While the market will almost certainly need a breather before attempting to scale $150 again, the increasing pace at which prices are rising and falling may suggest that the wait won't be as long as in the past. "Hedge fund longs have now reversed their positions and are trading the market from the short side," said Kornafel.
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Oil prices low, analysts and economy ext. Oil prices will stay low, analysts and economy prove Margot Habiby, Reporter covering energy markets, university of Oklahoma, 8/1/08 http://www.bloomberg.com/apps/news?pid=20601082&sid=a67jkNGp6Dno&refer=canada Demand Destruction Oil prices dropped in earlier trading amid signs demand will extend declines, after the government reported the U.S. lost jobs for a seventh-straight month in July. ``Today's spike might be a bit of a knee-jerk reaction,'' said Antoine Halff, head of energy research at Newedge USA LLC in New York. ``It's a tug-of-war between the more bullish geopolitical concerns and the more bearish economic outlook.'' Oil dropped as low as $122.10 a barrel today after the Labor Department said payrolls fell by 51,000, less than forecast, and the jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the month before. Fuel consumption in the past 12 months was the lowest since 2004-2005, according to the Energy Department. ``Bad economic news is leading to demand destruction,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. Futures have slipped more than $22 a barrel, or 15 percent, from the record on signs of declining demand in the U.S., which consumed about 24 percent of the world's crude in 2007. They fell 11 percent in July, the biggest one-month decline since December 2004. Gasoline Gasoline for September delivery rose 1.34 cents, or 0.4 percent, to $3.0843 a gallon on the Nymex. Earlier, the contract touched $3.1970 a gallon. Futures fell 13 percent last month, the biggest drop since September 2006, as a slowing economy cut demand for the motor fuel. It reached a record $3.631 on July 11. Regular gasoline at the pump, averaged nationwide, fell 1.1 cents to $3.898 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices have dropped every day since reaching a record $4.114 a gallon on July 17, as higher prices curbed demand. Record second-quarter energy prices have sapped U.S. automakers' profits as consumers shift to cars and away from the trucks and sport-utility vehicles that dominate the lineups for General Motors Corp., Ford Motor Co. and Chrysler LLC. GM reported a $15.5 billion quarterly loss today, the third-worst in the 100-year history of the biggest U.S. automaker. Economic News The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter. Gross domestic product increased at a 1.9 percent annualized rate, the Commerce Department said in Washington yesterday, compared with the median projection of 2.3 percent in a Bloomberg News survey. Brent crude oil for September settlement rose 20 cents to $124.18 a barrel on London's ICE Futures Europe exchange. Crude prices may fall next week on slowing demand. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline.
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Oil prices low economy/analysts/opec ext.
Crude oil prices will fall, low demand and increased supply prove Mark Shenk, Bloomberg, 8/4/08 http://www.chinapost.com.tw/business/global%20%20markets/2008/08/04/168507/Oil-may.htm Crude oil may fall next week as fuel consumption in the U.S. and other developed countries declines and OPEC increases production. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline. U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.4 percent from a year earlier, the Energy Department said July 30. Demand among the 30-member Organization for Economic Cooperation and Development will fall 480,000 barrels to 48.46 million barrels a day this year, the department said in a July 8 report. The OECD includes the richest economies, including the U.S., Japan, Germany and France. Daily oil shipments by members of the Organization of Petroleum Exporting Countries will climb 0.6 percent in the four weeks to Aug. 16, Halifax, England-based Oil Movements said Thursday. Saudi Arabia is responsible for the gain, the consultant said. The "fundamentals of weak OECD demand and rising OPEC production are likely to weigh further on prices in the weeks and months ahead," said Tim Evans, an energy analyst for Citi Futures Perspective in New York.
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Oil prices high Frontline Oil prices high now, statistics and Exxon prove CLIFFORD KRAUSS, national business correspondent, 8/1/08 http://www.nytimes.com/2008/08/01/business/01oil.html?8au&emc=au Crude oil prices in the second quarter averaged more than $124 a barrel, 91 percent higher than the same quarter in 2007, according to a recent report by Oppenheimer & Company, an investment bank. Natural gas prices averaged $10.80 for every thousand cubic feet, up 43 percent from the quarter a year ago. After spiking even higher in early July, prices settled on Thursday at $124.08 for oil and about $9.18 for natural gas. Despite its production problems, Exxon earned $10 billion in the quarter from exploration and production, up from $6 billion in the same period a year ago.
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Oil Prices high Frontline Oil prices will stay high, subsidies prove The New York Times Media Group, 8/2/08 http://www.istockanalyst.com/article/viewiStockNews+articleid_2467729&title=Keeping_Oil_Prices_High.html Unfortunately, a large share of the world's population is not responding to high energy prices. Across the developing world, governments are subsidizing energy, blunting the incentive to conserve by keeping prices low. They are absorbing the savings made by industrial countries and helping to raise oil prices by stoking demand. In China, demand rose by 400,000 barrels a day between the first quarter of 2007 and the same period of 2008. Demand in the industrialized nations in the Organization for Economic Cooperation and Development fell by one million barrels a day over the same period. In the rest of the world, it grew by 1.1 million barrels. Developing countries are growing faster than rich nations, of course. But experts say that government subsidies are exacerbating their unquenchable thirst for oil. China is expected to spend about $40 billion this year in subsidies. Venezuela and Egypt are forecast to spend more than 5 percent of their total economic output on subsidies this year. Indonesia is predicted to spend almost as much, the International Monetary Fund estimates. In all, the IMF says that 48 countries are shielding consumers from high energy prices with subsidies. As a result, while demand for oil in the rich world is expected to fall about 1 percent this year, consumption in emerging and developing countries is forecast to rise 3 percent, according to estimates by IMF economists. Governments in developing countries say they must shield the poor from high energy prices. They worry that eliminating subsidies might lead to inflation at a time when prices are rising broadly. But these subsidies are misguided and mainly benefit the well-off, who own big cars and fly in jets, as well as energy-intensive industries, which are not usually those that create most jobs. They are expensive, sucking in public money that might be better used on, say, health care or education. And they get costlier as the price of oil rises, which explains why some countries, including China and India, have allowed domestic energy prices to rise somewhat. Subsidies are a big factor keeping world oil prices high. Outside of the Middle East and some parts of Texas, this is in nobody's interest.
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Oil prices high Exxon ext. Oil prices are high now, Exxon proves Michael Erman, 7/31/08 http://www.reuters.com/article/businessNews/idUSWEN711420080731?feedType=nl&feedName=usbusinessearly&sp=true Exxon -- the world's largest publicly traded company -- previously set the high-water mark for quarterly earnings in the fourth quarter of last year, when it brought in $11.66 billion. Despite the new record, Exxon's results lagged behind analyst expectations. The company posted operating earnings of $2.27 a share in the quarter, which exclude a $290 million charge related to the recent Supreme Court ruling in the Exxon Valdez case. Analysts, on average, had expected the company to earn $2.53 a share, according to Reuters Estimates. Revenue in the quarter rose about 40 percent to $138.07 billion. Exxon both produces oil and refines it to make gasoline, and profit margins for gasoline were weak during the quarter, holding back earnings slightly. The company said earnings from its exploration and production business rose about 68 percent to $10.01 billion. But its refining and marketing earnings fell about 54 percent to $1.56 billion. U.S. oil prices averaged slightly less than $125 a barrel in the quarter, nearly double prices from a year earlier. Gasoline prices only rose 25 percent during that same period, resulting in weak profit margins for the fuel.
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Oil prices high multiple warrants ext. Oil prices will stay high, multiple warrants prove Financial Times, 8/2/08 http://www.ft.com/cms/s/0/d9efbeb8-602a-11dd-805e-000077b07658.html?nclick_check=1 There are a few reasons to think oil's fall is a dip rather than the start of a trend. First, there has been no big rise in stockpiles of crude oil or petrol; on the contrary, US inventories are low, even given the summer driving season. That suggests that the short-term market is still tight. Second, there has been little change in the shape of the futures curve, for deals to buy oil years from now. The curve remains flat, with futures for 2016 still above $120 a barrel. Futures utterly failed to predict the rise in spot oil prices over the past few years, but nonetheless, high prices suggest the market has little confidence that new supply will soon bring about a collapse in prices. The supply response to high oil prices has been a disappointment and, as always, it is the prospects for supply and demand that drive the market. It is now eight years since oil prices broke above $25 a barrel (although it was only in 2004 that their spectacular ascent began). In the period since 2000, global growth in oil output has been lower than it was in the 1990s, during the trough in prices. It may take a decade to find and develop a new field, but the feeble response of supply is consistent with an industry that is finding it physically difficult to locate and produce more oil. That leaves a fall in demand. The biggest reason the oil price has gone down is deepening gloom about the state of the US economy - and therefore about US demand for petroleum. There are clear signs that US motorists are driving less, that airlines are grounding uneconomic flights, and that energy efficiency is now the top priority for new vehicles and machinery. In the 1980s, after the oil shocks, the reduction in demand was delayed, but spectacular. By 1985, US oil consumption had fallen by 19 per cent from its peak, and oil prices slumped. Given the boom in gas-guzzlers such as sport utility vehicles in recent years, the potential to improve efficiency should be almost as great this time around. But there are differences as well as similarities to the 1970s oil shock. In 1978, Europe and the US consumed almost three-quarters of the world's oil output; in 2007 they consumed less than half. The economic growth of India and China may have slowed a little, but it remains rapid, and thirsty for energy to fuel it. Asian demand, which is often subsidised, will offset at least some of the gains in energy efficiency, and means that this time oil prices are likely to stay higher for longer.
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Oil prices high production ext. Oil prices high, production proves FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most of the new onshore drilling of the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of well-drilling permits on Western lands as in the Clinton administration’s last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Oil production declined over all to an average of 97.9 million barrels annually from 2001 through 2006, compared with average levels of 111.5 million barrels during the Clinton administration. Drilling in the West is more likely to provide natural gas. Natural gas production has increased by 34 percent during President Bush’s term in office, compared with the annual production levels during President Bill Clinton’s term. On federal land in the West, average natural gas production during the first six years of this presidency was 2.4 billion cubic feet annually, up from 1.8 billion, on average, during the previous eight years, federal data show. The wellhead price of natural gas is about five times higher than it was in the 1990s. The increased production of natural gas from federal lands, in general, puts downward pressure on natural gas prices because the North American gas market is largely isolated from the larger world market. New oil production usually does not depress prices locally, since oil is shipped by tanker in a worldwide market. The Energy Task Force convened by Vice President Dick Cheney in 2001 called for expanded production on federal lands and offshore; these figures, drawn from the data of the federal Minerals Management Service and analyzed by the Environmental Working Group, a research and advocacy organization based in Washington, give a partial sense of how the task force’s priorities have been carried out, and to what effect. “You have to start with the recognition that most wells drilled in the Rockies are not oil wells — they are gas wells,” said Porter Bennett, the president and chief executive of Bentek Energy, one of the industry’s largest research firms. “There would never be an expectation of huge returns on the oil side,” he added. Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. “We’ve turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof,” he said. “What these data show is that conservation and renewable energy are likely to be the solution to our energy woes.” Mr. Horwitt added, “On the oil side, the data show that there’s just not that much oil out there in the West.” More of the nation’s oil reserves are located in Texas (23 percent), offshore (19 percent), Alaska (18 percent) or California (16 percent), according to the federal Energy Information Administration. And the biggest onshore discoveries — like the Bakken field in western North Dakota and eastern Montana — are mostly not under federal land.
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Oil prices high Iran ext. Oil prices high, Iran proves Margot Habiby, Reporter covering energy markets, university of Oklahoma, 8/1/08 http://www.bloomberg.com/apps/news?pid=20601082&sid=a67jkNGp6Dno&refer=canada Crude oil rose after Israeli Deputy Prime Minister Shaul Mofaz said today that all options are open as Iran drives toward a ``major breakthrough'' in its nuclear weapons program. Oil climbed more than $4 a barrel in intraday trading as Mofaz's comments fueled speculation that the U.S. or Israel may attack Iran. Iranian President Mahmoud Ahmadinejad said OPEC's second-largest producer will ``resist with force'' any outside efforts to slow its nuclear program, Agence-France Presse said. Mofaz ``definitely has juice,'' and his comments ``would make everybody nervous,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. Mofaz is seen as a candidate for Israeli prime minister after Ehud Olmert said he would leave office. Crude oil for September delivery rose $1.02, or 0.8 percent, to settle at $125.10 a barrel at 2:57 p.m. on the New York Mercantile Exchange. Earlier, it touched $128.60 a barrel. Oil rose $1.84, or 1.5 percent, this week. It was the first weekly increase in four. Iran with a nuclear weapon would pose an ``unacceptable'' danger and be ``an existential threat'' to Israel, Mofaz said at a forum on Iran at the Washington Institute for Near East Policy. Similar speculation of an attack on Iran contributed to the oil-price rally that took futures to a record $147.27 a barrel on July 11. Iran previously has threatened to blockade the Strait of Hormuz, through which a quarter of the world's crude is exported, if its nuclear facilities are targeted. It pumped about 3.85 million barrels of oil a day in June, according to data compiled by Bloomberg. Iranian Supreme Leader Ayatollah Ali Khamenei, the country's highest authority, said this week that his country will push forward with its nuclear program, which Iranian officials say is designed for energy generation and other peaceful purposes. Weekend Deadline Ahmadinejad said July 27 that the country has 6,000 uranium- enriching centrifuges, the Associated Press reported. Iran faces a deadline tomorrow to reply to an offer from world powers of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program. It was set by U.S. and EU diplomats at talks in Geneva July 19. Iranian Foreign Minister Manouchehr Mottaki said yesterday that Iran doesn't face a deadline and has already replied to the six nations negotiating with it over its nuclear program. ``This whole thing with Iran tomorrow has everybody nervous because they're supposed to update everybody what they're going to do with their nukes, and then you have the saber-rattling from Israel,'' said Dean Hazelcorn, head trader at Coquest Inc. in Dallas.
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Oil prices high, Iran ext. Oil prices will stay high, Iran fears prove Pablo Gorondi, Associated Press Writer, 8/2/08 http://www.usatoday.com/money/markets/2008-08-01-oil-stocks-friday_N.htm Oil prices settled slightly higher Friday, clawing back above $125 a barrel after Israel raised new concerns about Iran's nuclear program. But more concerns that high prices are eating into demand limited the gains. Crude prices soared earlier in the day after news reports quoted Israeli Deputy Prime Minister Shaul Mofaz as saying that Iran's nuclear program was poised to make a "major breakthrough" and that his country must be "prepared for every option." Mofaz, a hawkish former defense minister and military chief, is a top contender to succeed Prime Minister Ehud Olmert, who announced Wednesday he will resign in September amid a corruption probe. Mofaz's comments "got everybody excited to buy oil again" on worries that a possible military strike against Iran would plunge the Middle East into another crisis and threaten regional oil supplies, said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "That caused the oil market to pop," Flynn said. "It's putting the focus back on Iran."
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Oil prices high, tropical storm/Iran ext. Oil prices will stay high, tropical storms, Iran and developing countries’ demand prove Gavin Evans and Catherine Yang, Bloomberg, 8/4/08 http://www.bloomberg.com/apps/news?pid=20601087&sid=aGLbMtQEhcUk&refer=home Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico, and Israeli and U.S. officials sought additional sanctions against Iran. Tropical Storm Edouard lies about 90 miles (145 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research. ``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said. Crude oil for September delivery rose as much as $1.21, or 1 percent, to $126.31 a barrel in after-hours electronic trading on the New York Mercantile Exchange and traded at $125.93 at 9:15 a.m. in Singapore. The contract gained 0.8 percent on Aug. 1 on speculation the odds of a military strike against nuclear research facilities in Iran, the world's fourth-largest oil producer, were increasing. Iran didn't respond by an Aug. 2 deadline to an offer from the U.S., Russia, China, France, the U.K. and Germany of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program. Extra sanctions are needed, Tzipi Livni, Israel's foreign minister, said yesterday on CNN's ``Late Edition'' program. Brent, Edouard Brent crude oil for September settlement climbed as much as $1.12, or 0.9 percent, to $125.30 a barrel on London's ICE Futures Europe exchange, and traded at $125 at 9:09 a.m. in Singapore. Tropical storm Edouard, with maximum wind speeds of 50 miles an hour, is likely to strengthen as it moves west parallel to the Louisiana coast before making land on the upper Texas coast Aug. 5, the Miami-based hurricane center said at 7 p.m. local time. There is a 24 percent chance it will strengthen to a hurricane, with winds of more than 74 miles an hour, before striking land. ``Keep a close eye on the storm,'' Rebecca Waddington, a meteorologist with the center, said in an interview. ``The industry knows better than we do how to safeguard their installations. I'd advise them to act early.'' New York oil futures have slipped more than $21 a barrel, or 14 percent, from the record $147.27 on July 11 as U.S. gasoline demand slowed, and a firming of the dollar reduced the attraction of commodities as an investment. Speculators Hedge fund managers and other large speculators last week reduced their bets on falling prices, according to Commodity Futures Trading Commission data. Net-short positions, the difference between orders to buy and sell the commodity, fell to 660 contracts at July 29, 82 percent less than a week earlier. While the U.S. economy may be heading toward recession, demand in India and China remains strong and global production is straining to keep up, Fat Prophets' Wendt said. He expects oil to reach $175 a barrel before the end of the year. An Institute for Supply Management report tomorrow will probably show U.S. service industries shrank for a second month in July, based on a Bloomberg survey of economists. Futures trading on the Chicago Board of Trade suggests less than a 7 percent chance the U.S. Federal Reserve will raise interest rates after it meets the same day. ``It's likely that we're going to see further weakness in the dollar,'' Wendt said. ``We can't see it bouncing back and sustaining any gains so we're looking towards further increases in the price of crude oil.''
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Energy costs low frontline Energy costs are falling, multiple warrants prove JAD MOUAWAD, Brown University in political science, energy correspondent 7/30/08 http://www.nytimes.com/glogin?URI=http://www.nytimes.com/2008/07/30/business/30crude.html&OQ=_rQ3D1&OP=68aedc82Q2F Q25lQ7DEQ25GQ20HBMQ20Q20.Q2BQ25Q2BPPDQ25PhQ25Q3BPQ25EQ3DB!-Q7DBBQ25Q3BPHMQ3DGQ7Dim.g1 The sharp drop in energy prices since the beginning of the month is turning into a rare bright spot in a bleak economic landscape. Americans are driving less and buying smaller cars, like this Smart car owned by Larry Syres, filling up in Palo Alto, Calif. For the moment, at least, fears of a prolonged energy shock seem to have subsided a bit. Oil has fallen more than $23 a barrel, or 16 percent, since peaking on July 3. Gasoline has slipped below $4 a gallon and is dropping fast as Americans drive less. Natural gas prices, which had risen the fastest this year as traders anticipated a hot summer, have fallen 33 percent since the beginning of the month. Crude oil prices extended their decline on Tuesday, falling 2.5 percent, to $122.19 a barrel, their lowest level since the beginning of May. This helped spur a broad rally in the stock market, with all major indexes rising more than 2 percent. But stock markets still remain close to the lows of earlier this month, when they officially entered bear-market territory. The declines in energy costs come after an equally sharp correction in the prices of many agricultural commodities like corn, wheat and rice, which took place a few weeks ago. These moves suggest to economists that global markets, in a near-panic early this year to find prices high enough to allocate scarce supplies, overshot the mark and bid prices too high. Commodity prices remain extraordinarily high by historical standards. Gasoline and particularly diesel remain especially costly despite the recent fall in crude oil prices, partly because of strong demand from emerging markets that continue to subsidize the retail sale of these fuels to consumers. But with the economy weakening amid a housing crisis and a credit squeeze that show few signs of improving, many traders have begun to believe demand for oil and other commodities will soften worldwide. Investors became net sellers in the oil market last week for the first time since mid-February 2007, according to Barclays Capital. “The market’s expectations have changed very rapidly and unexpectedly,” said Edward Morse, the chief energy economist at Lehman Brothers. “The market went out of control on the upside. But market participants realized there was much more demand destruction than had been thought even a month ago, that inventories are building up quickly, and that, in fact, more supplies are coming onto the market.” As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel. Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand? Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Persian Gulf could easily push prices back up again, quickly. Only a few weeks ago, Israel conducted war games and Iran tested new missiles, renewing fears of a flare-up in the Middle East, and pushing oil prices to a record of $145.29 a barrel. The recent shift in American policy regarding Iran, with an emphasis on diplomacy, helped deflate some of the geopolitical risk premium that had been built into oil prices. “The one piece of good news we’ve had recently has been the drop in oil prices,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group. “But there is nothing that tells us with any certainty that this decline can be sustained. Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors.” Gasoline peaked at a nationwide average of $4.11 a gallon on July 17. Since then, retail gasoline prices have been falling briskly, to a nationwide average of $3.94 on Tuesday, according to AAA, the automobile group. Still, that is $1.05 a gallon higher than at the same time last year, when gasoline sold for $2.89 a gallon. Natural gas settled at $9.22 a thousand cubic feet on Tuesday, down from a high of about $13.58 at the beginning of the month, as a cooler-than-expected summer helped curb the use of gas to generate electricity. That has led to a build-up of commercial inventories. The drop in oil prices has come as gasoline demand in the United States fell sharply in recent months, thanks to Americans cutting back on their driving. Gasoline consumption fell 3.6 percent in the week ending July 18, compared with the year-earlier period, according to the Energy Department. Americans drove 9.6 billion fewer miles in May
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Energy costs high Energy costs are rising, multiple figures prove MICHAEL BLACKLEY, Business Editor, 8/1/08 http://news.scotsman.com/opinion/Consumers-will-keep-feeling-the.4349044.jp WITH petrol prices continuing to rise, the cost of food soaring and interest rates forecast to climb before the year is out, consumers are finding their pay packet is not stretching quite as far as it did only a few months ago. The last thing that anybody feeling the pinch wanted was for another big rise in their energy bills at a time when they are going to feel it more than ever before. While the combined effect of a number of rises in gas and electricity prices in rec ent years has already been taking its toll, there will be few customers of Scottish Gas who will not feel the pressure on their wallets from the latest record-breaking price rise announced this week. While many customers of the company may have spent yesterday and today arranging to switch to another provider in order to avoid the rise, it will prove largely pointless – prices will rise whichever company's name is on your bill, it is only a matter of time until more price rise announcements come. Almost every time an energy company announces a price rise, all of its rivals invariably follow suit. They are, after all, putting up prices for the same reasons and, the companies argue, they cannot survive without raising prices. EDF Energy got the ball rolling last Friday with a 17 per cent rise in electricity prices and 22 per cent rise for gas bills. But the Scottish Gas rise blew that out of the water – with gas customers preparing for bills to rise by more than a third as electricity users face a nine per cent hike. The average dual fuel user will now face paying £405 more every year for their power. When added to the company's rise earlier this year, it means that the average dual fuel user on a Scottish Gas standard plan will now be paying 44 per cent more than they were at the turn of the year. EDF customers are paying 34 per cent more but there is now a fear among consumer groups that British Gas has set the benchmark. That has led Age Concern to express fears that lives could be put at risk as elderly people avoid putting on the heating for the fear of raking up huge bills. Yet fuel poverty is more widespread than may be expected – and is certainly not restricted to the elderly. Before the Centrica price rise, around 700,000 households in Scotland were in what is described as 'fuel poverty' – where at least ten per cent of the household disposable income is spent on energy. But the latest price rise is expected to make another 160,000 households fall into that category. It would mean that a third of all households in Scotland will be in fuel poverty – and that will rise once the other four providers raise prices. Graham Kerr, a spokesman for Energywatch Scotland, said: "If the companies keep going on like this we could have almost half of all households in Scotland being fuel poor. This will already take us uncomfortably past one-third of all households being fuel poor and, if it keeps rising, it will only get worse. "We thought the rise might be high, something like 17 per cent, but British Gas blew that out of the water." The 35 per cent rise in gas prices and nine per cent in electricity announced by Centrica was much bigger than previously expected and leaves a strong possibility that some firms may go even further and raise prices by more than 40 per cent.
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FILE NAME DDI 2008 Your Name
Energy Costs high oil ext. Energy costs will increase, oil costs prove Scotsman Business, 8/1/08 http://business.scotsman.com/personal-finance/Fix-your-power-bills-now.4352286.jp Charges will almost double this year due to the latest hikes, writes Teresa Hunter TIME is running out to lock into fixed bills and avoid combined annual gas and electricity charges nearly doubling to £1,600 in the coming months. Scottish Gas followed EDF last week by announcing a 35% increase in gas prices, after a 15% hike in January. But this is not the end. A recent report from energy analysts Eclipse warned that UK gas prices would climb 66%, leading to average bills of £1,000, because of falling domestic gas production and a greater reliance on imports, with their sensitivity to soaring oil prices. As electricity prices are also gas and oil-driven, these too are set to climb. Scottish Gas has increased electricity by a further 9% following January's 15% hike. In all, an average annual gas and electricity charge with the company will have risen from £912 at the beginning of the year to £1,322, before topping £1,600 in the months to come. But energy suppliers hunt in a pack, and the remaining companies are expected to follow their competitors' prices upwards. Energywatch is predicting that this will lead to a sharp rise in disconnections. Gas and electricity regulator Ofgem is due to publish its latest disconnection figures tomorrow. These are not expected to show any undue increase in people being cut off, but the data will only go up to March 2008, before the full effects of the recent punishing prices began to bite.
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Energy prices low ext. Energy costs will stay high 4029 tv, 8/1/08 http://www.4029tv.com/news/17068207/detail.html The cost of heating your home this winter is expected to increase, in some instances nearly 50 percent. According to the Arkansas Public Service Commission, CenterPoint Energy customers can expect to see a 24-percent increase compared to last year, rates are expected to be 31-percent higher for Arkansas Western Gas customers and 48-percent higher for Arkansas Oklahoma Gas Company customers. Energy officials blame the increase in prices on the sky-rocketing demand across the country during colder months. Fort Smith’s Community Services Clearinghouse helps families who are struggling to make ends meet. “It’s come to the point where they have to make the choice of buying their food or paying a utility to keep it on,” said Susan Ross of the Community Services Clearinghouse. Ross said more families may seek help if heating prices increase drastically. "We try and help as many people as we can," Ross said. "The need is definitely there."
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FILE NAME DDI 2008 Your Name
Natural Gas prices low Natural gas prices low, production proves FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most of the new onshore drilling of the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of well-drilling permits on Western lands as in the Clinton administration’s last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Oil production declined over all to an average of 97.9 million barrels annually from 2001 through 2006, compared with average levels of 111.5 million barrels during the Clinton administration. Drilling in the West is more likely to provide natural gas. Natural gas production has increased by 34 percent during President Bush’s term in office, compared with the annual production levels during President Bill Clinton’s term. On federal land in the West, average natural gas production during the first six years of this presidency was 2.4 billion cubic feet annually, up from 1.8 billion, on average, during the previous eight years, federal data show. The wellhead price of natural gas is about five times higher than it was in the 1990s. The increased production of natural gas from federal lands, in general, puts downward pressure on natural gas prices because the North American gas market is largely isolated from the larger world market. New oil production usually does not depress prices locally, since oil is shipped by tanker in a worldwide market. The Energy Task Force convened by Vice President Dick Cheney in 2001 called for expanded production on federal lands and offshore; these figures, drawn from the data of the federal Minerals Management Service and analyzed by the Environmental Working Group, a research and advocacy organization based in Washington, give a partial sense of how the task force’s priorities have been carried out, and to what effect. “You have to start with the recognition that most wells drilled in the Rockies are not oil wells — they are gas wells,” said Porter Bennett, the president and chief executive of Bentek Energy, one of the industry’s largest research firms. “There would never be an expectation of huge returns on the oil side,” he added.
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FILE NAME DDI 2008 Your Name
Natural gas low frontline Natural gas prices are low, imports prove CASSANDRA SWEET, wallstreet journal, 8/4/08 http://online.wsj.com/article/SB121779975669708187.html?mod=googlenews_wsj U.S. natural-gas prices could be in for a fall next year, when additional output from elsewhere in the world should enter the market. Overseas production of gas that is supercooled into liquid form for ocean transport is set to increase by about one-third, to more than 11 trillion cubic feet by the end of next year, according to Waterborne Energy Inc., a Houston research firm that tracks the world-wide liquefied-natural-gas business. The U.S. sees LNG imports in 2009 surpassing last year's record levels. "There is a huge bubble of LNG about to hit the market," said Waterborne President Steven Johnson. This global surge coincides with a U.S. production boom, inflated by unexpectedly large amounts of so-called unconventional gas from shale deposits in Texas and Louisiana. Emboldened by that windfall, U.S. producers are pressing Congress to help expand the market for gas, pointing to forecasts showing that growth in domestic output will outstrip demand this year and next. A U.S. market well supplied with domestic gas, backed up by a ready supply of fresh LNG output from overseas, would likely keep prices low. U.S. natural-gas prices, at $9 to $10 a million British thermal units, have fallen more than 30% in the last three weeks, although they are up 49% from 52 weeks ago. Most liquefied natural gas is consumed in Europe and Asia, where a dearth of domestic supply and storage capacity tends to keep prices 50% to 100% higher than in the U.S. These high prices lured LNG shipments away from the U.S. this year, damping a trend of rising imports. A record 771 billion cubic feet of LNG, enough to heat about 12 million homes, reached the U.S. in 2007. LNG imports are down 60% this year, according to the Energy Information Administration. Producers in Qatar, Russia, Indonesia and elsewhere are expected to increase global LNG production by about 34%, bringing nearly 2.8 trillion cubic feet a year of new supplies online by the end of 2009, Waterborne said. Qatargas -- a partnership of Qatar Petroleum, Exxon Mobil Corp. and several other oil companies -- says it plans to quadruple LNG production to more than two trillion cubic feet. Qatar Petroleum has a separate venture with Exxon Mobil, called RasGas, that plans to expand LNG production by about 75%, to more than 1.74 trillion cubic feet by the end of 2009. An additional 197 billion cubic feet of LNG is expected from a Nigerian project led by the national oil company and Royal Dutch Shell PLC, while the BP PLC-operated Tangguh field in Indonesia is expected to produce about 364 billion cubic feet of new LNG by mid-2009. In Russia, state-owned gas firm OAO Gazprom is partnering with Shell and Japanese trading firms Mitsui & Co. and Mitsubishi Corp. to develop the Sakhalin 2 oil and gas field, with 460 billion cubic feet a year of LNG expected to come online next year. About 158 billion cubic feet a year of LNG are expected to come out of a Total SA-led project in Yemen by July 2009, according to Waterborne. While most of the new LNG is slated for terminals in Europe and Asia, the large flow of new production is likely to saturate those markets and what is left over will come to the U.S., said Mr. Johnson. Not everyone expects a flood of LNG into the U.S. "I think [2009] is going to be more like this year than last year," said Zach Allen, an analyst at Pan EurAsian Enterprises, an energy-research firm in Raleigh, N.C. Although there will be more LNG production next year, there will also be stiff competition from new import terminals in Europe and high prices in Asia. Robust domestic production will likely keep U.S. prices relatively low and unattractive, he said.
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Natural gas prices high Natural gas prices are high regardless of oil prices FELICITY BARRINGER, New York Times 8/2/08 http://www.startribune.com/nation/26209424.html?location_refer=Nation:highlightModules:4 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most new onshore drilling in the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of welldrilling permits on Western lands as in the Clinton administration's last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Meanwhile, natural gas production has increased by 34 percent during President Bush's term in office, compared with the annual production levels during President Clinton's term. Meanwhile, the wellhead price of natural gas is about five times higher than it was in the 1990s. Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. "We've turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof," he said. Horwitt added, "On the oil side, the data show that there's just not that much oil out there in the West." But industry representatives contend that the high prices, and the technical skills learned in recovering hard-to-retrieve oil in places like Texas, provide an opportunity to find oil and natural gas that would not have seemed worth the trouble a few years ago.
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AT: natural gas prices low because of production Natural gas will increase despite increased production FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. “We’ve turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof,” he said. “What these data show is that conservation and renewable energy are likely to be the solution to our energy woes.” Mr. Horwitt added, “On the oil side, the data show that there’s just not that much oil out there in the West.” More of the nation’s oil reserves are located in Texas (23 percent), offshore (19 percent), Alaska (18 percent) or California (16 percent), according to the federal Energy Information Administration. And the biggest onshore discoveries — like the Bakken field in western North Dakota and eastern Montana — are mostly not under federal land.
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Energy Prices uniqueness file Economy Bad Frontline.........................................................................................................................................4 Economy Bad Frontline.........................................................................................................................................5 Economy Bad Frontline.........................................................................................................................................6 Economy Bad Frontline.........................................................................................................................................7 Economy bad cars ext............................................................................................................................................8 Economy Bad Car ext............................................................................................................................................9 Economy Bad stocks ext......................................................................................................................................10 Economy Bad banks ext......................................................................................................................................11 Economy Bad Jobs ext.........................................................................................................................................12 Economy Bad mortgages ext...............................................................................................................................13 AT: Economy recovering, trade and tax rebates prove....................................................................................14 ...............................................................................................................................................................................14 Economy Good Frontline....................................................................................................................................15 Economy Good Frontline....................................................................................................................................16 Economy Good Frontline....................................................................................................................................17 Economy Good banks ext....................................................................................................................................18 Economy Good jobs ext.......................................................................................................................................19 Economy Good pc markets ext...........................................................................................................................20 Economy Good housing bill ext..........................................................................................................................21 U.S. President George W. Bush on Wednesday signed into law a sweeping rescue package aimed at resurrecting the housing market from its worst slump since the Great Depression and stabilizing the two largest mortgage finance companies. The new law launches a $300 billion government initiative to refinance troubled mortgages, and boosts oversight of Fannie Mae and Freddie Mac, which own or guarantee almost half the country's $12 trillion in home mortgage debt. It expands a line of U.S. Treasury credit for the companies, and gives the government the option to take equity stakes if they ran into trouble. Lawmakers ironed out the law over the past month to stem a crisis in investor confidence over the two companies, which were created by Congress to keep mortgage money flowing. The companies are trying to strike a balance between expanding earning power and providing finance for the mortgage market against containing losses that have eroded their capital. "We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. Bush signed the legislation into law because it included numerous key housing reforms, including a stronger regulator of the two mortgage giants. The White House had originally opposed a provision that offers $4 billion in grants to states to buy and repair foreclosed homes. The Bush administration for years advocated a smaller role for the 1
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Economy Bad Frontline The economy is doomed, stock prices, unemployment and car sales prove GLENN SOMERVILLE, Economic Correspondent Reuters, 8/1/08 http://www.reuters.com/article/topNews/idUSN3133083420080801?feedType=nl&feedName=ustopnewsearly&sp=true The U.S. unemployment rate hit its highest in four years during July as employers cut jobs for a seventh straight month, though less severely than predicted, a Labor Department report showed on Friday. The rising toll of job losses and plunging new-car sales in July fueled worry that a recession may be unavoidable and helped drive stock prices lower again. The jobless rate climbed to 5.7 percent from 5.5 percent in June as 51,000 jobs were eliminated in July, bringing losses for the year to 463,000. Economists had expected 75,000 jobs would be cut last month but had forecast the unemployment rate would rise only to 5.6 percent. In a separate report, the Institute for Supply Management said manufacturing activity held steady in July and noted some moderation in inflation pressures. Its index of national factory activity slipped a bit to 50 from 50.2 in June -- with 50 being the dividing line between expansion and contraction. "If you look at ISM and the unemployment number together, it suggests an economy that is, at best, stuck in neutral," said Subodh Kumar, chief investment strategist with Subodh Kumar & Associates in Toronto. Stock prices dropped, with the Dow Jones industrial average off 51 points to end at 11,326 and the Nasdaq Composite Index down 14 points to 2,310.
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Economy Bad Frontline The economy is in a recession, housing jobs and prices prove GLENN SOMERVILLE, Economic Correspondent Reuters, 8/1/08 http://www.reuters.com/article/topNews/idUSN3133083420080801?feedType=nl&feedName=ustopnewsearly&sp=true Policy-makers at the Federal Reserve meet next week and are expected to keep official interest rates unchanged as they weigh concerns about economic weakness against worries about bubbling price pressures. Brian Gendreau, an investment strategist with ING Investment Management Americas in New York, described monthly job losses as "painful" and consistent with a weak economy. "We are clearly in a growth recession and my fear is that we are in a mild, but longer recession than the one we experienced in 2001-2002," Gendreau said. HOUSING SLIDE CONTINUES The unexpectedly steep climb in the unemployment rate underlines how a deterioration in the housing sector continues to chill economic growth. The last time the jobless rate was higher was in March 2004, when it hit 5.8 percent. While July's job loss was not as bad as feared, it did not change the picture of an economy that is basically treading water, analysts said. "Overall the report looks to be broadly consistent with other data that show the economy quite soft, basically stalled, not growing very much, but not contracting very much either," said David Resler, chief economist for Nomura Securities International in New York. The report showed 16-to-24 year olds facing particular difficulty in trying to nail down summer jobs, a factor that helped push up the overall unemployment rate. In addition, the average workweek slipped to 33.6 hours, the lowest since November 2004, from 33.7 hours in June, a further suggestion of economic weakness. July job losses were widespread. The only major sectors showing any gains were government, hospitality, and education and health services. Construction industries shed another 22,000 employees and factories cut 35,000 jobs. A Commerce Department report on June construction spending underlined the continuing slide in building that is dragging employment lower in the construction sector, with spending falling a steeper-than-expected 0.4 percent.
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Economy Bad Frontline The economy is in a recession PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 The American economy expanded more slowly than expected from April to June, the government reported Thursday, while numbers for the last three months of 2007 were revised downward to show a contraction — the first official slide backward since the last recession in 2001. Economists construed the tepid growth in the second quarter, combined with a surge in claims for unemployment benefits, as a clear indication that the economy remains mired in the weeds of a downturn. Many said the data increased the likelihood that a recession began late last year. The next major piece of data comes Friday, when the government is to release its monthly snapshot of the job market. Analysts expect the report to show a loss of 75,000 jobs, signifying the seventh straight month of declines. “We already knew the economy was weak, and now you have both a negative growth number coupled with job losses,” said Dean Baker, a director of the liberal Center for Economic and Policy Research. “There’s a lot of real bad times to come.” President Bush zeroed in on the positive growth in the second quarter — a 1.9 percent annual rate of expansion, compared with an anticipated 2.3 percent rate. That follows growth of 0.9 percent in the first quarter. He claimed success for the $100 billion in tax rebates sent out by the government this year in a bid to spur spending, along with $52 billion in tax cuts for businesses. “We got some positive news today,” the president said in West Virginia, addressing a coal industry trade association. “It’s not as good as we’d like it to be but I want to remind you a few months ago, there were predictions, and — that the economy would shrink this quarter, not grow.” But the snapshot of disappointing economic growth released by the Bureau of Economic Analysis on Thursday morning provided no comfort to Wall Street, where a broad sell-off commenced. By the end of business, the Dow Jones industrial average was down 206 points to close at 11,378, a drop of nearly 2 percent.
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Economy Bad Frontline The economy already in a recession, multiple warrants and 07 decline prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 “Looking forward, I don’t think there’s anything to change the lousy trend for the domestic economy,” said Joshua Shapiro, chief domestic economist at MFR, a research firm. With the last three months of 2007 now officially revised down — from an initial 0.6 percent annual rate of growth to a 0.2 percent decline — many economists expect that these tough times will officially be declared a recession. That label is affixed by a panel of economists at a private research institution, the National Bureau of Economic Research, though typically well after the fact. President Bush derided such characterizations, along with the academic discipline known as the dismal science. “You can listen to these economists,” Mr. Bush said in West Virginia. “On the one hand, they’ll say, and then on the other hand. If they had three hands, it would be on the one hand, the second hand and the third hand.” But for many, the old debate about whether this is a recession has become purely academic, and eclipsed by the troubles at hand. “All my cousins already know it’s a recession,” said Mr. Barbera, the ITG economist. “They have the luxury of not having Ph.D.’s. The auto companies are in dire straits, the airlines have been shutting down flights and firing pilots. The truckers are in near hysteria because of the price of diesel. If you round up the usual suspects, this is a bad circumstance. And the word we usually use for a bad circumstance is a recession.”
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Economy bad cars ext. The economy is failing, multiple car manufacturers prove Christiaan Hetzner and David Bailey, 8/1/08 http://www.reuters.com/article/businessNews/idUSL166453420080801?feedType=nl&feedName=usbusinessearly&sp=true The meltdown in the global car industry claimed more victims on Friday as General Motors lost another $15.5 billion, BMW warned on profits and Nissan earnings missed expectations by a wide margin. General Motor Corp's (GM.N: Quote, Profile, Research, Stock Buzz) quarterly loss -- the third largest in its 100-year history -came as its North American sales fell 20 percent and plunging prices for SUVs prompted deep charges for its auto finance business. The No. 1 U.S. automaker also burned through $3.6 billion in cash in the quarter, refocusing investor attention on whether GM can complete a rushed restructuring before its cash and available credit runs down. nN01288721 Germany's BMW AG (BMWG.DE: Quote, Profile, Research, Stock Buzz), the world's biggest premium carmaker, said it would miss its 2008 targets after a 44 percent plunge in quarterly pretax profit. "Business conditions for the automobile industry deteriorated sharply again in the second quarter due to further ongoing steep rises in oil and raw material prices, the weakness of the U.S. dollar, the impact of the international financial crisis and a weaker U.S. economy," BMW said. Nissan Motor Co (7201.T: Quote, Profile, Research, Stock Buzz), Japan's No.3 automaker controlled by Renault SA (RENA.PA: Quote, Profile, Research, Stock Buzz), posted a much worse-than-expected 46 percent drop in quarterly operating profit. It stuck to annual forecasts for its lowest operating profit in seven years. On Friday, the world's automakers reported a 13.2 percent drop in U.S. auto sales in July as an uncertain U.S. economy bludgeoned manufacturers in the largest and most lucrative auto market. It was the ninth consecutive month of declining sales in the U.S. market -- the first time that has happened since the last U.S. recession seven years ago -- and the worst showing since April 1992. nN01496226 The roiling U.S. market has also made leasing an issue for U.S.-based automakers. Chrysler's financial arm has stopped supporting leasing in the United States, while GM and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) have pared those programs in favor of adding retail incentives. MORE RISK AHEAD Because of that pullback and tighter credit, auto executives and analysts say the industry may be battered by double-digit sales declines in coming months and cannot forecast an end to the slide. The economic contagion is spreading to other markets, leading to a decline in Europe of nearly 8 percent last month. U.S.-based GM, Ford and Chrysler have taken a deeper hit from the shift toward cars than transplant automakers have in the United States because of their greater focus on trucks. However, few have been spared. Ford reported a record $8.7 billion quarterly loss in late July and even reliable outperformer Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) has slashed sales targets. Renault has backed away from its 2009 profit forecast, Honda Motor Co Ltd (7267.T: Quote, Profile, Research, Stock Buzz) trimmed its expectations and Daimler AG (DAIGn.DE: Quote, Profile, Research, Stock Buzz) sharply marked down its 2008 guidance.
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Economy Bad Car ext. The economy is poor, cars prove Chang-Ran Kim, Asia Autos 8/1/08 http://www.reuters.com/article/businessNews/idUST16709820080801?feedType=nl&feedName=usbusinessearly&sp=true In the past few months, the resale value of big, used cars has fallen as consumers seek fuel efficiency, dropping by as much as 30 percent in the latest quarter from the year before. About 30 percent of Nissan's U.S. sales are in light trucks. Even rival Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz), whose model line-up is dominated by smaller cars, last week set aside an additional allowance of 25 billion yen this year on such writedowns. "A further decline of used vehicle values in the United States remains a risk, but so far a weaker-than-assumed yen exceeds that comfortably so we're keeping our forecasts intact," Corporate Vice President Joji Tagawa told a news conference. Plunging resale prices for light trucks such as SUVs prompted Chrysler LLC's CBS.UL decision last week to stop offering vehicle leases -- which rely on a healthy resale value for a vehicle when a lease ends to make a profit. Bigger rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) took a $2.1 billion charge for its finance company when it reported second-quarter results, while General Motors Corp's (GM.N: Quote, Profile, Research, Stock Buzz) finance arm took a $716 million write-down on North American vehicle leases. Chief Executive Carlos Ghosn last week forecast U.S. industry sales of 14.3 million vehicles in 2008, the lowest level in more than a decade. Global vehicle sales grew 6.9 percent in the first quarter thanks to brisk sales of the Qashqai compact SUV, known as the Dualis in some markets, and the launch of new models, including the Livina series. But Nissan, like many of its rivals, faces falling demand for gas-guzzling vehicles and has been forced to significantly reduce production of light trucks. Underscoring the severity of the U.S. market, Nissan this week said it would seek to axe 1,200 workers at two plants in Tennessee, about one-fifth of its headcount. It is operating far below capacity in North America as sales of pickups and other big vehicles slump. Shares of Nissan have fallen 32 percent in the year to date, worse than Tokyo's transport sub-index , which has lost 21 percent. Before the results, Nissan ended down 1.4 percent at 828 yen.
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Economy Bad stocks ext The economy is failing, stocks prove Steven C. Johnson Reuters 8/1/08 http://www.reuters.com/article/businessNews/idUSL2219159120080801?feedType=nl&feedName=usbusinessearly&sp=true U.S. stocks fell on Friday as a $15.5 billion quarterly loss from General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and a rise in oil prices added to fears the economy could slip into recession and concerns about corporate earnings. A government report showing U.S. employers cut jobs for the seventh straight month in July added to market worries, though the decline in payrolls was not as severe as had been feared. The report also showed the jobless rate jumped to its highest level in four years. General Motors' (GM.N: Quote, Profile, Research, Stock Buzz) second-quarter loss was the latest example of how rising oil prices are hurting consumer spending. Its shares slumped 7.6 percent to $10.23 and weighed on the Dow and S&P. Sliding global metal prices and weak manufacturing data around the world knocked the shares of aluminum maker Alcoa (AA.N: Quote, Profile, Research, Stock Buzz) nearly 5 percent lower. Shares of Caterpillar (CAT.N: Quote, Profile, Research, Stock Buzz), the mining and heavy equipment maker, fell 2 percent. The two were the top drags on the Dow. Crude oil CLc1> settled up $1.02 at $125.10 a barrel in New York after Israeli Deputy Prime Minister Shaul Mofaz said Iran was heading toward a major breakthrough in its nuclear program, fanning concerns of a potential confrontation that could disrupt supply from the OPEC nation. "The stock market is down because oil went back up," said Frederic Dickson, senior vice president and market strategist at D.A. Davidson & Co in Lake Oswego, Oregon. "We have more market tension with oil than with the employment report."
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Economy Bad banks ext The economy is doing poorly, the cautiousness of banks prove Jonathan Gould and Philipp Halstrick, Reuters, 8/1/08 http://www.reuters.com/article/businessNews/idUSL137297220080801?feedType=nl&feedName=usbusinessearly Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) Chief Executive Josef Ackermann thinks difficult market conditions have made it harder for banks to do large acquisitions, he said in a New York Times interview published on Friday. While he would not comment directly on a possible takeover bid for Deutsche Postbank (DPBGn.DE: Quote, Profile, Research, Stock Buzz), Germany's largest retail bank, the newspaper said he seemed to signal that this was unlikely. "The current environment is not particularly intriguing. It's more challenging to make a deal and explain it to our shareholders," he was quoted as saying.
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Economy Bad Jobs ext. The economy is crashing, jobs prove LOUIS UCHITELLE ( a visiting scholar at the Russell Sage Foundation in New York in 2002-03 and taught journalism for many years at Columbia University’s School of General Studies. worked for The Associated Press as a reporter, an editor and a foreign correspondent) 8/2/08 http://www.nytimes.com/2008/08/02/business/02econ.html?scp=1&sq=Jobless%20Rate%20Rises%20to%205.7%%20in%20July&st= cse The unemployment rate spiked again in July, to 5.7 percent, its highest level in more than four years and a strong signal that come Election Day millions of Americans will still be hunting for work. “We are not seeing a catastrophic collapse in the job market, like you often see in recessions,” said James Glassman, senior domestic economist for JPMorgan Chase. “What we are seeing instead is a steady hemorrhaging of jobs, and that is going to continue until housing stabilizes and stops dragging down the rest of the economy.” The nation’s employers cut their payrolls for the seventh consecutive month, this time by 51,000 jobs, the government reported Friday. For millions still at work, hours were reduced, a hidden form of unemployment, and the average raise was less than enough to keep up with inflation. The steady erosion in payrolls — 463,000 jobs have disappeared since January — cut across nearly every sector in July. Teenagers, 16 to 19, trying to land work, were particularly hard hit. Their unemployment rate, 20.3 percent, up 2.2 percentage points in just a month, was the highest since 1992, contributing significantly to the jump in the overall unemployment rate. That rate jumped from 5.5 percent in June and 5 percent in April. “Parents don’t push their kids to go to work in good times,” Mr. Glassman said, “but they probably are doing so now with gasoline and food prices squeezing family budgets.” The weak jobs report and the Commerce Department’s finding on Thursday that the economy was growing sluggishly, at best, led Senator Barack Obama, the presumptive Democratic presidential candidate, to declare in a stump speech in Florida that “anxieties are getting worse, not better,” for many families. Senator John McCain, the presumptive Republican candidate, said the latest jobs report was “a reminder of the economic challenges we face.” The Bush administration offered a more upbeat assessment. “We are concerned about continued job losses,” Elaine L. Chao, the labor secretary, said in a statement, but “the long-term fundamentals of the economy remain solid.” The Federal Reserve’s policy makers, who have cut the key short-term interest rate they control to a low 2 percent, in an effort to stimulate the economy, are almost certain to leave the rate at that level when they meet in Washington on Tuesday. Neither the jobs report nor the persistently weak economic growth suggests that the surge in fuel and food prices will spread soon to a multitude of other items — a prospect that would push the Fed to raise rates to suppress inflation. “If you are the Federal Reserve, this jobs report might even be enough to convince you to cut rates again,” said Jared Bernstein, a senior economist at the labor-oriented Economic Policy Institute. The weak economy coincides with a sharp increase in labor productivity in the second quarter, which helps to explain why employers have been shedding workers. The latter are increasingly producing more in a day’s work than their employers can sell. That is partly because their employers prod them to do so, or introduce labor-saving devices. In either case, employers are laying off excess staff or reducing their hours or holding back on weekly raises, which rose at an annual rate of only 2.8 percent in July for the typical white-collar or blue-collar worker. That is well below the inflation rate of more than 4 percent.
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Economy Bad mortgages ext. The economy is falling, mortagages prove Al Yoon, Reuters 7/30/08 http://www.reuters.com/article/businessNews/idUSN2938021420080730?feedType=nl&feedName=usbusinessearly Applications for U.S. home mortgages dropped to their slowest pace since December 2000 as loan rates hovering near one-year highs compounded the housing market's woes, according to data from an industry group on Wednesday. The Mortgage Bankers Association said its seasonally adjusted index of mortgage application activity declined 14.1 percent to 420.8 in the week ended July 25. The decline was the most severe move in percentage terms since May. The MBA's seasonally adjusted index of refinancing applications plunged 22.9 percent to 1,074.4 last week. The MBA's gauge of loan requests for home purchases fell 7.8 percent to 309.5. Fixed 30-year mortgage rates averaged 6.46 percent in the week, compared with a one year-high of 6.59 percent in the prior week, the MBA said. While concerns of faster inflation have boosted the market rates that influence mortgages, the credit crisis has hurt banks' ability to support the market for mortgage-backed securities, applying upward pressure to the rates that lenders charge to consumers. A slowing rate of applications suggests potential homebuyers may be expecting better deals in the future as rising foreclosures and a softening economy nudge home prices lower. Prices of U.S. single-family homes measured in 20 major metropolitan areas have dropped about 16 percent in the past year, with few signs of recovery, according to S&P/Case Shiller Home Price Index on Tuesday. Sales of existing homes in June also dropped to their slowest pace in 10 years, the National Association of Realtors said last week.
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AT: Economy recovering, trade and tax rebates prove The economy is failing, multiple warrants prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 But many economists are dubious that consumer spending and exports can keep growing robustly in the face of substantial challenges that are now entrenched in the United States and are gathering force in many other major economies. Japan and much of Europe appear headed into downturns, damping demand for American-made products. “The trade improvement doesn’t look sustainable,” said Jan Hatzius, an economist at Goldman Sachs in New York. “In an environment where the global economy is clearly slowing, you’re not being able to get that export growth in future quarters.” Economists said the sharp drop in imports was largely a function of retailers delaying wholesale purchases in the midst of acute fears about declining American spending power — a dynamic that will eventually give way to new spending. The tax rebates have mostly been distributed. While the checks appear to have bolstered spending, they have failed to generate activity that is likely to carry on even after the cash has cycled through the economy, say economists. “They slowed the downturn, but it’s clear they didn’t really provide any spark,” Mr. Baker said. Employers have not hired much, even as shopping has picked up, cognizant that the rebate checks are a one-time event. Businesses have not shelled out for new machinery. Indeed, investment for equipment fell 3.4 percent in the spring months, dropping for the second consecutive quarter. Rather than stockpile more goods, businesses generally tried to sell what they already had on hand. Business inventories declined in the second quarter by $62 billion, a factor that shaved nearly 2 percent off the overall rate of economic growth. As the impact of the rebate checks continues to wear off in the coming weeks, households will be left confronting the same set of troubles that have been dragging on the economy for many months: a deteriorating job market, rising prices for food and gas and plummeting housing values. Tens of millions of Americans have in recent years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations and new cars. As housing values continue to fall, that artery of finance is rapidly constricting. Since last summer, when the mortgage crisis provoked panic on Wall Street and many Americans saw access to credit diminish, consumer spending on so-called durable goods like appliances, cars and furniture has been sliding. This spending barely grew in the last three months of 2007, fell at a 4.3 percent clip in the first three months of this year and dropped at a 3 percent pace in the second quarter. Meanwhile, joblessness is growing, with new unemployment claims filed in the week that ended July 26 swelling to 448,000 — up 44,000 from the previous week. And the purchasing power of wages is being eroded by higher prices for food and energy. Prices paid for goods by Americans surged at a 4.2 percent annual rate in the second quarter, after climbing at a 3.5 percent annual clip over the first three months of the year, according to the report on Thursday. Higher prices, fewer paychecks and less household wealth: It is not a recipe for free-spending abandon. “Now, consumers have to sing for their supper,” said Alan D. Levenson, chief economist at T. Rowe Price Associates in Baltimore. “Spending growth is slowing and income growth is slowing.”
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Economy Good Frontline The Economy is recovering, stock market and businesses prove Steven C. Johnson, Reuters, 7/30/08 http://www.reuters.com/article/businessNews/idUSL2219159120080730?feedType=nl&feedName=usbusinessearly&sp=true The Dow industrials and S&P 500 rose on Wednesday as a surprising increase in private-sector employment and central bank efforts to boost liquidity in stormy financial markets offset a surge in oil prices. Bank stocks rose after the Federal Reserve and other central banks said they would boost measures to stabilize financial companies struggling with credit losses. The price of oil rose nearly 4 percent after weekly inventory data showed a decline in gasoline stockpiles, sparking supply concerns. While higher oil prices crimp consumer and business spending, they also boost shares of energy companies, which lifted the Dow and S&P. Shares of Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) climbed 4 percent and Chevron jumped 5 percent. A private-sector employment report showing employers added 9,000 jobs in July set the tone early in the day. The data surprised economists, who had expected another month of job losses and raised hopes for a stronger-than-expected government jobs report on Friday. "The ADP was encouraging. If they're on the right track and Friday's payroll number comes in better than expected, then that would be very positive," said Bill Strazzullo, partner and chief market strategist at Bell Curve Trading in Boston. The Dow Jones industrial average .DJI shot up 186.13 points, or 1.63 percent, to 11,583.69. The Standard & Poor's 500 Index .SPX advanced 21.06 points, or 1.67 percent, to 1,284.26. The Nasdaq Composite Index .IXIC gained 10.10 points, or 0.44 percent, to 2,329.72. The rally accelerated in the last half hour of trading as traders reversed bets that stocks would fall, known as covering short positions. The late gains helped pull the Nasdaq out of negative territory. Avon Products Inc (AVP.N: Quote, Profile, Research, Stock Buzz) and diversified U.S. manufacturer SPX Corp (SPW.N: Quote, Profile, Research, Stock Buzz) posted better-than-expected profits, providing bright spots among otherwise dismal second-quarter results. Avon's stock surged 17.4 percent to $44.11 on the New York Stock Exchange, while shares of SPX gained 10.7 percent to $133.52. Financial shares advanced after U.S. securities regulators extended through August 12 an emergency rule aimed at curbing abusive short selling in the stocks of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz), Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) and 17 other major financial firms. That, coupled with the Fed's move to extend liquidity to stressed banks shows officials "are doing their best to calm individual investors' fears that are still out there," said Ryan Detrick, technical analyst at Schaeffer's Investment Research in Cincinnati. Bank of America's (BAC.N: Quote, Profile, Research, Stock Buzz) shares rose 4.3 percent to $33.61 while Citigroup (C.N: Quote, Profile, Research, Stock Buzz) climbed 2 percent to $18.81. Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) rose 2.5 percent to $26.91 as investors wondered whether the investment bank and brokerage has finished cleaning its balance sheet after saying it will write down $5.7 billion in credit losses and raise $8.55 billion by selling new stock. Shares of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) rose 5.3 percent to $12.21 on the SEC's emergency extension of its short-sale rule as well as on news that President George W. Bush had signed into law a housing rescue plan passed by Congress, which includes a government lifeline to the two housing finance companies. In the energy sector, Exxon Mobil shares gained 4.3 percent to $84.38, while Chevron surged 5.3 percent to $87.26. Their advance was in sync with the rebound in oil futures prices. U.S. crude oil for September delivery CLc1 gained $4.58, or 3.8 percent, to settle at $126.77 a barrel. Laggards included Irish drugmaker Elan Corp (ELN.I: Quote, Profile, Research, Stock Buzz)(ELN.N: Quote, Profile, Research, Stock Buzz), whose U.S.-listed shares plunged 41.8 percent to $19.63 on the NYSE while the stock of U.S. pharmaceutical company Wyeth (WYE.N: Quote, Profile, Research, Stock Buzz) dropped 11.9 percent to $39.74 after a drug trial showed the risk of a potentially serious side effect in a new Alzheimer's drug jointly developed by the companies. Trading volume was light on the New York Stock Exchange, with about 1.47 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion. Volume was high on the Nasdaq, where about 2.27 billion shares traded, above last year's daily average of 2.17 billion. Advancing stocks outnumbered declining ones on the NYSE by a ratio of about 2 to 1 and about 4 to 3 on the Nasdaq.
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Economy Good Frontline The Economy is recovering, tax rebates and housing prove ` Somerville, Economic Correspondent Reuters, 7/31/08 http://www.reuters.com/article/businessNews/idUSN3043337220080731?feedType=nl&feedName=usbusinessearly&sp=true An emergency dose of government stimulus helped the economy grow at a 1.9 percent annual rate in the second quarter, a soft pace but enough to take it off a path perilously close to recession. Revised data from the Commerce Department released with the second-quarter figures on Thursday showed national output shrank in the final quarter of 2007 before barely edging up at the start of this year. "With the boost from tax rebates now fading, lower interest rates having little positive impact and signs emerging that overseas demand is weakening, we expect the economy to contract outright in the second half of this year," said Paul Ashworth, senior U.S. economist for Capital Economics of London. As the countdown to the November 4 presidential elections continues, Bush administration officials insisted the economy could keep growing and dismissed calls from prominent Democrats on Capitol Hill for a second economic stimulus program, saying it was not warranted by recent economic reports. "I think the politicians are much more concerned about the polls than the economic data," White House budget chief Jim Nussle said during a CNBC television interview. President George W. Bush told a coal producers meeting he considered the economy on a sound footing. "Exports are on the rise. Durable goods orders are strong. That suggests that businesses are anticipating a better second half of the year," Bush said. The second-quarter advance in gross domestic product followed a slim revised growth rate of 0.9 percent rate in the first quarter, previously reported as 1 percent. That followed a 0.2 percent contraction in GDP during the final quarter of last year and skirted the popular definition of recession, which is back-to-back quarters of declining output, but it provided no comfort to financial markets. Stocks fell and Treasury debt prices gained as investors sought safer haven. The dollar held steady against other major currencies. Adding to a sense of foreboding about the economy, new claims for jobless benefits unexpectedly jumped 44,000 last week. Though Labor Department officials said special factors were at play, the jump in claims just before Friday's unemployment report for July reinforced worry about a deeper downturn if consumers retrench on spending for fear of losing their jobs. Payrolls have declined for six straight months, and analysts expect a drop of 75,000 to be reported for non-farm payrolls in July. Economists surveyed by Reuters had expected GDP to advance by a slightly more robust 2 percent in the second quarter. The Commerce Department said businesses reduced inventories at the sharpest rate since the end of 2001, a possible sign they anticipate restrained growth ahead. A key reading on core inflation -- personal consumption expenditures excluding food and energy -- rose at a 2.1 percent annual rate in the second quarter after gaining 2.3 percent in the first quarter. The moderation in core prices came despite a jump in overall prices of 4.2 percent from 3.6 percent in the first quarter. Consumer spending, which fuels two-thirds of U.S. economic activity, grew at a 1.5 percent annual rate in the second quarter, up from 0.9 percent in the first quarter and 1 percent in the fourth quarter last year. The department noted that personal incomes had risen more sharply in the second quarter and attributed it primarily to the stimulus payments the government was issuing to qualifying consumers. The economy continues to be hobbled by a severe downturn in the housing sector but the drag from it was less severe in the second quarter. Spending on home building contracted at a 15.6 percent annual rate in the second quarter, down from rates of 25.1 percent in the first quarter and 27 percent in last year's fourth quarter.
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Economy Good Frontline The economy is recovering, trade and tax rebates prove PETER S. GOODMAN, national economic writer, NY Times, 8/1/08 http://www.nytimes.com/2008/08/01/business/01econ.html?pagewanted=2&sq=Stimulus%20Checks%20Lift%20G.D.P.%20in%20Qu arter%20&st=cse&scp=1 That the economy grew at all this spring is a testament to two bright spots — increased consumer spending fueled by the tax rebates, and the continuing expansion of American exports. Consumer spending, which amounts to 70 percent of the economy, grew at a 1.5 percent annual rate between April and June, after growing at a meager 0.9 percent clip in the previous quarter. “Clearly the tax rebates did give some oomph to the economy,” said Robert Barbera, chief economist at the research and trading firm ITG. Exports expanded at a 9.2 percent annual pace in the second quarter, up from 5.1 percent in the first three months of the year. Foreign sales have been lubricated by the weak dollar, which makes American-made goods cheaper on world markets. Adding to the improving trade picture, imports dropped by 6.6 percent, as Americans tightened their spending. Imports are subtracted from economic growth, so the effect was positive. Over all, trade added 2.42 percentage points to the growth rate from April to June. Without that contribution, the economy would have contracted.
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Economy Good banks ext. The economy is recovering, banks prove Glenn Somerville, Economic Correspondent Reuters, 7/28/08 http://www.reuters.com/article/businessNews/idUSWEQ00007020080728?feedType=nl&feedName=usbusinessearly&sp=true The Treasury and the nation's four biggest banks on Monday said they will kick-start a market for an investment product to support home financing in the latest effort to spur a slumping housing market. Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz), Citigroup (C.N: Quote, Profile, Research, Stock Buzz), JPMorgan Chase (JPM.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo (WFC.N: Quote, Profile, Research, Stock Buzz) said they planned to begin issuing covered bonds, which are secured by pools of assets like home loans. And the Treasury released a set of "best practices" for covered bonds, in a move designed to help develop the market for the investment instrument. "The key to the U.S. economy making a major improvement will be turning the corner on housing finance and on the housing correction," Treasury Secretary Henry Paulson told a news conference. "We're not going to be able to do that unless we have availability of mortgage financing, and this is an attractive resource for mortgage financing." The U.S. housing market has traditionally been supported by mortgage-backed securities, which involves bundling loans into securities and selling them to investors worldwide. Financing, however, has dried up since the wave of foreclosures spawned by the collapse of the subprime mortgage market last year. Unlike mortgage securities, which pass all the risk to investors, covered bonds collateralized with mortgages would continue to perform even if the mortgages backing them default -- as long as the bank remains solvent. Covered bonds are widely used in Europe but have only become attractive in the United States since the segment of the mortgage securitization market driven by investment banks dried up last year. "I think there'll be some issuance very soon," Paulson said. "There's not 100 percent certainty that it ever will become very significant but this is an innovative tool and we think it's one that we think is very promising." Officials from the four banks, said in a statement, "We look forward to being leading issuers as the U.S. covered bond market develops." Covered bond loans stay on the balance sheet of the bank that issues the bond, so they are obligations on the bank. The issuer retains control of the assets that back the loans, which will be high-quality home mortgages in good standing. Covered bonds are not totally new in the United States, but have been a small factor in the nation's $11 trillion home mortgage market that Paulson thinks can become bigger with the backing of the four big banks. A Bank of America official said that, given time, covered bond issuance might reach $1 trillion, enough to be considered significant part of the mortgage market. Whatever it amounts to, Paulson made clear that any new source of mortgage financing was welcomed given the seriousness of a housing downturn that is rated the worst since the Great Depression. Two weeks ago, the Federal Deposit Insurance Corp. had offered guidance specifying how investors would get their collateral if an issuing bank failed, and the Treasury put together the set of best practices in the hope of further encouraging the market's development. Federal Reserve Governor Kevin Warsh told the news conference the U.S. central bank was willing to consider highly rated, highquality covered bonds as collateral for banks seeking emergency funds from the Fed. "A covered bond framework may attract investor interest and facilitate greater access to mortgage credit," he said. Some analysts, however, were skeptical covered bonds would be the answer to the housing market's woes. "Absent of (lowering) the capital requirement on covered bonds, which would put them on the same footing as agency mortgagebacked securities, this is like exercising on a stationary bike," said Michael Youngblood, principal and portfolio manager at Five Bridges Capital in Washington. The Securities Industry and Financial Markets Association, a bond market industry group, said a dedicated U.S. covered bond trader would be appointed within each of its member firms and those institutions would provide price information to electronic platforms for covered bonds -- steps that could help the market develop. In another move to jump-start this market, Bank of New York Mellon (BK.N: Quote, Profile, Research, Stock Buzz) said banks can use covered bonds as collateral for its repurchase program.
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Economy Good jobs ext. The economy is recovering, jobs prove Burton Frierson 7/30/08 http://www.reuters.com/article/businessNews/idUSWEN706720080730?feedType=nl&feedName=usbusinessearly Private employers added 9,000 jobs in July, according to a private report by ADP Employer Services released on Wednesday. In June, the private sector slashed 77,000, according to revised data. June was originally reported as 79,000 jobs lost. The median of estimates from economists surveyed by Reuters was for the ADP report to show a drop of 60,000 private-sector jobs in July. The 32 forecasts ranged widely from a decline of 110,000 to a fall of 4,000.
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Economy Good pc markets ext The economy is recovering, PC markets prove Ruben Bicho, Reuters, 7/30/08 http://www.reuters.com/article/technologyNews/idUSB21466920080730?feedType=nl&feedName=ustechnology&sp=true Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz), the world's biggest microchip producer, expects no slowdown in global demand for personal computers despite economic problems in the United States and in other countries, Intel Chairman Craig Barrett said on Wednesday. He also told reporters in Lisbon, where he was to sign a draft deal with the Portuguese government to make 500,000 cheap portable computers for schools, that the company was upbeat on demand prospects for low-cost computers and broadband wireless systems. "We gave a relatively upbeat business forecast, saying that despite the economic problems in the United States our business is so international that we didn't see any slowdown in the PC market," he said. Barrett said a range of economies have not been seriously affected by the U.S. slowdown, providing hope that the crisis will have limited implications. "We are seeing ... that the slowdown in the U.S. hasn't spilled everywhere else. The world's economy is not as robust as it could be, but it's not a disaster." Apart from broadband wireless, and the next generation of low-cost computers, Intel also remains bullish about the introduction of more digital capability in health care. "There's a huge opportunity to use it not just in the back-office but in remote diagnostics," he added. Referring to the European Union's recent antitrust charges against Intel, Barrett said price reductions for microprocessors and computers have an "anti-inflationary nature" while prices are rising globally and also said that was a testimony to high competition in the sector. "It looks as the market is functioning as it should, because every year consumers are getting more for less. We continue to say that, please just look at the facts, don't just listen to a competitor complaint," he said.
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Economy Good housing bill ext. Economy good, housing bill proves Jeremy Pelofsky, White House Correspondent for Reuters, 7/30/08 http://www.reuters.com/article/topNews/idUSN3042756820080730?feedType=nl&feedName=ustopnewsearly&sp=true U.S. President George W. Bush on Wednesday signed into law a sweeping rescue package aimed at resurrecting the housing market from its worst slump since the Great Depression and stabilizing the two largest mortgage finance companies. The new law launches a $300 billion government initiative to refinance troubled mortgages, and boosts oversight of Fannie Mae and Freddie Mac, which own or guarantee almost half the country's $12 trillion in home mortgage debt. It expands a line of U.S. Treasury credit for the companies, and gives the government the option to take equity stakes if they ran into trouble. Lawmakers ironed out the law over the past month to stem a crisis in investor confidence over the two companies, which were created by Congress to keep mortgage money flowing. The companies are trying to strike a balance between expanding earning power and providing finance for the mortgage market against containing losses that have eroded their capital. "We look forward to put in place new authorities to improve confidence and stability in markets, and to provide better oversight for Fannie Mae and Freddie Mac," said White House spokesman Tony Fratto. Bush signed the legislation into law because it included numerous key housing reforms, including a stronger regulator of the two mortgage giants. The White House had originally opposed a provision that offers $4 billion in grants to states to buy and repair foreclosed homes. The Bush administration for years advocated a smaller role for the companies, asserting that their management of trillions in assets placed too much risk on the U.S. financial system. The bill underscores the importance of the companies, long criticized as private companies with an implicit guarantee from the U.S. government. The more explicit taxpayer backing put in place by legislation benefits holders of their $1.6 trillion in combined debt used to fund mortgage purchases. "The oddity of the situation is if the debt is backed by the government, then it might be impossible to imagine how the companies might ever fail," said Charles Lieberman, chief investment officer at Advisors Capital Management in Paramus, New Jersey. The companies' mortgage holdings have ballooned this year, and their regulator and the Treasury have pressured them to raise capital needed to fill a huge void left by the crippled Wall Street mortgage funding machine. They have plowed some capital into buying mortgages from lenders, which helps hold down home loan rates and provides banks with fresh money to continue lending. The capital also helps offset expected losses. Fannie Mae on Wednesday said its investment portfolio in June increased at the fastest annualized rate in nearly five years, though it slightly slowed planned future purchases. The portfolio, which is the company's top revenue source, increased to $749.6 billion. Solid demand for $4 billion of bills sold by Fannie Mae and Freddie Mac on Wednesday also suggested growing confidence among investors in the two. The housing legislation comes amid signs that real estate is continuing a nearly two-year descent that many economists say will hamper U.S. economic growth through 2009. Prices for U.S. single-family homes plunged 15.8 percent in May from a year earlier, a record pace, according to the Standard & Poor's/Case Shiller Home Price Index released on Tuesday. Applications for new mortgages dropped last week to the slowest rate since 2000, the Mortgage Bankers Association said on Wednesday. The new law also sets up a $300 billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under risky mortgages they cannot afford. The bill also offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that the Fannie Mae and Freddie Mac can guarantee. Shares of Fannie Mae and Freddie Mac initially rose after Bush signed the legislation early on Wednesday, and as U.S. securities regulators extended an emergency rule aimed at curbing bets against the stocks of 19 major financial firms, including Fannie Mae and Freddie Mac, known as short selling. Stock and bond investors were also heartened by a ruling by the Financial Accounting Standards Board to delay a change that could have put $4 trillion of mortgage bond guarantees onto the balance sheets of Fannie Mae and Freddie Mac, making them fall severely short of capital. Fannie Mae shares rose 5.3 percent to $12.21 and Freddie Mac's stock increased 3.3 percent to $8.70, according to preliminary closing figures.
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Economy Brink The economy on the brink Steven C. Johnson Reuters 8/1/08 http://www.reuters.com/article/businessNews/idUSL2219159120080801?feedType=nl&feedName=usbusinessearly&sp=true The Dow Jones industrial average .DJI was down 51.70 points, or 0.45 percent, at 11,326.32. The Standard & Poor's 500 Index .SPX was down 7.07 points, or 0.56 percent, at 1,260.31. The Nasdaq Composite Index .IXIC was down 14.59 points, or 0.63 percent, at 2,310.96. For the week, the Dow ended down 0.4 percent, the S&P closed up 0.2 percent and the Nasdaq ended flat. "Add up the scorecard and it says the economy is neither collapsing nor recovering rapidly," said James Paulsen, chief investment strategist at Wells Capital Management in Minneapolis.
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Oil low frontline Oil prices are dropping Steven C. Johnson, Reuters, 7/29/08 http://www.reuters.com/article/businessNews/idUSL2219159120080729?feedType=nl&feedName=usbusinessearly&sp=true Stocks rebounded on Tuesday, rising more than 2 percent on another sharp slide in oil prices and after Merrill Lynch's (MER.N: Quote, Profile, Research, Stock Buzz) latest write-down and share sale hinted at a possible turning point in the credit crisis. Stocks were also helped by data showing the rate of monthly price declines in the U.S. housing market is slowing and a separate report showing the mood of American consumers improved for the first time in six months in July. U.S. crude prices dropped more than 2 percent, relieving some concern about inflation and consumer spending and brightening the outlook for a wide range of companies, including retailers and airlines. An index of airlines .XAL rose 11.4 percent while the S&P Retail Index .RLX gained 4.0 percent. Merrill Lynch jumped nearly 8 percent after coming into trade on the defensive after the brokerage said late on Monday it will write down $5.7 billion and raise $8.5 billion by selling new stock. After the share sale, sentiment on financial stocks began to shift, with investors saying Merrill's latest write-down may be a sign that banks are nearly through purging their balance sheets of bad mortgage debt. "There's always the hope that this might be the last big financial blowup," said Tim Ghriskey, chief investment officer at Solaris Asset Management in Bedford Hills, New York. "Some people think we may be getting toward the end in terms of large write-downs." The Dow Jones industrial average .DJI rose 266.48 points, or 2.39 percent, at 11,397.56. The Standard & Poor's 500 Index .SPX gained 28.82 points, or 2.33 percent, at 1,263.19. The Nasdaq Composite Index .IXIC rose 55.40 points, or 2.45 percent, at 2,319.62. Crude oil for September delivery settled down $2.54, or 2.04 percent, at $122.19 a barrel. That was about $25 below an all-time high set earlier this month and helped stocks reverse the prior session's losses. "I think with oil at around the $120 area, that is giving the market a psychological uplift today" said John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas. Financial shares rose broadly. Merrill Lynch shares rose 7.9 percent to $26.25 after falling about 11 percent in the prior session. Several analysts had widened their loss view for the brokerage after Monday's write-down news. But on Tuesday analysts were taking a "glass half-full" view. Jim Awad, chairman of W.P. Stewart Asset Management in New York, called it "a feeling that Merrill is working its way through its problems." The KBW bank index .BKX, which tracks stocks of 24 major banks, gained 8.7 percent as Citigroup shares erased early losses to rise 5.9 percent to $18.45 and Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz) rose 14.8 percent to $32.22.
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Oil prices low frontline Oil prices are falling JAD MOUAWAD, Brown University in political science, energy correspondent 7/30/08 http://www.nytimes.com/2008/07/30/business/30crude.html&OQ=_rQ3D1&OP=68aedc82Q2FQ25lQ7DEQ25GQ20HBMQ20Q20.Q 2BQ25Q2BPPDQ25PhQ25Q3BPQ25EQ3DB!-Q7DBBQ25Q3BPHMQ3DGQ7Dim.g1 Oil has fallen more than $23 a barrel, or 16 percent, since peaking on July 3. Gasoline has slipped below $4 a gallon and is dropping fast as Americans drive less. Natural gas prices, which had risen the fastest this year as traders anticipated a hot summer, have fallen 33 percent since the beginning of the month. Crude oil prices extended their decline on Tuesday, falling 2.5 percent, to $122.19 a barrel, their lowest level since the beginning of May. This helped spur a broad rally in the stock market, with all major indexes rising more than 2 percent. But stock markets still remain close to the lows of earlier this month, when they officially entered bear-market territory. The declines in energy costs come after an equally sharp correction in the prices of many agricultural commodities like corn, wheat and rice, which took place a few weeks ago. These moves suggest to economists that global markets, in a near-panic early this year to find prices high enough to allocate scarce supplies, overshot the mark and bid prices too high. Commodity prices remain extraordinarily high by historical standards. Gasoline and particularly diesel remain especially costly despite the recent fall in crude oil prices, partly because of strong demand from emerging markets that continue to subsidize the retail sale of these fuels to consumers. But with the economy weakening amid a housing crisis and a credit squeeze that show few signs of improving, many traders have begun to believe demand for oil and other commodities will soften worldwide. Investors became net sellers in the oil market last week for the first time since mid-February 2007, according to Barclays Capital. “The market’s expectations have changed very rapidly and unexpectedly,” said Edward Morse, the chief energy economist at Lehman Brothers. “The market went out of control on the upside. But market participants realized there was much more demand destruction than had been thought even a month ago, that inventories are building up quickly, and that, in fact, more supplies are coming onto the market.” As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel. Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand? Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Persian Gulf could easily push prices back up again, quickly. Only a few weeks ago, Israel conducted war games and Iran tested new missiles, renewing fears of a flare-up in the Middle East, and pushing oil prices to a record of $145.29 a barrel. The recent shift in American policy regarding Iran, with an emphasis on diplomacy, helped deflate some of the geopolitical risk premium that had been built into oil prices. “The one piece of good news we’ve had recently has been the drop in oil prices,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group. “But there is nothing that tells us with any certainty that this decline can be sustained. Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors.” Gasoline peaked at a nationwide average of $4.11 a gallon on July 17. Since then, retail gasoline prices have been falling briskly, to a nationwide average of $3.94 on Tuesday, according to AAA, the automobile group. Still, that is $1.05 a gallon higher than at the same time last year, when gasoline sold for $2.89 a gallon. Natural gas settled at $9.22 a thousand cubic feet on Tuesday, down from a high of about $13.58 at the beginning of the month, as a coolerthan-expected summer helped curb the use of gas to generate electricity. That has led to a build-up of commercial inventories. The drop in oil prices has come as gasoline demand in the United States fell sharply in recent months, thanks to Americans cutting back on their driving. Gasoline consumption fell 3.6 percent in the week ending July 18, compared with the year-earlier period, according to the Energy Department. Americans drove 9.6 billion fewer miles in May compared with the same period last year, a 3.7 percent decline and the biggest-ever drop at that time of year, the Transportation Department said on Monday. “People are waking up to the fact that prices have an impact on demand and that what happens in the U.S. gasoline market has a worldwide impact,” said Daniel Yergin, the chairman of Cambridge Energy Research Associates, a consulting firm. The United States is the world’s largest oil consumer, and its gas market alone is bigger than the entire Chinese oil market, he said. “As a result of the economic slowdown and high prices, we’ve probably seen the peak in American gasoline demand, at least for some years,” he said.
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Oil prices low Frontline Oil prices are falling, economy and gas shocks prove Elliott H Gue, semimonthly newsletter, The Energy Strategist, bachelor’s degree in economics and management and a master’s degree in finance at the University of London, 8/1/08 http://www.kciinvesting.com/articles/9196/1/Defining-Demand-Destruction/Page1.html If there’s one factor that’s catalyzed the recent selloff in crude oil prices, it’s declining oil consumption from developed-market economies. The US consumes more than 20 million barrels of oil per day, making it far and away the largest oil consumer in the world. To put that into context, the second-largest consumer of crude in the world is China; in 2007, China used about 7.9 million barrels of oil per day, less than half the US total. Or to put it another way, the US uses almost four times as much oil as the entirety of South and Central America combined. The US is also behind most of the developed-world decline in oil consumption over the past year. According to the most recent data from the Energy Information Administration (EIA), US gasoline demand is down about 2.4 percent year-over-year. In total, the drop in demand equates to about 500,000 to 600,000 barrels of oil per day. There are two main culprits for the US demand slump. First, the weakening US economy is quite likely to get worse before it gets better. And second, high gasoline prices have finally shocked US consumers into cutting back on their driving; according to the Federal Highway Administration, total vehicle miles driven in May of this year were down about 10 billion miles, or 3.7 percent, year-over-year. These points are undeniable; however, none of this adds up to a crash in energy demand or an end to the bull market in energy-related stocks. A further drop in oil prices from current levels is possible, perhaps to the $110-per-barrel area.
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Oil low economy ext./Iran link Oil prices are low, economy proves TOM INCANTALUPO, autos, energy and related personal finance and consumer issues analyst 8/1/08 http://www.newsday.com/classified/automotive/ny-bzoil015784610aug01,0,2214590.story For drivers who've spent the summer feeding $20 bills into seemingly bottomless gasoline tanks and for homeowners dreading the cost of heat this winter, there was more good news yesterday: The price of crude oil dropped again and heating oil fell for the first time since March. Crude oil fell by $2.69, to settle at $124.08 a barrel in trading on the New York Mercantile Exchange, mostly on lower demand in the United States and Europe because of high prices and weakened economies. "The reason we're getting this good news in the form of lower oil prices is because we've got bad news on the economic front," said James Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., an oil trading advisory firm. Crude oil had traded as high as $147 a barrel on July 11. A state survey of fuel dealers found the average price of heating oil Monday on Long Island was down by 27 cents in the past two weeks to $4.65 a gallon. That's still $1.82 a gallon higher than a year earlier but is down from the record $4.93 on July 14. Ritterbusch said it's headed lower, though it's too soon to predict prices next winter. "Terrific, it's about time," said Dix Hills homeowner Todd Baker, 45, president of a nonfiction film production company in East Northport. But, he said, he'd still like to convert to gas heat if he can get National Grid to give him service. "Our economy has taken a toll this year because of the cost of oil." Regular gasoline averaged $4.198 a gallon on Long Island yesterday, according to the AAA - down from the record average of $4.346 on July 8. Web sites based on motorists' reports indicated pump prices as low as $3.95 yesterday at a few stations on the Island. But the average still is $1.08 a gallon higher than a year earlier. Ritterbusch said that, if crude oil stays in the low $120s, gasoline prices probably would fall about 20 cents more. But he expects oil futures to slide about $7 lower in coming weeks and for pump prices to drop an additional 15 or 20 cents as a result. He also expects the usual seasonal decline in prices after Labor Day, when the summer vacation season ends, but adds, "The wild card in this whole thing is geopolitical factors. If Israel takes a shot at Iran or vice versa, all bets are off."
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Oil low commodities market ext. Oil prices are falling now trading prices prove Jonathan Leff, Reuters, 7/30/08 http://www.reuters.com/article/businessNews/idUSSP30525320080730?feedType=nl&feedName=usbusinessearly&sp=true As the rout in oil prices nears the 20 percent mark that for stocks would signal a bear market, many analysts offer a word of caution -don't mistake a healthy correction for the end of a multi-year bull trend. The 16 percent slump since its record-high close of $145.18 a barrel on July 14 could yet deepen to $100 a barrel, many analysts say, but equally many remain convinced that another surge to as-yet unconquered peaks may lie just months ahead. "Maybe in financial markets 20 percent means the trend has changed, but in the case of commodities we are not really looking at it like that, commodities are based more on fundamentals," said Tetsu Emori, a fund manager at Astmax Co Ltd in Tokyo who regularly analyses charts for price direction. The U.S. Dow Jones industrial average entered bear market territory -- marked by a 20 percent fall from a closing peak -- in late June, but similar setbacks in commodity markets have proven less prescient. Those who might have mistaken oil's last deep fall -- a near 21 percent decline over four weeks to mid-January 2007 -- for a sustained pull-back paid dearly. Prices hit a low of $49.90 a barrel before nearly trebling over the next 18 months. Dealers who trade on the basis of technical indicators are looking at more crucial figures, such as the 100-day moving average. Prices fell below that level on Tuesday for the first time since early February, hinting at more to come. "The 20 percent retracement being an indicator of a bear market doesn't have quite the impact as pushing through the 100-day moving average at $122. That's what analysts and traders were really looking at," said Jonathan Kornafel, Asia director at U.S.-based options trader Hudson Capital Energy. For Emori, a break below $117 to $119 could trigger a slide to around $100, but "even if that happens I don't think it will mean that the long-term bull trend will be finished." Bullish long-term structural issues such as growing Asian demand and lackluster non-OPEC supply growth remain unresolved, market bulls argue, suggesting the market may have yet to see the highs, regardless of indicators on candlestick charts. "We've seen a spectacular rise, so 20 percent is not a bear market at all," said Mark Pervan, commodities analyst at ANZ Bank. "This is really steam coming out of the market." "We can't realistically expect it to remain around these levels with new demand coming into the market." Crude oil is no stranger to some deep corrections during a six-year price boom that has lifted U.S. crude from around $20 a barrel at the start of 2002. In early 2003, before the rally even hit its stride, prices collapsed from a pre-Iraq war peak of nearly $40 to below $25 a barrel. They hit the skids again in mid-2006, falling from a high above $78 to a January low of $49.90. The market didn't make a new record high until August 1, just over 12 months after the previous peak. While the market will almost certainly need a breather before attempting to scale $150 again, the increasing pace at which prices are rising and falling may suggest that the wait won't be as long as in the past. "Hedge fund longs have now reversed their positions and are trading the market from the short side," said Kornafel.
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Oil prices low, analysts and economy ext. Oil prices will stay low, analysts and economy prove Margot Habiby, Reporter covering energy markets, university of Oklahoma, 8/1/08 http://www.bloomberg.com/apps/news?pid=20601082&sid=a67jkNGp6Dno&refer=canada Demand Destruction Oil prices dropped in earlier trading amid signs demand will extend declines, after the government reported the U.S. lost jobs for a seventh-straight month in July. ``Today's spike might be a bit of a knee-jerk reaction,'' said Antoine Halff, head of energy research at Newedge USA LLC in New York. ``It's a tug-of-war between the more bullish geopolitical concerns and the more bearish economic outlook.'' Oil dropped as low as $122.10 a barrel today after the Labor Department said payrolls fell by 51,000, less than forecast, and the jobless rate rose to 5.7 percent, the highest since March 2004, from 5.5 percent the month before. Fuel consumption in the past 12 months was the lowest since 2004-2005, according to the Energy Department. ``Bad economic news is leading to demand destruction,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. Futures have slipped more than $22 a barrel, or 15 percent, from the record on signs of declining demand in the U.S., which consumed about 24 percent of the world's crude in 2007. They fell 11 percent in July, the biggest one-month decline since December 2004. Gasoline Gasoline for September delivery rose 1.34 cents, or 0.4 percent, to $3.0843 a gallon on the Nymex. Earlier, the contract touched $3.1970 a gallon. Futures fell 13 percent last month, the biggest drop since September 2006, as a slowing economy cut demand for the motor fuel. It reached a record $3.631 on July 11. Regular gasoline at the pump, averaged nationwide, fell 1.1 cents to $3.898 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices have dropped every day since reaching a record $4.114 a gallon on July 17, as higher prices curbed demand. Record second-quarter energy prices have sapped U.S. automakers' profits as consumers shift to cars and away from the trucks and sport-utility vehicles that dominate the lineups for General Motors Corp., Ford Motor Co. and Chrysler LLC. GM reported a $15.5 billion quarterly loss today, the third-worst in the 100-year history of the biggest U.S. automaker. Economic News The U.S. economy shrank at the end of 2007 and grew less than forecast in this year's second quarter. Gross domestic product increased at a 1.9 percent annualized rate, the Commerce Department said in Washington yesterday, compared with the median projection of 2.3 percent in a Bloomberg News survey. Brent crude oil for September settlement rose 20 cents to $124.18 a barrel on London's ICE Futures Europe exchange. Crude prices may fall next week on slowing demand. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline.
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Oil prices low economy/analysts/opec ext.
Crude oil prices will fall, low demand and increased supply prove Mark Shenk, Bloomberg, 8/4/08 http://www.chinapost.com.tw/business/global%20%20markets/2008/08/04/168507/Oil-may.htm Crude oil may fall next week as fuel consumption in the U.S. and other developed countries declines and OPEC increases production. Thirteen of 29 analysts surveyed by Bloomberg News, or 45 percent, said prices will drop through August 8. Seven of the respondents, or 24 percent, said oil will rise and nine forecast little change. Last week 46 percent expected a decline. U.S. fuel demand averaged 20.2 million barrels a day during the past four weeks, down 2.4 percent from a year earlier, the Energy Department said July 30. Demand among the 30-member Organization for Economic Cooperation and Development will fall 480,000 barrels to 48.46 million barrels a day this year, the department said in a July 8 report. The OECD includes the richest economies, including the U.S., Japan, Germany and France. Daily oil shipments by members of the Organization of Petroleum Exporting Countries will climb 0.6 percent in the four weeks to Aug. 16, Halifax, England-based Oil Movements said Thursday. Saudi Arabia is responsible for the gain, the consultant said. The "fundamentals of weak OECD demand and rising OPEC production are likely to weigh further on prices in the weeks and months ahead," said Tim Evans, an energy analyst for Citi Futures Perspective in New York.
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Oil prices high Frontline Oil prices high now, statistics and Exxon prove CLIFFORD KRAUSS, national business correspondent, 8/1/08 http://www.nytimes.com/2008/08/01/business/01oil.html?8au&emc=au Crude oil prices in the second quarter averaged more than $124 a barrel, 91 percent higher than the same quarter in 2007, according to a recent report by Oppenheimer & Company, an investment bank. Natural gas prices averaged $10.80 for every thousand cubic feet, up 43 percent from the quarter a year ago. After spiking even higher in early July, prices settled on Thursday at $124.08 for oil and about $9.18 for natural gas. Despite its production problems, Exxon earned $10 billion in the quarter from exploration and production, up from $6 billion in the same period a year ago.
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Oil Prices high Frontline Oil prices will stay high, subsidies prove The New York Times Media Group, 8/2/08 http://www.istockanalyst.com/article/viewiStockNews+articleid_2467729&title=Keeping_Oil_Prices_High.html Unfortunately, a large share of the world's population is not responding to high energy prices. Across the developing world, governments are subsidizing energy, blunting the incentive to conserve by keeping prices low. They are absorbing the savings made by industrial countries and helping to raise oil prices by stoking demand. In China, demand rose by 400,000 barrels a day between the first quarter of 2007 and the same period of 2008. Demand in the industrialized nations in the Organization for Economic Cooperation and Development fell by one million barrels a day over the same period. In the rest of the world, it grew by 1.1 million barrels. Developing countries are growing faster than rich nations, of course. But experts say that government subsidies are exacerbating their unquenchable thirst for oil. China is expected to spend about $40 billion this year in subsidies. Venezuela and Egypt are forecast to spend more than 5 percent of their total economic output on subsidies this year. Indonesia is predicted to spend almost as much, the International Monetary Fund estimates. In all, the IMF says that 48 countries are shielding consumers from high energy prices with subsidies. As a result, while demand for oil in the rich world is expected to fall about 1 percent this year, consumption in emerging and developing countries is forecast to rise 3 percent, according to estimates by IMF economists. Governments in developing countries say they must shield the poor from high energy prices. They worry that eliminating subsidies might lead to inflation at a time when prices are rising broadly. But these subsidies are misguided and mainly benefit the well-off, who own big cars and fly in jets, as well as energy-intensive industries, which are not usually those that create most jobs. They are expensive, sucking in public money that might be better used on, say, health care or education. And they get costlier as the price of oil rises, which explains why some countries, including China and India, have allowed domestic energy prices to rise somewhat. Subsidies are a big factor keeping world oil prices high. Outside of the Middle East and some parts of Texas, this is in nobody's interest.
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Oil prices high Exxon ext. Oil prices are high now, Exxon proves Michael Erman, 7/31/08 http://www.reuters.com/article/businessNews/idUSWEN711420080731?feedType=nl&feedName=usbusinessearly&sp=true Exxon -- the world's largest publicly traded company -- previously set the high-water mark for quarterly earnings in the fourth quarter of last year, when it brought in $11.66 billion. Despite the new record, Exxon's results lagged behind analyst expectations. The company posted operating earnings of $2.27 a share in the quarter, which exclude a $290 million charge related to the recent Supreme Court ruling in the Exxon Valdez case. Analysts, on average, had expected the company to earn $2.53 a share, according to Reuters Estimates. Revenue in the quarter rose about 40 percent to $138.07 billion. Exxon both produces oil and refines it to make gasoline, and profit margins for gasoline were weak during the quarter, holding back earnings slightly. The company said earnings from its exploration and production business rose about 68 percent to $10.01 billion. But its refining and marketing earnings fell about 54 percent to $1.56 billion. U.S. oil prices averaged slightly less than $125 a barrel in the quarter, nearly double prices from a year earlier. Gasoline prices only rose 25 percent during that same period, resulting in weak profit margins for the fuel.
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Oil prices high multiple warrants ext. Oil prices will stay high, multiple warrants prove Financial Times, 8/2/08 http://www.ft.com/cms/s/0/d9efbeb8-602a-11dd-805e-000077b07658.html?nclick_check=1 There are a few reasons to think oil's fall is a dip rather than the start of a trend. First, there has been no big rise in stockpiles of crude oil or petrol; on the contrary, US inventories are low, even given the summer driving season. That suggests that the short-term market is still tight. Second, there has been little change in the shape of the futures curve, for deals to buy oil years from now. The curve remains flat, with futures for 2016 still above $120 a barrel. Futures utterly failed to predict the rise in spot oil prices over the past few years, but nonetheless, high prices suggest the market has little confidence that new supply will soon bring about a collapse in prices. The supply response to high oil prices has been a disappointment and, as always, it is the prospects for supply and demand that drive the market. It is now eight years since oil prices broke above $25 a barrel (although it was only in 2004 that their spectacular ascent began). In the period since 2000, global growth in oil output has been lower than it was in the 1990s, during the trough in prices. It may take a decade to find and develop a new field, but the feeble response of supply is consistent with an industry that is finding it physically difficult to locate and produce more oil. That leaves a fall in demand. The biggest reason the oil price has gone down is deepening gloom about the state of the US economy - and therefore about US demand for petroleum. There are clear signs that US motorists are driving less, that airlines are grounding uneconomic flights, and that energy efficiency is now the top priority for new vehicles and machinery. In the 1980s, after the oil shocks, the reduction in demand was delayed, but spectacular. By 1985, US oil consumption had fallen by 19 per cent from its peak, and oil prices slumped. Given the boom in gas-guzzlers such as sport utility vehicles in recent years, the potential to improve efficiency should be almost as great this time around. But there are differences as well as similarities to the 1970s oil shock. In 1978, Europe and the US consumed almost three-quarters of the world's oil output; in 2007 they consumed less than half. The economic growth of India and China may have slowed a little, but it remains rapid, and thirsty for energy to fuel it. Asian demand, which is often subsidised, will offset at least some of the gains in energy efficiency, and means that this time oil prices are likely to stay higher for longer.
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Oil prices high production ext. Oil prices high, production proves FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most of the new onshore drilling of the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of well-drilling permits on Western lands as in the Clinton administration’s last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Oil production declined over all to an average of 97.9 million barrels annually from 2001 through 2006, compared with average levels of 111.5 million barrels during the Clinton administration. Drilling in the West is more likely to provide natural gas. Natural gas production has increased by 34 percent during President Bush’s term in office, compared with the annual production levels during President Bill Clinton’s term. On federal land in the West, average natural gas production during the first six years of this presidency was 2.4 billion cubic feet annually, up from 1.8 billion, on average, during the previous eight years, federal data show. The wellhead price of natural gas is about five times higher than it was in the 1990s. The increased production of natural gas from federal lands, in general, puts downward pressure on natural gas prices because the North American gas market is largely isolated from the larger world market. New oil production usually does not depress prices locally, since oil is shipped by tanker in a worldwide market. The Energy Task Force convened by Vice President Dick Cheney in 2001 called for expanded production on federal lands and offshore; these figures, drawn from the data of the federal Minerals Management Service and analyzed by the Environmental Working Group, a research and advocacy organization based in Washington, give a partial sense of how the task force’s priorities have been carried out, and to what effect. “You have to start with the recognition that most wells drilled in the Rockies are not oil wells — they are gas wells,” said Porter Bennett, the president and chief executive of Bentek Energy, one of the industry’s largest research firms. “There would never be an expectation of huge returns on the oil side,” he added. Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. “We’ve turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof,” he said. “What these data show is that conservation and renewable energy are likely to be the solution to our energy woes.” Mr. Horwitt added, “On the oil side, the data show that there’s just not that much oil out there in the West.” More of the nation’s oil reserves are located in Texas (23 percent), offshore (19 percent), Alaska (18 percent) or California (16 percent), according to the federal Energy Information Administration. And the biggest onshore discoveries — like the Bakken field in western North Dakota and eastern Montana — are mostly not under federal land.
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Oil prices high Iran ext. Oil prices high, Iran proves Margot Habiby, Reporter covering energy markets, university of Oklahoma, 8/1/08 http://www.bloomberg.com/apps/news?pid=20601082&sid=a67jkNGp6Dno&refer=canada Crude oil rose after Israeli Deputy Prime Minister Shaul Mofaz said today that all options are open as Iran drives toward a ``major breakthrough'' in its nuclear weapons program. Oil climbed more than $4 a barrel in intraday trading as Mofaz's comments fueled speculation that the U.S. or Israel may attack Iran. Iranian President Mahmoud Ahmadinejad said OPEC's second-largest producer will ``resist with force'' any outside efforts to slow its nuclear program, Agence-France Presse said. Mofaz ``definitely has juice,'' and his comments ``would make everybody nervous,'' said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. Mofaz is seen as a candidate for Israeli prime minister after Ehud Olmert said he would leave office. Crude oil for September delivery rose $1.02, or 0.8 percent, to settle at $125.10 a barrel at 2:57 p.m. on the New York Mercantile Exchange. Earlier, it touched $128.60 a barrel. Oil rose $1.84, or 1.5 percent, this week. It was the first weekly increase in four. Iran with a nuclear weapon would pose an ``unacceptable'' danger and be ``an existential threat'' to Israel, Mofaz said at a forum on Iran at the Washington Institute for Near East Policy. Similar speculation of an attack on Iran contributed to the oil-price rally that took futures to a record $147.27 a barrel on July 11. Iran previously has threatened to blockade the Strait of Hormuz, through which a quarter of the world's crude is exported, if its nuclear facilities are targeted. It pumped about 3.85 million barrels of oil a day in June, according to data compiled by Bloomberg. Iranian Supreme Leader Ayatollah Ali Khamenei, the country's highest authority, said this week that his country will push forward with its nuclear program, which Iranian officials say is designed for energy generation and other peaceful purposes. Weekend Deadline Ahmadinejad said July 27 that the country has 6,000 uranium- enriching centrifuges, the Associated Press reported. Iran faces a deadline tomorrow to reply to an offer from world powers of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program. It was set by U.S. and EU diplomats at talks in Geneva July 19. Iranian Foreign Minister Manouchehr Mottaki said yesterday that Iran doesn't face a deadline and has already replied to the six nations negotiating with it over its nuclear program. ``This whole thing with Iran tomorrow has everybody nervous because they're supposed to update everybody what they're going to do with their nukes, and then you have the saber-rattling from Israel,'' said Dean Hazelcorn, head trader at Coquest Inc. in Dallas.
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Oil prices high, Iran ext. Oil prices will stay high, Iran fears prove Pablo Gorondi, Associated Press Writer, 8/2/08 http://www.usatoday.com/money/markets/2008-08-01-oil-stocks-friday_N.htm Oil prices settled slightly higher Friday, clawing back above $125 a barrel after Israel raised new concerns about Iran's nuclear program. But more concerns that high prices are eating into demand limited the gains. Crude prices soared earlier in the day after news reports quoted Israeli Deputy Prime Minister Shaul Mofaz as saying that Iran's nuclear program was poised to make a "major breakthrough" and that his country must be "prepared for every option." Mofaz, a hawkish former defense minister and military chief, is a top contender to succeed Prime Minister Ehud Olmert, who announced Wednesday he will resign in September amid a corruption probe. Mofaz's comments "got everybody excited to buy oil again" on worries that a possible military strike against Iran would plunge the Middle East into another crisis and threaten regional oil supplies, said Phil Flynn, analyst at Alaron Trading Corp. in Chicago. "That caused the oil market to pop," Flynn said. "It's putting the focus back on Iran."
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Oil prices high, tropical storm/Iran ext. Oil prices will stay high, tropical storms, Iran and developing countries’ demand prove Gavin Evans and Catherine Yang, Bloomberg, 8/4/08 http://www.bloomberg.com/apps/news?pid=20601087&sid=aGLbMtQEhcUk&refer=home Crude oil rose for a second day as a storm threatened U.S. output in the Gulf of Mexico, and Israeli and U.S. officials sought additional sanctions against Iran. Tropical Storm Edouard lies about 90 miles (145 kilometers) southeast of the Mississippi River mouth and may strengthen to a hurricane as it heads west toward Texas, the National Hurricane Center said. Oil rose from an 11-week low last week as U.S. fuel stockpiles fell and Iran ignored a deadline in its dispute with the United Nations over its nuclear research. ``Those wildcat factors'' are holding up prices today, Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney, said in a Bloomberg Television interview. ``Prices should be a lot stronger than they were a week ago,'' given the risks from the storm and Iran, he said. Crude oil for September delivery rose as much as $1.21, or 1 percent, to $126.31 a barrel in after-hours electronic trading on the New York Mercantile Exchange and traded at $125.93 at 9:15 a.m. in Singapore. The contract gained 0.8 percent on Aug. 1 on speculation the odds of a military strike against nuclear research facilities in Iran, the world's fourth-largest oil producer, were increasing. Iran didn't respond by an Aug. 2 deadline to an offer from the U.S., Russia, China, France, the U.K. and Germany of economic and diplomatic incentives in exchange for the suspension of its uranium-enrichment program. Extra sanctions are needed, Tzipi Livni, Israel's foreign minister, said yesterday on CNN's ``Late Edition'' program. Brent, Edouard Brent crude oil for September settlement climbed as much as $1.12, or 0.9 percent, to $125.30 a barrel on London's ICE Futures Europe exchange, and traded at $125 at 9:09 a.m. in Singapore. Tropical storm Edouard, with maximum wind speeds of 50 miles an hour, is likely to strengthen as it moves west parallel to the Louisiana coast before making land on the upper Texas coast Aug. 5, the Miami-based hurricane center said at 7 p.m. local time. There is a 24 percent chance it will strengthen to a hurricane, with winds of more than 74 miles an hour, before striking land. ``Keep a close eye on the storm,'' Rebecca Waddington, a meteorologist with the center, said in an interview. ``The industry knows better than we do how to safeguard their installations. I'd advise them to act early.'' New York oil futures have slipped more than $21 a barrel, or 14 percent, from the record $147.27 on July 11 as U.S. gasoline demand slowed, and a firming of the dollar reduced the attraction of commodities as an investment. Speculators Hedge fund managers and other large speculators last week reduced their bets on falling prices, according to Commodity Futures Trading Commission data. Net-short positions, the difference between orders to buy and sell the commodity, fell to 660 contracts at July 29, 82 percent less than a week earlier. While the U.S. economy may be heading toward recession, demand in India and China remains strong and global production is straining to keep up, Fat Prophets' Wendt said. He expects oil to reach $175 a barrel before the end of the year. An Institute for Supply Management report tomorrow will probably show U.S. service industries shrank for a second month in July, based on a Bloomberg survey of economists. Futures trading on the Chicago Board of Trade suggests less than a 7 percent chance the U.S. Federal Reserve will raise interest rates after it meets the same day. ``It's likely that we're going to see further weakness in the dollar,'' Wendt said. ``We can't see it bouncing back and sustaining any gains so we're looking towards further increases in the price of crude oil.''
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FILE NAME DDI 2008
Energy costs low frontline Energy costs are falling, multiple warrants prove JAD MOUAWAD, Brown University in political science, energy correspondent 7/30/08 http://www.nytimes.com/glogin?URI=http://www.nytimes.com/2008/07/30/business/30crude.html&OQ=_rQ3D1&OP=68aedc82Q2F Q25lQ7DEQ25GQ20HBMQ20Q20.Q2BQ25Q2BPPDQ25PhQ25Q3BPQ25EQ3DB!-Q7DBBQ25Q3BPHMQ3DGQ7Dim.g1 The sharp drop in energy prices since the beginning of the month is turning into a rare bright spot in a bleak economic landscape. Americans are driving less and buying smaller cars, like this Smart car owned by Larry Syres, filling up in Palo Alto, Calif. For the moment, at least, fears of a prolonged energy shock seem to have subsided a bit. Oil has fallen more than $23 a barrel, or 16 percent, since peaking on July 3. Gasoline has slipped below $4 a gallon and is dropping fast as Americans drive less. Natural gas prices, which had risen the fastest this year as traders anticipated a hot summer, have fallen 33 percent since the beginning of the month. Crude oil prices extended their decline on Tuesday, falling 2.5 percent, to $122.19 a barrel, their lowest level since the beginning of May. This helped spur a broad rally in the stock market, with all major indexes rising more than 2 percent. But stock markets still remain close to the lows of earlier this month, when they officially entered bear-market territory. The declines in energy costs come after an equally sharp correction in the prices of many agricultural commodities like corn, wheat and rice, which took place a few weeks ago. These moves suggest to economists that global markets, in a near-panic early this year to find prices high enough to allocate scarce supplies, overshot the mark and bid prices too high. Commodity prices remain extraordinarily high by historical standards. Gasoline and particularly diesel remain especially costly despite the recent fall in crude oil prices, partly because of strong demand from emerging markets that continue to subsidize the retail sale of these fuels to consumers. But with the economy weakening amid a housing crisis and a credit squeeze that show few signs of improving, many traders have begun to believe demand for oil and other commodities will soften worldwide. Investors became net sellers in the oil market last week for the first time since mid-February 2007, according to Barclays Capital. “The market’s expectations have changed very rapidly and unexpectedly,” said Edward Morse, the chief energy economist at Lehman Brothers. “The market went out of control on the upside. But market participants realized there was much more demand destruction than had been thought even a month ago, that inventories are building up quickly, and that, in fact, more supplies are coming onto the market.” As a result of looser market fundamentals, many analysts believe energy prices could keep falling through the end of the year. The president of the OPEC oil cartel, Chakib Khelil, said Tuesday that oil might drop as low as $70 a barrel. Whether that actually happens will depend on the course of the American economy and its impact on the rest of the world. How long will the American slowdown last and what effect will it have on emerging markets like China, which have accounted for the bulk of the growth in oil demand? Many experts warn that a hurricane hitting the oil-producing region of the Gulf Coast or renewed tensions in the Persian Gulf could easily push prices back up again, quickly. Only a few weeks ago, Israel conducted war games and Iran tested new missiles, renewing fears of a flare-up in the Middle East, and pushing oil prices to a record of $145.29 a barrel. The recent shift in American policy regarding Iran, with an emphasis on diplomacy, helped deflate some of the geopolitical risk premium that had been built into oil prices. “The one piece of good news we’ve had recently has been the drop in oil prices,” said Bernard Baumohl, the chief global economist at the Economic Outlook Group. “But there is nothing that tells us with any certainty that this decline can be sustained. Just as abruptly as they have fallen, oil prices can rebound because of geopolitical factors.” Gasoline peaked at a nationwide average of $4.11 a gallon on July 17. Since then, retail gasoline prices have been falling briskly, to a nationwide average of $3.94 on Tuesday, according to AAA, the automobile group. Still, that is $1.05 a gallon higher than at the same time last year, when gasoline sold for $2.89 a gallon. Natural gas settled at $9.22 a thousand cubic feet on Tuesday, down from a high of about $13.58 at the beginning of the month, as a cooler-than-expected summer helped curb the use of gas to generate electricity. That has led to a build-up of commercial inventories. The drop in oil prices has come as gasoline demand in the United States fell sharply in recent months, thanks to Americans cutting back on their driving. Gasoline consumption fell 3.6 percent in the week ending July 18, compared with the year-earlier period, according to the Energy Department. Americans drove 9.6 billion fewer miles in May
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FILE NAME DDI 2008
Energy costs high Energy costs are rising, multiple figures prove MICHAEL BLACKLEY, Business Editor, 8/1/08 http://news.scotsman.com/opinion/Consumers-will-keep-feeling-the.4349044.jp WITH petrol prices continuing to rise, the cost of food soaring and interest rates forecast to climb before the year is out, consumers are finding their pay packet is not stretching quite as far as it did only a few months ago. The last thing that anybody feeling the pinch wanted was for another big rise in their energy bills at a time when they are going to feel it more than ever before. While the combined effect of a number of rises in gas and electricity prices in rec ent years has already been taking its toll, there will be few customers of Scottish Gas who will not feel the pressure on their wallets from the latest record-breaking price rise announced this week. While many customers of the company may have spent yesterday and today arranging to switch to another provider in order to avoid the rise, it will prove largely pointless – prices will rise whichever company's name is on your bill, it is only a matter of time until more price rise announcements come. Almost every time an energy company announces a price rise, all of its rivals invariably follow suit. They are, after all, putting up prices for the same reasons and, the companies argue, they cannot survive without raising prices. EDF Energy got the ball rolling last Friday with a 17 per cent rise in electricity prices and 22 per cent rise for gas bills. But the Scottish Gas rise blew that out of the water – with gas customers preparing for bills to rise by more than a third as electricity users face a nine per cent hike. The average dual fuel user will now face paying £405 more every year for their power. When added to the company's rise earlier this year, it means that the average dual fuel user on a Scottish Gas standard plan will now be paying 44 per cent more than they were at the turn of the year. EDF customers are paying 34 per cent more but there is now a fear among consumer groups that British Gas has set the benchmark. That has led Age Concern to express fears that lives could be put at risk as elderly people avoid putting on the heating for the fear of raking up huge bills. Yet fuel poverty is more widespread than may be expected – and is certainly not restricted to the elderly. Before the Centrica price rise, around 700,000 households in Scotland were in what is described as 'fuel poverty' – where at least ten per cent of the household disposable income is spent on energy. But the latest price rise is expected to make another 160,000 households fall into that category. It would mean that a third of all households in Scotland will be in fuel poverty – and that will rise once the other four providers raise prices. Graham Kerr, a spokesman for Energywatch Scotland, said: "If the companies keep going on like this we could have almost half of all households in Scotland being fuel poor. This will already take us uncomfortably past one-third of all households being fuel poor and, if it keeps rising, it will only get worse. "We thought the rise might be high, something like 17 per cent, but British Gas blew that out of the water." The 35 per cent rise in gas prices and nine per cent in electricity announced by Centrica was much bigger than previously expected and leaves a strong possibility that some firms may go even further and raise prices by more than 40 per cent.
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FILE NAME DDI 2008
Energy Costs high oil ext. Energy costs will increase, oil costs prove Scotsman Business, 8/1/08 http://business.scotsman.com/personal-finance/Fix-your-power-bills-now.4352286.jp Charges will almost double this year due to the latest hikes, writes Teresa Hunter TIME is running out to lock into fixed bills and avoid combined annual gas and electricity charges nearly doubling to £1,600 in the coming months. Scottish Gas followed EDF last week by announcing a 35% increase in gas prices, after a 15% hike in January. But this is not the end. A recent report from energy analysts Eclipse warned that UK gas prices would climb 66%, leading to average bills of £1,000, because of falling domestic gas production and a greater reliance on imports, with their sensitivity to soaring oil prices. As electricity prices are also gas and oil-driven, these too are set to climb. Scottish Gas has increased electricity by a further 9% following January's 15% hike. In all, an average annual gas and electricity charge with the company will have risen from £912 at the beginning of the year to £1,322, before topping £1,600 in the months to come. But energy suppliers hunt in a pack, and the remaining companies are expected to follow their competitors' prices upwards. Energywatch is predicting that this will lead to a sharp rise in disconnections. Gas and electricity regulator Ofgem is due to publish its latest disconnection figures tomorrow. These are not expected to show any undue increase in people being cut off, but the data will only go up to March 2008, before the full effects of the recent punishing prices began to bite.
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FILE NAME DDI 2008
Energy prices low ext. Energy costs will stay high 4029 tv, 8/1/08 http://www.4029tv.com/news/17068207/detail.html The cost of heating your home this winter is expected to increase, in some instances nearly 50 percent. According to the Arkansas Public Service Commission, CenterPoint Energy customers can expect to see a 24-percent increase compared to last year, rates are expected to be 31-percent higher for Arkansas Western Gas customers and 48-percent higher for Arkansas Oklahoma Gas Company customers. Energy officials blame the increase in prices on the sky-rocketing demand across the country during colder months. Fort Smith’s Community Services Clearinghouse helps families who are struggling to make ends meet. “It’s come to the point where they have to make the choice of buying their food or paying a utility to keep it on,” said Susan Ross of the Community Services Clearinghouse. Ross said more families may seek help if heating prices increase drastically. "We try and help as many people as we can," Ross said. "The need is definitely there."
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FILE NAME DDI 2008
Natural Gas prices low Natural gas prices low, production proves FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most of the new onshore drilling of the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of well-drilling permits on Western lands as in the Clinton administration’s last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Oil production declined over all to an average of 97.9 million barrels annually from 2001 through 2006, compared with average levels of 111.5 million barrels during the Clinton administration. Drilling in the West is more likely to provide natural gas. Natural gas production has increased by 34 percent during President Bush’s term in office, compared with the annual production levels during President Bill Clinton’s term. On federal land in the West, average natural gas production during the first six years of this presidency was 2.4 billion cubic feet annually, up from 1.8 billion, on average, during the previous eight years, federal data show. The wellhead price of natural gas is about five times higher than it was in the 1990s. The increased production of natural gas from federal lands, in general, puts downward pressure on natural gas prices because the North American gas market is largely isolated from the larger world market. New oil production usually does not depress prices locally, since oil is shipped by tanker in a worldwide market. The Energy Task Force convened by Vice President Dick Cheney in 2001 called for expanded production on federal lands and offshore; these figures, drawn from the data of the federal Minerals Management Service and analyzed by the Environmental Working Group, a research and advocacy organization based in Washington, give a partial sense of how the task force’s priorities have been carried out, and to what effect. “You have to start with the recognition that most wells drilled in the Rockies are not oil wells — they are gas wells,” said Porter Bennett, the president and chief executive of Bentek Energy, one of the industry’s largest research firms. “There would never be an expectation of huge returns on the oil side,” he added.
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FILE NAME DDI 2008
Natural gas low frontline Natural gas prices are low, imports prove CASSANDRA SWEET, wallstreet journal, 8/4/08 http://online.wsj.com/article/SB121779975669708187.html?mod=googlenews_wsj U.S. natural-gas prices could be in for a fall next year, when additional output from elsewhere in the world should enter the market. Overseas production of gas that is supercooled into liquid form for ocean transport is set to increase by about one-third, to more than 11 trillion cubic feet by the end of next year, according to Waterborne Energy Inc., a Houston research firm that tracks the world-wide liquefied-natural-gas business. The U.S. sees LNG imports in 2009 surpassing last year's record levels. "There is a huge bubble of LNG about to hit the market," said Waterborne President Steven Johnson. This global surge coincides with a U.S. production boom, inflated by unexpectedly large amounts of so-called unconventional gas from shale deposits in Texas and Louisiana. Emboldened by that windfall, U.S. producers are pressing Congress to help expand the market for gas, pointing to forecasts showing that growth in domestic output will outstrip demand this year and next. A U.S. market well supplied with domestic gas, backed up by a ready supply of fresh LNG output from overseas, would likely keep prices low. U.S. natural-gas prices, at $9 to $10 a million British thermal units, have fallen more than 30% in the last three weeks, although they are up 49% from 52 weeks ago. Most liquefied natural gas is consumed in Europe and Asia, where a dearth of domestic supply and storage capacity tends to keep prices 50% to 100% higher than in the U.S. These high prices lured LNG shipments away from the U.S. this year, damping a trend of rising imports. A record 771 billion cubic feet of LNG, enough to heat about 12 million homes, reached the U.S. in 2007. LNG imports are down 60% this year, according to the Energy Information Administration. Producers in Qatar, Russia, Indonesia and elsewhere are expected to increase global LNG production by about 34%, bringing nearly 2.8 trillion cubic feet a year of new supplies online by the end of 2009, Waterborne said. Qatargas -- a partnership of Qatar Petroleum, Exxon Mobil Corp. and several other oil companies -- says it plans to quadruple LNG production to more than two trillion cubic feet. Qatar Petroleum has a separate venture with Exxon Mobil, called RasGas, that plans to expand LNG production by about 75%, to more than 1.74 trillion cubic feet by the end of 2009. An additional 197 billion cubic feet of LNG is expected from a Nigerian project led by the national oil company and Royal Dutch Shell PLC, while the BP PLC-operated Tangguh field in Indonesia is expected to produce about 364 billion cubic feet of new LNG by mid-2009. In Russia, state-owned gas firm OAO Gazprom is partnering with Shell and Japanese trading firms Mitsui & Co. and Mitsubishi Corp. to develop the Sakhalin 2 oil and gas field, with 460 billion cubic feet a year of LNG expected to come online next year. About 158 billion cubic feet a year of LNG are expected to come out of a Total SA-led project in Yemen by July 2009, according to Waterborne. While most of the new LNG is slated for terminals in Europe and Asia, the large flow of new production is likely to saturate those markets and what is left over will come to the U.S., said Mr. Johnson. Not everyone expects a flood of LNG into the U.S. "I think [2009] is going to be more like this year than last year," said Zach Allen, an analyst at Pan EurAsian Enterprises, an energy-research firm in Raleigh, N.C. Although there will be more LNG production next year, there will also be stiff competition from new import terminals in Europe and high prices in Asia. Robust domestic production will likely keep U.S. prices relatively low and unattractive, he said.
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FILE NAME DDI 2008
Natural gas prices high Natural gas prices are high regardless of oil prices FELICITY BARRINGER, New York Times 8/2/08 http://www.startribune.com/nation/26209424.html?location_refer=Nation:highlightModules:4 With the advent of $4-a-gallon gasoline has come a bruising debate in Congress over whether to intensify efforts to drill on federal lands, including part of the Arctic National Wildlife Refuge in Alaska. But while those hoping to lower prices at the pump are clamoring for new oil, most new onshore drilling in the past seven years has produced natural gas, not oil. The Bush administration, in its effort to expand energy production, has issued more than three times the number of welldrilling permits on Western lands as in the Clinton administration's last six years. But oil production in that region during the Bush years is 12 percent below average levels from the Clinton era, according to federal data. Meanwhile, natural gas production has increased by 34 percent during President Bush's term in office, compared with the annual production levels during President Clinton's term. Meanwhile, the wellhead price of natural gas is about five times higher than it was in the 1990s. Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. "We've turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof," he said. Horwitt added, "On the oil side, the data show that there's just not that much oil out there in the West." But industry representatives contend that the high prices, and the technical skills learned in recovering hard-to-retrieve oil in places like Texas, provide an opportunity to find oil and natural gas that would not have seemed worth the trouble a few years ago.
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FILE NAME DDI 2008
AT: natural gas prices low because of production Natural gas will increase despite increased production FELICITY BARRINGER, NY times, 8/3/08 http://www.nytimes.com/2008/08/03/us/03drill.html?pagewanted=2&_r=1 Dusty Horwitt, a senior analyst for public lands at the Environmental Working Group, said that opening more lands to drilling would not bring down the price of natural gas. “We’ve turned our Western lands into a pincushion and gasoline is $4 a gallon and the price of natural gas has gone through the roof,” he said. “What these data show is that conservation and renewable energy are likely to be the solution to our energy woes.” Mr. Horwitt added, “On the oil side, the data show that there’s just not that much oil out there in the West.” More of the nation’s oil reserves are located in Texas (23 percent), offshore (19 percent), Alaska (18 percent) or California (16 percent), according to the federal Energy Information Administration. And the biggest onshore discoveries — like the Bakken field in western North Dakota and eastern Montana — are mostly not under federal land.
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