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Thursday PM August 28th, 2008

Drilling companies and gasoline refiners prepare for Gustav…Revised second-quarter growth clocked at annual rate of 3.3 per cent–the fastest pace in nearly a year…Bankruptcy filing rate falls for people under 55, but soars for older Americans…

Texas is getting ready for a possible brush with Gustav as the tropical storm continues heading toward the Gulf of Mexico. Governor Rick Perry has issued a disaster declaration for 61 counties. Perry said that more than 5,000 guardsmen and other state resources are on standby in case the storm comes ashore along the Texas coast. Forecasters say the tropical storm could make landfall Tuesday anywhere from Texas to the Florida panhandle as a Category 3 storm. Gustav was churning toward Jamaica and the Cayman Islands with wind near 70 miles per hour. Hotels in east Texas are filling up fast as Gulf Coast residents make plans to head north. Tourism officials in Tyler say that more than 2,000 hotel rooms in the East Texas city are full. Fort Worth-based Burlington Northern Santa Fe will close its facility in New Orleans on Friday.

Based on forecasts that Tropical Storm Gustav will strengthen again into a hurricane and enter the Gulf of Mexico, Shell Oil says it’s working toward a full evacuation of Shell-operated assets in the Gulf. Shell has been evacuating some 300 personnel from its Gulf operations, after evacuating almost 400 yesterday. The remaining 600 are expected to leave their rigs and platforms on Friday and Saturday. The company says it has begun shut-in procedures for a few assets that require long lead times, such as subsea wells. Transocean is suspending operations at its 11 rigs, pulling 1,550 people out of the Gulf. Noble Corporation is evacuating about 600 workers from its seven rigs. Pride International will remove 650 from ten rigs and three production platforms by Saturday. BP is bringing non-essential workers to shore. In 2005, Hurricanes Katrina and Rita destroyed 109 oil platforms and five drilling rigs. The Oil Price Information Service says if the storm goes anywhere near refineries, that’s going to knock out gasoline production for about a week. The weather research firm Planalytics says as much as 80 per cent of the Gulf’s oil and gas production could be shut down if Gustav enters as a major storm. Analysts say any damage to oil and gas facilities—especially along the Gulf Coast–could send retail gas prices spiking back above $4 a gallon. Along with the speculation the federal government could release supplies from the Strategic Petroleum Reserve to counter any drop in production from Gustav, the International Energy Agency said the 27-member body was prepared to tap its emergency stocks if needed. At the pump, AAA says the average for regular unleaded gasoline is $3.66 a gallon.

Northrop Grumman officials say the company’s unmanned aerial vehicle could be launched to assist emergency workers if a hurricane threatened the Gulf Coast. Northrop Grumman’s Global Hawk is currently used by the Air Force for surveillance overseas. Its fuselages are built at Northrop Grumman integrated systems in Moss Point. Ed Walby, business director for the Global Hawk program, says the company could use some of its Global Hawks to search for “chokepoints” that delay hurricane evacuation. He also says the aircraft could be used in search and rescue missions after a storm. In 2009, Walby says NASA will begin test-flying Global Hawks to use for hurricane tracking in partnership with the National Oceanic and Atmospheric Administration.

Not only did the economy avoid contraction in the spring, the government has revised second-quarter growth to an impressive annual rate of 3.3 per cent. That was the fastest pace in nearly a year. The revision, issued by the Commerce Department, was well above the earlier gross domestic product growth of 1.9 per cent and also topped expectations. The revised reading was much better than the government’s initial estimate of a 1.9 per cent pace and exceeded economists’ expectations for a 2.7 per cent growth rate. The lift came as buyers overseas bought U.S. exports and tax rebates gave consumers more spending power. Federal Reserve Chairman Ben Bernanke has warned the economy will be weak through the rest of this year. A growing number of analysts fear that the national economy could hit a slow patch toward year end.

The U.S. government says the number of people signing up for jobless benefits declined last week, the third straight drop from a six-year high reached earlier this month. The Labor Department says applications for unemployment benefits dropped to a seasonally adjusted 425,000—down 10,000 from the previous week. That was a slightly better figure than the 427,000 analysts expected. Still, economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with rising energy costs and tighter credit.

A study finds that, while the bankruptcy filing rate for people under 55 has fallen, it has soared for older Americans. The Consumer Bankruptcy Project examined a sampling of noncommercial bankruptcies filed between 1991 and 2007. The older the age group, the worse it got. People 65 and up were more than twice as likely to file during that period, and the filing rate for those 75 and older more than quadrupled. One of the authors of the study, Harvard law professor Elizabeth Warren, says older Americans are hit by a one-two punch of having to keep working but facing medical problems, and the two are often intertwined. Warren notes increasing numbers of Americans are entering their retirement years with significant debt and are still paying off mortgages. She says it’s wrong to assume that lives of luxury are bankrupting seniors; rather, they’re incurring debts to meet needs such as medical treatment.

The fire is out at a Central Texas natural gas pipeline after an explosion sent flames 400 feet into the air. No injuries were reported in the rupture of the 36-inch pipeline owned by Dallas-based Energy Transfer Partners. The explosion happened about 8 a.m. near the town of Stairtown, about five miles northwest of Luling and 40 miles south of Austin. Fire officials in Lockhart, about 11 miles to the northeast, said the explosion was felt there. KXAN-TV reports about ten families who live within a half mile of the rupture were still kept from returning home around midday.

The Port of Houston Authority has approved a $34 million plan to purchase three dockside electric container cranes for Berth 3, which currently operates with six cranes. The Port also okayed a $1 million contract to Lockwood, Andrews & Newman to help prepare the Terminal Next Site Selection Study, to evaluate the need for a future container terminal.

A federal appeals court says a criminal case against more than a dozen former KPMG tax firm employees was properly dismissed. The 2nd U.S. Circuit Court of Appeals in Manhattan issued the ruling. It says the federal government interfered with the global tax firm’s practice of providing legal assistance to its employees by pressuring KPMG to limit or end the practice. The appeals court says the government’s overwhelming influence interfered with the rights of the employees to defend themselves. A judge had tossed out conspiracy and tax evasion charges against 13 former KPMG employees last year. Charges remain against four other people.

The Federal Reserve says banks borrowed more over the past week from its emergency lending program, while Wall Street firms passed for the fourth straight week. The report says commercial banks averaged $18.47 billion in daily borrowing over the past week. That compared with a daily average of $17.51 billion in the previous week. For the week ending August 27th, Wall Street firms didn’t take out any loans. Their borrowing, however, averaged as high as $38.1 billion a day over the course of a week in early April.

General Motors’ top product executive says the race between GM and Toyota to produce a rechargeable car is meaningless because the companies’ vehicles are so different. GM Vice Chairman Bob Lutz says Toyota’s plug-in hybrid has a much shorter electric range than the Chevrolet Volt and must use a gasoline engine to go any farther. Toyota’s president pledged to bring his company’s plug-in hybrid to market in 2009, while the Volt is due in showrooms in late 2010. But Lutz says he expects Toyota’s plug-in will be debut in controlled fleets and not in large numbers. He says GM will have production versions of the Volt working in a large test fleet in late 2009. Lutz was speaking at an event in Illinois where GM showed reporters its 2009 model lineup.

Toyota has lowered its global sales target for next year from more than ten million vehicles to 9.7 million. Toyota blames “tough times” caused by rising costs, a slowing U.S. market and soaring gasoline prices. Toyota had already trimmed its global vehicle sales forecast for this year by some 350,000 vehicles. Toyota’s president says Japan’s biggest automaker will continue to boost growth by focusing on hybrids as a core strategy. It will start making the Prius Hybrid in the U.S. at a plant in Mississippi, to meet growing demand. Meanwhile, Toyota is moving up the rollout of a plug-in hybrid for fleet purchase to late next year, earlier than previously planned. A plug-in hybrid can travel longer than a regular hybrid as an electric vehicle, using less gasoline.

The European Commission says it has filed an appeal at the World Trade Organization against a ruling that found European import tariffs for bananas unfairly discriminated against Latin American countries. The European Commission says the WTO ruling did not take into account evidence that Latin American suppliers had seen a ten per cent increase in market access in recent years. The announcement is the latest move in a longstanding trade dispute over how many bananas the 27-nation bloc lets in from Ecuador and other countries that do not have preferential trade ties with the EU bloc. The WTO said in May that Brussels breached trade agreements by favoring imports from Africa, Caribbean and Pacific states, many former French and British colonies.

The Centers for Disease Control and Prevention says the salmonella outbreak that’s sickened more than 1,440 people appears to be over. A joint probe by the CDC and the Food and Drug Administration has found strong evidence that jalapeno peppers were a major carrier of the bacteria, and that serrano peppers were also a carrier. The strain that caused the outbreak has been traced back to a produce distribution center in Texas, and to a Mexican farm that grew peppers. The investigation hasn’t found any contaminated tomatoes. But investigators say they can’t rule out that tomatoes might have been a carrier, particularly early on. It’s the largest outbreak of food borne illness in the U.S. in the past decade.


Dellsays its fiscal second-quarter profit fell 17 percent. Restructuring charges were partly to blame. For the three-month period that ended August 1st, Round Rock-based Dell’s earnings dropped to $616 million from $746 million. Sales rose 11 percent to $16.4 billion, ahead of Wall Street’s view for $15.9 billion in sales, according to analysts polled by Thomson Reuters.

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