BP says engineers have begun testing to determine whether they can begin pumping mud down the throat of the blown-out Gulf oil well in hopes of choking it for good. Engineers are probing the busted blowout preventer with an oil-like liquid to decide whether it can handle this “static kill” process. If the test is successful, the company plans to start slowly pumping the heavy mud down the well and it could continue through Thursday. BP engineers say the static kill may permanently plug the well but they may not know for sure until they finish a relief well later this month. They then plan to pump mud and cement through that 18,000-foot well to permanently suffocate the source of the oil.
BP could face up to $21 billion in fines stemming from the oil spill. A federal task force says about 206 million gallons of oil gushed out of the busted rig, but more than 33 million gallons were contained. That means 172 million gallons made it into the Gulf between April and mid-July, when a temporary cap stopped the flow. Based on that estimate, BP could be fined up to $5.4 billion under the Clean Water Act. The fine could soar to $21 billion if the oil company is found to have committed gross negligence or willful misconduct. If the government credits BP for the oil it has recovered, the fine would range between $4.5 billion and $17.6 billion. Any fines will be on top of the $20 billion escrow fund the company has set up to pay damage claims.
The nation’s top drilling regulator says the Obama administration hopes to lift a freeze on deep water drilling well before its scheduled November 30th expiration date. Michael Bromwich, who is director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said he and Interior Secretary Ken Salazar are gathering information to decide whether to revise or even lift the ban, which has shut down drilling at 33 ocean wells in the wake of the BP spill. Bromwich says that officials hope to feel comfortable enough with safety improvements so the moratorium can be lifted “significantly in advance of November 30th.” Bromwich is hosting a series of public forums on the Gulf Coast starting Wednesday in New Orleans.
BP’s incoming chief executive Robert Dudley and the man he will succeed, Tony Hayward, are heading to Moscow this week to meet with the company’s investors in Russia. BP spokesman Toby Odone says that the visit marked a “handover” and the two men would meet with government officials as well as BP’s partners. Dudley is already familiar with BP’s operations in Russia, which account for a quarter of the company’s global oil output. The U.S.-born executive ran the company’s joint venture–TNK-BP—from 2003 until 2008 when he was forced to flee the country after a dispute with BP’s billionaire partners. Odone says that Dudley will also visit other BP operations around the world, but the schedule has not yet been set.
BP says it has agreed to sell its oil and gas exploration business in Colombia for $1.9 billion to a consortium of Ecopetrol, Colombia’s national oil company, and Talisman of Canada. The deal is the latest in BP’s plans to sell up to $30 billion of assets to cover costs related to the Gulf spill. The company last month agreed to sell assets in the U.S., Canada and Egypt to Apache for $7 billion. It also plans to sell assets in Pakistan and Vietnam. BP last week revealed it has set aside $32.2 billion to cover spill costs as it posted a $17 billion second quarter loss. It will receive a cash deposit for the Colombian sale, which is expects to complete by the end of the year.
Factory orders have fallen for the second straight month in June due to lower demand for steel, construction machinery and aircraft. The Commerce Department says that factory orders dropped by 1.2 percent to a seasonally adjusted $406.4 billion. Analysts expected a much smaller drop. May’s decline was revised lower to a decrease of 1.8 percent. The two months of declines follow nine straight months of increases, as manufacturers ramped up production last fall and into the spring, helping the U.S. economy grow after four quarters of contraction. But the sector has since shown signs of stumbling, raising concerns the economic recovery will stall in the second half of this year.
The number of buyers who signed contracts to purchase homes dropped in June, as the weak economy and tight lending standards kept consumers away from the housing market. The National Association of Realtors says its seasonally adjusted index of sales agreements for previously occupied homes dipped 2.6 percent to a reading of 75.7. That was the lowest on records dating back to 2001 and down nearly 19 percent from the same month a year earlier. May’s reading was revised slightly downward to 77.7. Economists surveyed by Thomson Reuters had expected the index would rise to 78.1. The index provides an early measurement of sales activity because there is usually a one- to two-month lag between a sales contract and a completed deal.
The pace of consumer spending stalled in June and personal incomes failed to increase. The Commerce Department say personal spending was unchanged in June, the third straight month of lackluster consumer demand. Incomes were flat as well, the weakest showing in nine months. The lack of growth for spending and incomes shows the economy ended the second quarter on a weak note. Many analysts believe growth will slow further in the second half of the year as high unemployment, shaky consumer confidence and renewed troubles in housing weigh on the year-old economic recovery.
Treasury Secretary Timothy Geithner says it would be “deeply irresponsible” for the Obama administration to support a wholesale extension of the Bush era tax cuts, including breaks for the wealthy. Geithner tells ABC’s Good Morning America that President Barack Obama strongly believes those reductions should be retained for the “95 percent” of taxpayers with individual incomes under $200,000 a year and families below $250,000. He disagreed with charges the administration has been hostile to Wall Street. Geither says that Obama had no choice but to pursue much tighter regulation of business, saying the president had a deep obligation “to fix what was broken.” The secretary acknowledged the economy hasn’t bounced back as quickly as federal officials would like.
Is there a chance that airline seat next to you won’t be full? A research firm says airlines in North America are adding a few extra seats this month for the first time since 2007. OAG says the increase is just one percent compared with August 2009, but it’s the first year-over-year increase in three years. The company said there is a four percent increase in seating capacity to and from North America, although those flights account for only one-fourth as much capacity as those within North America. OAG says growth is still flat in several key markets including Dallas-Fort Worth and Las Vegas. Miami, however, is up five percent over a year ago. U.S. airlines cut capacity in 2008 when jet fuel prices hit record levels, and kept them low when the recession cut into business travel. Less capacity has helped airlines boost fares, which has contributed to strong profits at most major U.S. airlines.
Hewlett-Packard says it has agreed in principle to settle a lawsuit by the Department of Justice, which alleges that HP and other technology companies paid kickbacks to Accenture in exchange for recommendations for government work. HP denies “engaging in any illegal conduct.” It says the deal will lower its fiscal third-quarter profit by two cents per share. That’s about $50 million given that it has 2.33 billion shares outstanding. The settlement still needs to be approved by the Justice Department, an Arkansas district court where the original lawsuit was filed, and government agencies. The government joined whistleblower lawsuits against HP, Accenture and Microsoft in 2007 over the arrangements, alleging violations of the False Claims Act. The companies had “alliance relationships” in which they agreed to work together, but the agreements resulted in what amounted to kickbacks in securing government contracts, it said at the time.
General Motors says its U.S. July sales rose slightly from June, an indication that uneasy consumers are still spending on big-ticket items such as cars and trucks. The automaker’s sales rose 2.6 percent over June, a month in which overall industry sales cooled because shoppers grew worried about the economy. GM says July sales rose five percent from the same month last year, helped by deals to make room for 2011 models. GM says sales from its four brands that haven’t been sold or closed–Chevrolet, Buick, GMC and Cadillac–rose 25 percent over July of 2009. Buick and Cadillac sales more than doubled.
Ford says its U.S. sales rose three percent in July compared with the same month last year as its new Fiesta subcompact hit the market. Ford brand sales rose eight percent. But they were dragged down by a 31 percent drop in Mercury sales. Ford announced in June that it will end production of Mercury at the end of this year. Lincoln sales slid 16 percent, largely because of a drop in sales of the Town Car sedan. Ford plans to stop producing the Town Car next year. Overall, the automaker’s sales were flat from June, which was a disappointing month for the industry but was relatively strong for Ford.
An SUV with a minimum price tag of more than $62,000 is once again the most popular vehicle among thieves. The Highway Loss Data Institute says the 2007-2009 Cadillac Escalade has been stolen more than any other vehicle–and car thieves go the extra mile to get one. The Escalade has a antitheft ignition immobilizer that prevents it from being started without a special key. But the institute’s Kim Hazelbaker says thieves just haul it away on a flatbed truck. One in every 100 Escalades is stolen and one in every four Escalade thefts has a claim for $40,000 or more. Next on the most popular stolen vehicle list–the F-250 crew cab pickup, Infiniti G37 two-door car, Dodge Charger with its high-power hemi engine and Chevrolet Corvette Z06. The vehicles least likely to be stolen are the Volvo s80, Saturn Vue and Nissan Murano, Honda Pilot and Subaru Impreza. They’re family vehicles.
Amazon.com says it has already sold out of the two new Kindle e-reader models it announced last week. A spokesman confirms that the company is temporarily sold out of the Kindles. Both can wirelessly download books–a $189 model does so over 3G cellular networks and wi-fi, while a $139 model just uses wi-fi. Amazon.com started taking new Kindle orders on July 28th, saying they would ship to customers on August 27th. On Monday, its Website said customers could still order the devices, and they’re expected to ship on or before September 4th. Amazon’s Website indicated that its larger-screen Kindle, the $379 Kindle DX, is still in stock. It’s hard to determine how the Kindle is selling overall since the online retailer has not disclosed sales figures.
Marathon Oil says its second-quarter earnings jumped 72 percent on higher oil and gas prices and better refining margins. The results beat Wall Street estimates and follow similar gains by ExxonMobil and Chevron. The Houston oil company reported net income of $709 million for the quarter ended June 30th. That’s up from $413 million in the year-ago period. Revenue jumped 39 percent to $18.6 billion. Excluding special charges, Marathon said it would have made $792 million. Analysts, which exclude special charges, expected revenue of $19.7 billion.
Natural and organic grocery chain Whole Foods Market says its third-quarter net income almost doubled as sales rose. Whole Foods says that it earned $65.7 million for the quarter. That’s up 88 percent from $35 million a year earlier. Also aiding the bottom line were lower spending on relocating, closing and leasing stores–$700,000 in this year’s third quarter, compared with $18.2 million in last year’s. Revenue grew 15 percent to $2.16 billion. The earnings met analysts’ average forecast for revenue of $2.14 billion. Whole Foods said its sales trends remain strong and it is gaining market share. It raised its full-year guidance.