Wednesday PM August 27th, 2008
ExxonMobil has reached an agreement with plaintiffs in the Exxon Valdez oil spill case. Lawyers say they have negotiated a settlement in which Exxon will pay $383 million. Under the deal, the money will be distributed to nearly 33,000 commercial fishermen and others who sued Exxon. Lawyers will continue to negotiate over $70 million and nearly a half billion in interest. The Exxon Valdez oil tanker went aground on a reef in 1989 and spilled 11 million gallons of crude in Prince William Sound. It was the worst oil spill in the nation's history. David Oesting of Anchorage, the lead attorney for the plaintiffs, says checks could begin showing up by early October.
Tropical Storm Gustav is seen as a possible threat to the Gulf Coast and that's prompting traders to send crude prices higher. A powerful storm in the Gulf could force shutdowns on the offshore rigs that account for about a quarter of U.S. crude production and much natural gas. At the pump, AAA says the average price of unleaded regular gas has dipped below $3.67 a gallon. Oil companies with operations in the Gulf began removing nonessential workers from rigs, platforms and other facilities this morning, and refiners were preparing too. There have been some minor production cuts, but so far, output has largely been unaffected. Royal Dutch Shell began evacuating some 300 workers from offshore rigs, and other companies pulled out non-essential personnel. Any damage to the oil infrastructure or Gulf Coast refineries could send U.S. pump prices spiking, possibly before the busy Labor Day weekend. The Gulf provides about 15 per cent of U.S. natural gas production and about 27 per cent of its oil production. It's home to nearly half the nation's refining capacity. The National Hurricane Center says the storm could head toward the coast as a Category 3 hurricane early next week. Friday is the anniversary of Hurricane Katrina's strike on Louisiana and Mississippi, and Gustav's tentative track raised the possibility of a Labor Day landfall there. But the average error in five-day forecasts is about 310 miles in either direction, meaning the likeliest targets could be anywhere from South Texas to the Florida panhandle.
The Energy Department says both crude oil and gasoline inventories fell last week. The weekly supplies report is monitored closely by oil traders. Crude inventories fell by 100,000 barrels. Analysts had been looking for crude supplies to rise by 1.5 million barrels. Gasoline supplies fell by 1.2 million barrels, which was less of a decline than expected. Supplies of distillates, which include diesel and heating oil, were unchanged. Analysts had predicted an increase. Demand for gasoline over the previous four weeks was 1.6 per cent lower than a year earlier.
ConocoPhillips is selling the remainder of its gas stations in the United States. But Conoco, Phillips 66, and 76 will continue to operate under those familiar signs. The 600 or so stations are being sold to a subsidiary of PetroSun Fuel. Financial terms were not disclosed. Houston-based ConocoPhillips began several years ago to spin off its retail stores, focusing more on exploration and refining. The newly formed company, Pacific Convenience & Fuel, said it's pushing into urban areas along the west coast.
Supervisors in Santa Barbara County, California, have voted three-to-two in favor of offshore drilling. It was an oil spill off their coast in 1969 that helped ignite modern environmentalism. The board of supervisors doesn't have the power to approve new drilling, but the vote sends a letter to Governor Arnold Schwarzenegger urging a reversal of a state ban. Backers say drilling would provide a new source of revenue in hard times and that modern advancements have made drilling safer. Conservation groups say the board's letter is shortsighted and embarrassing. The 1969 oil platform disaster coated miles of Santa Barbara County's beaches with oil, killed thousands of birds and helped inspire the clean water act and a moratorium on offshore drilling.
Some Venezuela lawmakers want to allow the nationalization of fuel distribution, in the government's latest move to tighten state control over the country's economy. Under the bill, fuel distributors including subsidiaries of BP, ExxonMobil and Chevron, would have 60 days to negotiate the sale of their businesses to the government or face expropriation. The draft law under discussion would also force distributors to sell storage tanks and gasoline pumps to a subsidiary of Venezuela's state-run oil company. Distributors would also have to give up their brand names, essentially making them contractors. Privately owned fuel distributors are hoping to convince lawmakers not to seize total control of their businesses.
The state-run oil companies of Ecuador and Chile are signing up to explore for oil in the crude-rich Orinoco belt of Venezuela. That's the region abandoned by several U.S. oil companies after Venezuelan President Hugo Chavez demanded a bigger slice of profits. Ecuador's oil minister says Petroecuador will sign accords on Friday with its Chilean and Venezuelan counterparts to formalize the joint venture. Venezuela will hold the majority of shares in the venture created by Petroecuador, Petroleos de Venezuela and Chile's national petroleum company.
The Iraqi Oil Ministry says that Iraq's oil exports in July inched up to 58.8 million barrels--a 0.7 per cent increase from the previous month. Wednesday's ministry statement says the barrel was sold at an average price of $113.8 and yielded $6.692 billion. June's price stood at $123 a barrel. The statement adds that 46.9 million barrels were exported through the country's south and 11.9 million barrels from the north, from Turkey's Port of Ceyhan. The oil was uploaded by 19 international oil companies. In May, Iraq saw its highest oil exports since the U.S.-led invasion in 2003, with 62.4 million barrels. Iraq sits on the world's third-largest oil reserves with about 115 billion barrels.
The Houston metro area enjoyed the second-largest employment increase in the United States in the first half of 2008, according to the Bureau of Labor Statistics. Houston added 57,100 jobs, surpassed only by the Dallas-Fort Worth area's 68,000 jobs. Unemployment in the Houston area jumped to 4.9 per cent in July—up from 4.7 per cent in June. Unemployment was at 4.6 per cent in July 2007.
The Truman School of Public Affairs in Columbia, Missouri, says official statistics on household incomes are a reflection of the economic situation in 2007, and not the current situation. The U.S. Census Bureau this week released its "Income, Poverty and Health Insurance Coverage and American Community Survey: 2007 Report" this week, stating that household incomes are up for the third consecutive year. Truman Professor Colleen Heflin says the economy began to decline in mid-2007 and accelerated in 2008. She says these numbers will be completely different a year from now. The report shows that median household income increased last year, but the level of income doesn't buy as much as it did a year earlier.
The Consumer Credit Counseling Service division of Money Management International says 86 per cent of respondents in a recent survey confirm their families are feeling the effects of an economic slowdown. CCCS says families relying on credit to make ends meet over the past couple of years are realizing that the cost of living spike isn't a temporary thing. About one in five have resorted to paying for necessities with credit.
An option used by almost 20 per cent of new home buyers to help scrape together a down payment is going away, making it tougher for many people to become homeowners. A loophole in Federal Housing Administration rules has let builders and other home sellers channel money through a charity to help homebuyers cover their down payment. Lawmakers axed the programs, effective October 1st, because almost 40 per cent of FHA borrowers who went into foreclosure since October had such down payment assistance. Despite many months of price cuts and free upgrades, builders have seen business slow dramatically. Sales of new, single-family homes climbed 2.4 per cent between June and July, yet they're down more than 35 per cent versus July last year. Some builders have dismissed the loss of down payment assistance, while others are taking steps to alert would-be buyers that they should buy now while the programs remain available.
Southwest Airlines is contesting a record$10.2 million federal fine. The Dallas-based airline says it is not going to pay the money Friday--the deadline set by the Federal Aviation Administration. The FAA levied the fine against Southwest in March because it said the airline continued to fly dozens of Boeing 737s that had not been inspected for cracks in their fuselages. The FAA has warned it will refer the case to the U.S. Attorney's Office if the fine is not paid. An airline spokesman tells the Dallas Morning News that Southwest hopes the matter will be resolved amicably, ``however long that takes." The FAA says talks are continuing.
Federal aviation officials say they know what happened at a Georgia facility that led to massive flight delays. According to the Federal Aviation Administration, the source of the computer software malfunction in a communication link was what's described as a "packet switch" that "failed due to a database mismatch." The link transmits data from the Georgia facility, which processes flight plans for the eastern half of the U.S., to a similar facility in Salt Lake City. After it failed, the Utah facility had to process those plans, causing delays in planes taking off. The FAA says 646 flights were delayed. The northeast was hardest hit. The agency says it'll work to make sure the problem doesn't happen again. Flight schedules are now back to normal. Still, the problem has led to more criticism for the FAA. The nonprofit travel industry association calls it "one more example of America's deteriorating air travel system."
California's attorney general says Citigroup will pay nearly $18 million in refunds and settlement charges for taking $14 million from customers' credit-card accounts. Attorney General Edmund G. Brown, Jr., says the bank will make refunds to the 53,000 customers affected. It will also pay $3.5 million in damages and civil penalties to the state of California. Brown says Citigroup's "account sweeping program" automatically removed positive balances from customers' credit-card accounts. For instance, if a customer double-paid a bill by mistake or refunded a purchase for credit, that positive balance was then taken from the customer without telling them. For its part, Citigroup says it stopped the practice in 2003 and had begun making refunds before the settlement.
Federal regulators say U.S. thrifts lost $5.4 billion in the second quarter and set aside a record amount to cover losses from bad mortgages and other loans. Data from the U.S. Office of Thrift Supervision show federally-insured savings and loan institutions posted their second-largest quarterly loss ever in the April-June period, after the $8.8 billion loss in the fourth quarter of last year. Heavily focused on mortgage lending, thrifts have been stung by mounting home-loan defaults. The $5.4 billion quarterly loss compared with net profits of $3.8 billion in the year-ago period, and a loss of $627 million in the first quarter. The roughly 830 thrifts also set aside a record $14 billion to cover losses from bad mortgages and other loans.
Orders for big-ticket manufactured goods turned in a second consecutive strong monthly performance in July, a far bigger-than-expected gain led by a huge jump in demand for commercial aircraft. The Commerce Department says orders for durable goods rose 1.3 per cent last month, far above the slight 0.1 per cent increase economists had been expecting. The July increase matched a 1.3 per cent rise in June, which was revised up from an earlier reading of 0.8 per cent. Both months turned in the strongest gains since a 4.1 per cent surge last December.
The Port of Houston has hire a consultant to help develop a comprehensive air quality plan. Starcrest Consulting of Washington will help the port address major sources of emissions from port activities and suggest ways to implement measurable goals and timelines. The plan is expected to be ready for public comment within six months.
Pride International has ordered a fourth ultradeepwater drillship from Samsung Heavy Industries in South Korea for $745 million. The drillship is slated for delivery in late 2011. Pride expects to take delivery of three other ultradeepwater drillships in 2010. Contracts for all four drillships total more than $2.9 billion.
Dell unveiled four low-cost computer models that are designed for China, India and other emerging economies. The two new notebook and two desktop personal computers are the first that Dell's designed especially for emerging markets. The models are a new bid by the Round Rock-based computer maker to tap the potential of high-growth markets outside the United States. They're meant for small business users and are to be sold in 20 countries across Asia, Africa and Latin America. Strong sales in Asia helped Dell turn in better-than-expected results in the first quarter despite a slowing U.S. economy. It's due to report its latest quarterly results on Friday, and analysts are watching whether it can maintain its growth pace. Dell and rivals Hewlett-Packard, Taiwan-based Acer and China's Lenovo Group are expanding aggressively in emerging economies as sales growth in the United States and other developed markets slows.