Wednesday PM June 9th, 2010

BP containment efforts continue; offshore drilling is “on the pause button, not the stop button”…Federal Reserve says economic activity improved across all 12 regions tracked…Number of customers applying for mortgage falls to lowest level in 13 years…


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BP Chief Operating Officer Doug Suttles continues to insist that no massive underwater oil plumes in “large concentrations” have been detected from the spill in the Gulf of Mexico. Suttles’ comments came this morning on network news shows, a day after the government said water tests confirmed underwater oil plumes from the oil spill, but that concentrations are “very low.” Suttles told NBC’s Today show that it “may be down to how you define what a plume is here.” NOAA administrator Jane Lubchenco said that the tests conducted at three sites by a University of South Florida research vessel confirmed oil as far as 3,300 feet below the surface 42 miles northeast of the well site.

Coast Guard Admiral Thad Allen says the oil spill containment operation is now catching up to 630,000 gallons daily. Admiral Allen also said that with temperatures rising in the stricken area, officials have concern about the safety of workers involved in the containment effort. He also said Obama administration officials are talking with BP about a longer-term containment strategy with “built-in redundancies.” Allen has written to BP for more specific information on how the company is handling damage claims. Allen tells BP CEO Tony Hayward in a letter dated Tuesday that his office and state offices in the stricken area “have made several requests for additional information which we have not received.”


The Associated Press conducted an analysis of BP’s 582-page regional spill plan, approved last year by the federal government. BP claimed it could marshal enough resources to scoop up all the oil before any deepwater spill could reach shore. BP’s spill scenarios projecting something ten times worse than what actually occurred have fish, marine mammals and birds escaping serious harm. Beaches remain pristine and water quality is only a temporary problem. The plan refers to marine mammals that don’t live anywhere near the Gulf. Also BP’s proposed method to calculate spill volume differs from an internationally accepted formula that would produce estimates 100 times higher.

The government’s ban on deepwater petroleum drilling in the Gulf is being challenged by a Louisiana petroleum service company. Hornbeck Offshore Services filed suit in U.S. District Court in New Orleans, claiming the Interior Department recommended the six-month moratorium to President Barack Obama without any legal justification. Hornbeck operates a fleet of vessels that haul people and supplies to offshore drilling rigs and production platforms. The company wants a federal judge to issue an injunction nullifying the moratorium. The Interior Department, in a response, said the moratorium is needed for a special commission to study offshore drilling and make recommendations to the administration in light of the Deepwater Horizon disaster and oil spill.

Interior Secretary Ken Salazar is reassuring Congress that the Obama administration has pressed what he described as the “pause button, not the stop button,” on all offshore oil drilling in the Gulf elsewhere. Salazar, testifying before the Senate Energy and Natural Resources Committee, described the recent moratorium that President Barack Obama put in place for offshore deepwater drilling, along with new requirements for shallow water oil drilling. Gulf residents rely heavily on paychecks from the oil industry and are worried about their economic futures.

With pressure building on President Obama to fix the crisis, the White House said he’ll be heading back to the scene, spending next Monday and Tuesday inspecting oil damage in Mississippi, Alabama and Florida. The president has come under fire even within his own party, accused of being slow to recognize the political danger of the spill and for appearing somewhat detached. Colorado College political scientist Thomas E. Cronin says it’s hard for Obama to get angry but he’s being motivated by increasing anger in the U.S.

Shares in BP have been falling further amid fears the British oil company will bow to U.S. political pressure to cut dividends to help pay for the Gulf of Mexico disaster. BP stock was at a fresh 20-month low Wednesday–down four percent at 392.45 pence ($5.71) as investors fret over the prospect of the first cut in shareholder payments since 1992. BP’s market value has already lost tens of billions of pounds since the explosion on April 20th.

In a grass-roots movement inspired by the 1980s Hands Across America chain, people in 30 states and nearly a dozen countries plan to join hands later this month to form symbolic barriers to protect coastlines from oil spills. The “Hands Across the Sand” movement started in February in Florida, before the Deepwater Horizon oil rig disaster. On June 26th, people will stand up and hold hands for 15 minutes to form human chains. They will also pledge to take personal steps to conserve energy and let elected officials know they oppose offshore oil drilling. Nearly 70 events are planned in Florida and 30 in California, and one at a Colorado reservoir.

OPEC says Europe’s debt crisis and an oversupply of crude in the market are weighing heavily on crude demand in the second half of the year. In its latest monthly report, the Organization of the Petroleum Exporting Countries held its world oil demand growth forecast largely unchanged at 940,000 barrels per day in 2010. OPEC says U.S. oil demand will play a “major role” in crude consumption this year. The bloc, which supplies almost 35 percent of the world’s oil, says oil’s recent price drop appears linked to Europe’s debt crisis and a cooling in China’s economic growth. It says any improvements seen so far in world oil demand have been “overwhelmed” by increased supply and persistent worries about the stability of the world’s economic recovery.

The economic recovery is finally spreading to all parts of the country. But the modest pace of growth suggests companies won’t be ramping up hiring to quickly drive down unemployment. A new survey by the Federal Reserve says economic activity improved across all 12 regions tracked. That’s a tad better than April’s survey when all of the fed’s regions–except for St. Louis–reported “economic activity increased somewhat.” The last time all regions were in a growth mode was roughly before the recession started in December 2007. Manufacturing picked up, retail sales grew, tourism improved and housing was helped by the now-expired tax credit for homebuyers. But commercial real-estate is weak and labor market conditions improved only “slightly.”

One sign of better economic times is when more people start finding jobs. Another is when they feel confident enough to quit them. More people have quit their jobs than were laid off in the past three months. That’s a sharp reversal after 15 straight months in which layoffs exceeded voluntary departures. The trend suggests the job market is finally thawing. Some quitters have left for new jobs. But others have no firm offers. Economist Steven Davis of the University of Chicago says there is a century’s worth of evidence that bears out this view that quits rise and layoffs fall as the job market improves. The government says that the number of people quitting rose in April to nearly two million. That’s an increase of nearly 12 percent since January.

Federal Reserve Chairman Ben Bernanke sees “no easy resolution” to restoring millions of jobs wiped out by the recession and strengthening the economy. Bernanke says in prepared remarks that there has been some modest improvement in the labor market. But he also says the country continues to endure high unemployment, now at 9.7 percent. Bernanke delivered the remarks at a work force development conference in Richmond, Virginia. He says it will take a “significant amount of time” to restore the nearly 8.5 million jobs lost nationwide between 2008 and 2009.

Inventories held by wholesalers rose for a fourth straight month in April while sales rose for a 13th consecutive time. Both gains were encouraging signs pointing to a sustained economic recovery. The Commerce Department says wholesale inventories increased 0.4 percent last month after a 0.7 percent gain in March. Sales increased 0.7 percent in April, helped by higher demand for autos, lumber, computers and electrical equipment. The hope is that a sustained rise in demand will prompt businesses to step up orders and restock depleted shelves. That would give a boost to factories and prompt them to increase hiring.

The number of customers applying for a mortgage to purchase a property fell to the lowest level in 13 years last week, a sign the housing market is struggling without government incentives. The Mortgage Bankers Association says purchase volume declined 5.7 percent and is at its lowest point since February 1997. Michael Fratantoni, MBA’s vice president of Research and Economics, says purchase applications are now 35 percent below their level of four weeks ago. He says homebuyers have not yet returned to the market following the expiration of the homebuyer tax credit at the end of April.

Federal immigration officials are proposing to increase the fees to apply for legal U.S. residency to nearly $1,100, but would leave existing citizenship application fees intact. It now costs a total of $1,010 to apply for legal residency and get required fingerprinting, and that cost would rise to $1,085. The agency is required by law to review its fees regularly and decide whether they are covering the cost of doing business. The CIS had a major fee hike in the summer of 2007, helping to trigger a flood of citizenship applications that were filed in advance of the increases.

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