Friday PM February 29th, 2008

Texas average gasoline prices just two cents from setting record…Oil prices hover around $103 a barrel…Consumer spending flat for second straight month…

The average retail gasoline price in Texas is two cents shy of setting a record. The current Texas average is $3.07 a gallon, and the all-time statewide record high is $3.09 a gallon. That’s according to the weekly AAA Texas gas price survey. Houston’s average is up more than eight cents to $3.05 per gallon. The national average is up over seven cents to $3.16 per gallon. Seven of the 11 Texas regions surveyed set record highs for gas prices this week. San Antonio gas prices rose eight cents to an average of $3.03 a gallon. It is the lowest average price but a record for San Antonio. Texarkana once again has the state’s highest average at $3.14 a gallon, which is also a record.

Oil prices have spiked above $103 a barrel for the first time ever amid a weak U.S. dollar and the prospect of still lower interest rates. That combination has led to an infusion of cash into the oil market. Oil investors are taking more encouragement from Thursday’s comments by Federal Reserve Chairman Ben Bernanke, who indicates further interest rate reductions may be on the horizon. Lower interest rates tend to weaken the dollar. Oil futures offer investors a hedge against a falling dollar. Light, sweet crude for April delivery jumped to a new trading record Friday of just over $103 a barrel in Asian trading on the New York Mercantile Exchange before slipping back under the $103 mark. One Asian analyst predicts the oil market may soften at some point, but not likely in the near term. Crude prices are now within the range of inflation-adjusted highs set in early 1980.

The Federal Reserve says it will auction another $60 billion in March as it continues to combat the effects of a severe credit crisis. The central bank said it will conduct two auctions in the coming month and will make $30 billion available to cash-strapped banks at each auction. One will be held on March 10, the second on March 24. The central bank began the new auctions in December in hopes that the increased supply of cash would prompt banks to keep lending and combat the adverse effects from a severe credit squeeze.

The government says consumer spending, adjusted for inflation, was flat for the second straight month in January. The report is raising new concerns about a possible recession. The Commerce Department says spending posted a 0.4 percent rise in January, which was better than economists had been expecting. However, all of that gain came from a surge in inflation during the month. Taking away the effect of prices, spending showed no gain in January or December. Other than two negative months in August and September of 2005, which reflected the disruptions from Hurricane Katrina, inflation-adjusted consumer spending has not been so weak since November and December of 2001, when the country was struggling to emerge from the last recession. Incomes in January posted a 0.3 percent increase following a 0.5 percent gain in December. The January performance was boosted by a number of one-time factors, such as big annual bonuses paid to business executives. A closely watched gauge of inflation tied to consumer spending is up 3.7 percent over the past 12 months.

Consumers likely continued to see the economy with a jaundiced eye this month. Economists surveyed by Dow Jones Newswires look for the University of Michigan Consumer Sentiment Index to come in at 69.6 for all of February–versus a reading of 78.4 in January. Earlier this week, the Conference Board said its Consumer Confidence Index registered a 12-point decline during February.

The 5th U.S. Circuit Court of Appeals has ordered U.S. District Judge Lee Rosenthal to delay action on BP’s Texas City refinery blast.. The appeals court is determining if victims of the 2005 blast were properly consulted in reaching the deal. It prevents Rosenthal from ruling on another complaint that a proposed $50 million fine and felony plea agreed to by BP are insufficient.

The chairman and CEO of Schlumberger saw his total compensation fall by nearly one-third in 2007. Andrew Gould still earned nearly $16 million worth of pay and benefits. The decline for the 61-year-old Gould came despite another year of surging profit for the oilfield services provider. The company’s principal offices are in Houston, Paris and the Hague. Schlumberger’s filing with the Securities and Exchange Commission says Gould received compensation valued at $15.9 million in 2007. That’s down from the $22.9 million he got in 2006. The filing noted a year-over-year difference in stock and option awards. Gould has been Schlumberger’s CEO since 2003.

Baker Hughes in Houston says the number of rigs actively exploring for oil and natural gas in the U.S. dropped by eight this week–to reach 1,763. One year ago the rig count stood at 1,752. Texas lost seven rigs.

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