AAA's daily fuel gauge report puts the nationwide average price of regular at $3.96 cents a gallon. That's a penny more than Thursday. The average for premium is also up a penny, to $4.36 a gallon. Texas averages are up 11 cents over the past week to $3.84 per gallon. Houston's average is now $3.82 per gallon—an increase of 12 cents since last week. The continued run-up comes even as the price of crude oil continues a decline that began with a $4.41-a-barrel retreat Thursday. Analysts say a stronger dollar and falling demand outweighed an unexpected drop in U.S. stocks of crude. An investigation of U.S. oil markets, with a focus on possible price manipulation may also have contributed to oil's declines.
The U.S. Energy Department's Energy Information Administration says delays in unloading oil tankers along the Gulf Coast led to an 8.8 million-barrel drop in crude oil inventories for the week ended May 23rd. Analysts surveyed by Platts had expected a gain of 750,000 barrels. Victor Shum, an energy analyst with Purvin & Gertz in Singapore, says traders instead focused on gains in the U.S. dollar, which hit a three-month high against the yen overnight. Investors who buy commodities such as oil as a hedge against inflation when the dollar is falling tend to sell when the greenback strengthens. Also, a stronger dollar makes oil more expensive to investors dealing in foreign currencies.
Spanish and Portuguese fishermen are striking over the soaring cost of fuel. In Madrid, Spain, about 10,000 protesters are handing out 20 tons of free fish to win public support. People have been gathered outside the Agriculture Ministry, blowing whistles and chanting slogans criticizing the government. Boats of all sizes remain docked at ports across both countries. The Spanish Fishing Confederation behind the strike says it could see markets empty of fresh and frozen fish by mid-June. The fishermen are demanding government action to bring down fuel prices. They also want tax breaks, as well as restrictions on the import of cheaper fish from Africa and Latin America. Spain's finance minister says the government is looking for ways to help, but doesn't think lowering taxes is the best way to solve the crisis.
Consumer spending barely budged in April while growth in personal income slowed sharply, even though the government started sending out billions of dollars in economic stimulus payments. The Commerce Department reports that consumer spending edged up a small 0.2 percent in April, just half the 0.4 percent rise in March. When inflation is excluded, the performance was even weaker, showing no gain in spending after excluding price changes. Incomes rose by 0.2 percent in April, just half of the March increase. That performance would have been even weaker without a boost as the government began mailing out the first of $106.7 billion in economic stimulus payments.
A government report shows Canada's economy contracted unexpectedly in the first three months of this year. It was Canada's first quarterly decline in so-called real gross domestic product in five years. Canada said that the country's GDP edged down one-tenth of a percent and economic output contracted two-tenths of a percent in March. It was the first back-to-back slump since March and April of 2003. The Canadian dollar skidded by about a penny immediately after the news. The government said the economy stalled due to widespread cutbacks in manufacturing, most notably in motor vehicles. The economy, which had begun to lose momentum in the second half of 2007 as exports slowed, suffered from factory slowdowns during the January-March period, while winter weather disruptions added to the quarter's woes. Gross domestic product--Canada's total output of goods and services--was up just 1.7 percent year-over-year.
CEOs of United Airlines and US Airways have formally shelved their effort to create the world's largest airline, telling employees that a combination isn't going to happen "at this time." The message comes a day after a meeting of United's Glenn Tilton and US Airways' Doug Parker at which united disclosed its decision not to pursue a deal. The two were exploring such a combination for more than two months. The discussion was overshadowed by the tightening financial outlook for all airlines, making cash more precious and making them less attractive for banks that would have to provide capital. Also seen as challenges: the likelihood of labor turbulence and difficulties integrating operations.
Talks between Continental and United Airlines on the Star Alliance are continuing. Continental is considering joining the alliance. The Houston-based air carrier is also a member of SkyTeam with Delta and Northwest, which are merging. Continental says it wants to remain independent rather than merge with another airline, but leaves open the possibility of an alliance. Continental has also talked with British Airways and American Airlines about joining them in an alliance. BA and American are part of another group of carriers called the OneWorld alliance. Alliances are agreements among airlines to work together to reduce costs and market themselves while continuing to fly their own planes using their own employees.
Bear Stearns is now part of JPMorgan Chase. The investment house's shareholders approved the government-assisted purchase, ending its 85 year history as a Wall Street pillar that was brought down by bets on high-risk mortgages. Banking giant JPMorgan Chase now must mesh Bear Stearns' maverick culture with its own--including the thousands of workers affected by the takeover. The deal was worth about $2.3 billion. JPMorgan is spending $1.4 billion for the firm itself and spent another $900 million over the past month-and-a-half buying bear Stearns stock to guarantee the deal would go through. JPMorgan has the backing of the New York Federal Reserve. The two parties say the previously announced sale of $30 billion in Bear Stearns assets to JPMorgan will happen on or around June 26th.
Rates on 30-year mortgages have surged this week to the highest level since mid-March, reflecting investor concern about future Federal Reserve moves to combat rising inflation pressure. Freddie Mac reports that 30-year fixed-rate mortgages averaged 6.08 percent this week. That is up from 5.98 percent last week. It was the highest level for 30-year mortgages in 11 weeks, when they averaged 6.13 percent. Rates on 15-year fixed-rate mortgages rose to 5.66 percent, up from 5.55 percent last week. The average for a one-year adjustable-rate mortgage edged down slightly, dropping to 5.22 percent. That is compared to 5.24 percent last week.
Toyota says nothing had been decided yet on using its California joint venture plant with General Motors to produce its Prius hybrid--a move that would mark the first North American plant for the hit "green" car. Major daily Tokyo Shimbun reports that Toyota was in talks with GM about producing the Prius, now made in only Japan and China, at a joint venture plant in Fremont, California. The newspaper, which did not cite sources as is common in Japanese media reports, says adding another production plant will help boost Toyota hybrid sales. Toyota is hoping to sell a million hybrids a year sometime after 2010. Toyota took a decade before recently reaching cumulative sales of one million for the Prius, the world's first mass produced gas-electric hybrid. The paper says the major components of the Prius would be shipped to be assembled at the Nummi plant in California. Set up in 1984, Nummi, or New United Motor Manufacturing Incorporated, produces the Corolla subcompact and other Toyota models.
The number of rigs actively exploring for oil and natural gas in the United States fell by 12 this week to 1,877. Houston-based Baker Hughes reported that of the rigs running nationwide, 1,479 were exploring for natural gas and 390 for oil. Eight were listed as miscellaneous. A year ago, the rig count stood at 1,774. Of the major oil- and gas-producing states, Texas lost 14 rigs. Baker Hughes has tracked rig counts since 1944. The tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.