The head of BP says the era of cheap energy is over, echoing suggestions from other big oil executives that the steep drop in prices may not last long term. BP Chief Executive Tony Hayward told an oil conference in the United Arab Emirates capital of Abu Dhabi that growing global population and rapid industrialization in countries in China and India will continue to drive demand for oil. Current production levels still fall short of meeting this growing demand over the long term, he says.
A prominent Canadian economist says oil prices deserve credit for the global economic slowdown, not the crash of the U.S. housing market. CIBC World Markets economist Jeff Rubin said Monday oil is being virtually ignored as a culprit even though the real price of crude increased by more than 500 per cent. He notes that four of the past five global recessions were preceded by an oil shock, and this time it's no different. The price of crude spiked at a record $147 in July, but has since been cut by more than half to below $65 a barrel. Rubin says that if triple-digit oil prices are what started the recession, then $60 oil prices are what will end it.
Circuit City stores announced that it's closing about 20 per cent of its U.S. stores in an effort to return the nation's second-largest consumer electronics retailer to profitability. Those include nine in Texas. Two are in Sharpstown and League City. Other Texas store closings are in Burleson, Cedar Park, Dallas, Mansfield, McKinney, Sherman and Temple. The Richmond, Virginia-based company said it will shutter 155 of its more than 700 stores in 55 markets by December 31st. Circuit City also said it will further reduce new store openings and plans to work with landlords to renegotiate leases, lower rent or terminate agreements.
A closely-followed snapshot of the nation's manufacturing sector fell to its lowest level in 26 years in October. The credit crisis and Hurricane Ike are blamed for the weaker-than-expected reading from the Institute for Supply Management. The private group's manufacturing index fell to 38.9. Any reading below 50 indicates contraction. That was well below September's 43.5 and well short of economist forecasts for an October reading of 41.5. In another report, the Commerce Department says construction spending fell 0.3 per cent in September. That was not as large a drop as expected. A rebound in nonresidential activity helped offset more weakness in home building.
Construction spending fell by a smaller-than-expected amount in September as a rebound in nonresidential activity helped offset further weakness in home building. The Commerce Department says construction spending dropped by 0.3 per cent in September, less than the 0.8 per cent decline many economists had been expecting. Spending had been up by 0.3 per cent in August after a huge 2.4 per cent plunge in July. The weakness in September was led by a 1.3 per cent drop in housing construction, which has fallen every month but two over the past 30 months. Spending on government projects fell by 1.3 per cent, the biggest setback since January.
Online spending grew six per cent in the third quarter, down from a 13 per cent annual growth rate in the previous quarter, according to Comscore. Total online spending was $30 billion in the third quarter, not counting travel. Online spending growth has declined for five consecutive months.
A former El Paso Corporation natural gas trader has been sentenced to ten months in prison today in Houston by Judge Vanessa Gilmore for transmitting false information about gas transactions. Donald Burwell admitted knowingly transmitting false information in 2000 to Inside FERC Gas market Report, which publishes index prices widely used to set prices for domestic natural gas sales.
Administaff says most small and medium-sized businesses remain optimistic about growth, according to the Houston Business Journal. More than 37 per cent of owners and managers expect a higher rate of growth in 2009, according to the Houston-based staffing firm's latest business confidence survey. The economy is the biggest concern of nearly 82 per cent of the more than 6,200 businesses polled nationwide. About 61 per cent plan to either increase or maintain the current capital spending. Some 38 per cent expect to maintain their current staffing levels next year.
The National Association of Business Economists says 90 per cent of its members are more pessimistic about the economy than they had been in July, according to the Houston Business Journal. Economists indicate the U.S. has fallen into a recession that will continue throughout 2009. Only 36 per cent feel rate cuts and other Fed initiatives to unfreeze credit markets have working—in fact, 58 per cent believe the programs are having little impact.
Ford says its October sales dropped 30 per cent as low consumer confidence and tight credit continued to keep buyers out of showrooms. Ford's report is a strong indication that sales for the month will be poor for nearly all automakers and could be the worst in more than 25 years. Ford is the first of the automakers to report its U.S. sales Sunday. The company says Ford, Lincoln and Mercury truck sales were off 30 per cent compared with October of last year, while the three brands' car sales were down 27 per cent. General Motors says its October U.S. sales plummeted 45 per cent because of weak consumer confidence and tight credit markets. The Detroit-based automaker said Monday that it sold nearly 169,000 light vehicles, down from about 307,000 in the same month last year. Car sales fell 34 per cent, while light truck sales dropped 51 per cent. Despite the drop, GM's total still beat Toyota's sales. GM's Japanese rival offered zero per cent financing on several models for most of last month and sold about 152,000 vehicles--a drop of 23 per cent. Toyota says it will continue Its zero per cent financing incentive for another month after posting another steep sales drop. Toyota Division General Manager Bob Carter says the Japanese automaker will continue offering zero percent financing nationwide on 11 models through the end of November, but the company's marketing approach will become more regional in nature. Carter attributed Toyota's better-than-average performance in part to the success of the financing deal. Honda announced a 25 per cent drop in sales, which includes a 29 per cent decline in truck sales. But its Acura sales rose six per cent.
Governor Rick Perry has announced a $2 million Texas Emerging Technology Fund investment into CryoPen of Corpus Christi for development and commercialization of their Cryosurgical device CryoPen. It provides physicians with a non-invasive means to perform cryosurgery, which implements freezing to destroy unwanted or harmful tissue.
Banks tightened up further on all sorts of lending from home mortgages to credit cards and business loans as the worst financial crisis in seven decades took a bigger toll on the economy. The Federal Reserve says its latest quarterly survey of bank lending practices found high numbers of banks reporting tighter credit standards across a broad range of loan products. The Fed says its survey, released Monday and conducted in the first two weeks of October, found that sizable percentages of banks had "`continued to tighten their lending standards and terms on all major loan categories over the previous three months."
The government says it will borrow a record $550 billion in the current quarter as it scrambles to fund the huge rescue programs being put in place to deal with the worst financial crisis in seven decades. The Treasury Department plans to borrow more than a half-trillion dollars in the current October-December quarter and another $368 billion in the first three months of next year. Major Wall Street bond traders estimate the government's borrowing needs for the whole year will total an unprecedented $1.4 trillion.
British Prime Minister Gordon Brown says whoever succeeds President Bush must demonstrate more leadership on the global economy. Brown warns against protectionism. The British leader sees the United States working within an international framework for the restoration of economic growth, stability and jobs. Brown also says Persian Gulf states should have a bigger role in the governance of the International Monetary Fund, in exchange for financial bailouts for collapsing economies. Analysts have suggested that Arab states would be unwilling to contribute to the IMF, which is dominated by the G-7and the United States. Brown says the IMF must now reflect the rising power of Gulf states. He spoke at an international conference in the United Arab Emirates.
Could Cuba turn out to be another oil power? The state-run oil company of Brazil has signed an agreement with the communist country to explore for oil in deep waters off the Cuban coast. Officials in Havana say the field could contain 20 billion barrels of crude. The deal calls for seven years of exploration. And if the reserves are confirmed, the Brazilian company would produce oil and natural gas from it for another 25 years. The site is north of Cuba's famed beach resort of Varadero, 80 miles outside Havana. At an oil-deal signing ceremony Friday, Cuba's President Raul Castro joked about the prospects of success, saying, "God would not be so unfair to us as to not let us hit anything."
Abu Dhabi National Oil and a division of Royal Dutch Shell say they have signed a deal to explore the possibility of developing deep natural gas fields off the emirate's coast. The memorandum of understanding calls for the companies to evaluate the joint exploration, development and production of the fields. Shell says that once the evaluation is complete, it "hopes to move forward rapidly with final agreements in order to quickly begin joint exploration and development activities."' Shell already holds a 9.5 per cent stake in the Abu Dhabi Onshore Company and a 15 per cent share of Abu Dhabi Gas Industries. Financial terms were not disclosed.
Could pond scum be the next green fuel? Supporters think algae could someday be turned into cheap fuel for automobiles and airplanes, and are betting heavily on the idea. About $180 million in venture capital money has been raised for algae research, with more than half coming in the third quarter of this year. That's according to Cleantech, an industry research group. Some academic institutes have set up dedicated algae research centers, and a handful of start-ups are planning to test algae on larger demonstration projects in coming months. Even the federal government is getting interested. The Department of Energy has invested $2.3 million in algae-to-fuel grants so far this year.
The Baylor Eye Clinic opens tomorrow on the McNair campus of Baylor College of Medicine. It's the first building to open on the campus at Cambridge and Old Spanish Trail—also the site of the future Baylor Clinic and Hospital in 2011.
Along with the election, investors will be watching a number of key economic reports this week. They include the monthly jobs report due on Friday. Like some other recent economic reports, it's expected to be grim. On Thursday, there's the report from the government on third-quarter productivity.