Oil rises again
Oil rebounds in Asia after 2-day tumble September 17, 2008 - 1:45am
By ALEX KENNEDY Associated Press Writer
SINGAPORE (AP) - Oil prices rebounded Wednesday in Asia as traders viewed a two-day $10 drop as overdone and driven more by market jitters than by fundamentals.
Sentiment got a boost on news that the U.S. Federal Reserve agreed to provide an $85 billion emergency loan to rescue insurance giant American International Group, helping stabilize global markets rattled by the failure of U.S. investment bank Lehman Brothers.
Light, sweet crude for October delivery rose $3.50 to $94.65 a barrel in electronic trading on the New York Mercantile Exchange midday in Singapore. Overnight, the contract fell $4.56 to settle at $91.15, after dropping $5.47 on Monday.
At one point Tuesday, oil touched $90.51, its lowest since Feb. 8, and down 39 percent from a record $147.27 on July 11.
"Prices had really fallen off a cliff," said Peter McGuire, managing director at investment firm Commodity Warrants Australia in Sydney. "When a market falls 25 percent in 3 weeks and 40 percent in two months, it tends to find some support for a bounce back."
The Federal Reserve said in a statement Tuesday it determined that a disorderly failure of AIG could hurt financial markets already reeling from a year-long credit crisis that led to the bankruptcy of investment bank Lehman Brothers earlier this week.
It also could have "lead to substantially higher borrowing costs, reduced household wealth and materially weaker economic performance," the Fed said.
The Fed said in return for the loan, the government will receive a 79.9 percent equity stake in AIG.
With so much uncertainty surrounding the U.S. financial system and fears that slowing economic growth will undermine crude demand, Wednesday's jump in oil prices probably hasn't broken the recent downward trend, McGuire said.
Events that would usually boost prices _ such as OPEC cutting output by 520,000 barrels a day last week or damage to oil installations on the Texas coast by Hurricane Ike last weekend _ haven't done so.
"The OPEC cut didn't have any impact," McGuire said. "Then Ike didn't slow the market either."
Investors were also waiting for the U.S. Energy Department's Energy Information Administration to release later in the day its report on U.S. oil stocks for the week ended Sept. 12. The petroleum supply report was expected to show that oil stocks fell 3.7 million barrels, according to the average of analysts' estimates in a survey by energy information provider Platts.
The Platts survey also showed that analysts projected gasoline inventories fell 3.6 million barrels and distillates went down 1.7 million barrels during last week.
In other Nymex trading, heating oil futures rose 6.17 cents to $2.7814 a gallon, while gasoline prices dropped 6.92 cents to $2.47 a gallon. Natural gas for October delivery fell 12.1 cents to $7.4 per 1,000 cubic feet.
In London, October Brent crude fell $3.58 to $92.80 a barrel on the ICE Futures exchange.
German Nationalist group to rally against Islam
BRITAIN is facing an explosion of violent crime and illegal immigration sparked by Labour’s economic crisis, a leaked Home Office memo to Gordon Brown revealed last night.Violent attacks are set to soar by up to a fifth in a growing climate of disorder on the streets, the Prime Minister has been warned. Smuggling is tipped to rise significantly and unscrupulous employers are expected to turn increasingly to illegal foreign workers to cut costs.Ministers are also being warned of potential inter-racial strife, an upsurge in racist extremism and even terrorism as community relations come under strain in difficult economic times.
Budgets for policing and border control are expected to be slashed by falling tax revenues, potentially leading to cuts in police officers and border guards.
The disturbing portrait of spiralling social anarchy is set out in a document prepared by staff in Home Secretary Jacqui Smith’s office specifically for Mr Brown’s eyes.Last night the Tories seized on the leak as evidence that the Home Office remains in crisis, while law and order could be further undermined by Labour’s economic mismanagement.
Senior Tory Damian Green said: “This rips the veil off the complacent comments we have been getting from Home Office ministers about how their performance is improving. “It is clear that in almost all areas of the Home Office things are going to get worse.”
The leaked memo from the Home Office is titled: “Responding to Economic Challenges.” It is thought to be among a number of documents commissioned from Whitehall departments by Number 10 to examine potential consequences of the worsening economy.
The leak follows Chancellor Alistair Darling’s claim at the weekend that the economy is facing its biggest challenge “for 60 years”. The memo warns that the strength of the economy and its performance compared to other countries “are key drivers of crime and migration respectively”.
It says: “Officials anticipate that a harsher economic climate will see a rise in criminality, including burglaries, robberies and violence. An economic downturn could mean an increase in illegal working if migrants’ opportunities for legal working decline and employers are seeking to save costs.”
Anger toward migrants could breed extremism and encourage neo-Nazi organisations. And the backlash could fuel radicalisation among immigrant communities, such as young Muslims turning to Islamist terrorism.
There is a possibility that it will increase the pool of those susceptible to radicalisation,” the memo says.
Shadow Home Secretary Dominic Grieve said last night: “It is deeply disturbing that a department as shambolic as the Home Office already is facing such problems as a result of the economic downturn. It is patently not equipped to cope. Why haven’t they prepared for this?
“Now we see that the consequences of Gordon Brown’s complete mismanagement of the economy will not just hit hard-working families in the pocket but will also threaten their security and safety.”
The Home Office claimed the leaked version was an early draft. A spokeswoman said: “We are confident that we have the right systems in place to respond flexibly to changing economic needs.”
http://www.express.co.uk/posts/view/59364/Home-Office-predicts-anarchy-in-leaked-memo
New FBI protocols feed profiling fear Anti-terror rules to start Oct. 1 FBI Director Robert Mueller. Associated Press. Justice Department officials say new FBI protocols only give agents the same tools to fight terrorism that they already have to combat crime. But civil libertarians argue the guidelines give the bureau unprecedented authority to investigate anyone it wants. The revamped, so-called "Attorney General's guidelines" promise to be a major focus of FBI Director Robert S. Mueller III's appearance next week in front of the Senate Judiciary Committee. The Justice Department has briefed lawmakers, civil libertarians and Arab-American groups about the changes, an unusual move that department officials say reflects the importance of the changes. The department also expects to make some adjustments to the guidelines as a result of those meetings. On Friday, a senior Justice Department and senior FBI officials, speaking on the condition of anonymity, briefed reporters about the changes, which are expected to take effect Oct. 1. They said the changes are part of the FBI's efforts since the terrorist attacks of Sept. 11, 2001, to become more proactive in the areas of national security and intelligence gathering. The officials said there has been illogical and inconsistent differences between how agents are allowed to handle typical criminal cases - and how they address national security cases in their earliest stages before a formal investigation is opened. In the early stages of a potential criminal case, agents are allowed to query sources, conduct physical surveillance of potential targets and even gather information without identifying themselves as FBI agents or explaining the purpose of their questioning. But agents in the earliest parts of potential investigations into spies or terrorists are prohibited from using such techniques. The new guidelines change that and give the same tools to agents investigating criminal and national security cases. "We're not getting any new power," an official said. Michael German, policy counsel for the American Civil Liberties Union, disagreed, saying the changes allow the FBI to essentially conduct undercover investigations into anyone on the flimsiest of evidence. "They can do it even before they suspect anything," he said. "It's just really an extraordinary claim of authority that I don't think is really consistent with the Constitution." The FBI official said such preliminary assessments must be based on tips or information from analysts, but concerns persist that people could be targeted because of race or political views. Justice officials said the guidelines prohibit targeting people because of protected First Amendment activities, and insist they will not result in racial profiling. "But it is simply not responsible to say that race may never be taken into account when conducting an investigation. The reality is that a number of criminal and terror groups have very strong ethnic associations. For example, the IRA was Irish, La Cosa Nostra is Italian; Hezbollah is largely Lebanese," Justice Department spokesman Brian Roehrkasse said. "Nevertheless, the department is sensitive to the fact that transitioning the FBI into an intelligence-driven organization that seeks proactively to identify potential threats must be done carefully: while most members of a terror group may be of a particular ethnic background that does not mean most people of that ethnic background are members of the terror group."
http://www.washingtontimes.com/news/2008/sep/13/new-fbi-protocols-feed-profiling-fear/
Warning: 30 airlines will go bust this year
By David Prosser, Deputy Business Editor, and Martin HickmanSaturday, 13 September 2008
Up to 30 more airlines will go bankrupt before Christmas, the chief executive of British Airways warned yesterday, as the biggest rescue of stranded passengers in travel industry history began.
Willie Walsh said the scenes of chaos in which 85,000 passengers have been stranded at locations around the world after the collapse of XL, Britain's third largest holiday company, would become a familiar sight as the travel industry struggled with soaring fuel costs and the effects of a global economic downturn.
"We are in the worst trading environment the industry has ever seen", said Mr Walsh. "We have already seen 30 or so airlines go bust this year and it would be fair to expect a similar number of casualties worldwide over the next three to four months."
Mr Walsh also announced up to 1,400 redundancies at his own airline yesterday.
Travel industry experts said smaller airlines and tour operators were most at risk and warned passengers to book in a way that ensured they got their money back if an airline went bankrupt.
Joseph Thomas, a travel and leisure analyst at Investec, the City stockbroker, said: "XL will not be the last: there have been a number of similar issues recently of smaller tour operators hitting financial difficulties."
John Strickland, an aviation consultant with JLS Consulting, added: "There are carriers in the UK that are not cash-rich like BA or Ryanair and who have not been able to hedge their oil costs. I think there will be other failures in coming months."
The travel sector is particularly vulnerable at this time of year because operators have to begin paying suppliers, such as hoteliers just as the number of bookings begins to dwindle.
This year, however, is especially difficult because the UK's economic slowdown has begun to damage sales. At the same time, the costs of airlines and other travel companies remain high, primarily because of the hugely inflated price of jet fuel, which has doubled in a year.
Britain's biggest tour operators, TUI Travel and Thomas Cook, have already announced they are cutting by about 8 per cent the number of holidays on offer next summer to avoid being caught out by falling demand. Most leading airlines, including national carriers such as BA and budget airlines such as Ryanair, have also announced reductions in capacity, particularly during the winter months. But smaller players may have insufficient resources to survive. XL is understood to have had large borrowings, which left it especially vulnerable to a rise in costs.
Kenny Ezard, of Airline Business magazine, said she was sure other airlines would go bust, following Zoom, Silverjet and XL. "It's an ever-growing list," she said. "It will be the ones that don't have strong balance sheets, probably the start-ups. There will also be a lot more consolidation, which is already happening in Europe."
Some bookmakers are now taking bets on which airline or tour operator will be the next to go bankrupt, though transport analysts are reluctant publicly to name those considered most vulnerable for fear of sparking a panic that would seal their fate.
Gert Zonneveld, a transport analystm, said: "Companies that have gone under in the UK have tended to be younger, smaller companies; the larger companies have a lot more cash and are well established and it takes a long time to achieve that."
Alitalia, the Italian national airline, could be the next high-profile victim of the downturn, having been given one more day by the Italian government yesterday to come to an agreement with trades unions. Ministers said that if the unions did not sign up to a rescue plan for the ailing airline its assets would be liquidated.
British Airways said its programme of redundancies, which are – for now – voluntary rather than compulsory, was the final stage of a restructuring plan launched in 2005. A spokesman for BA said it had intended to complete the restructuring by next March but was now bringing forward the final phase.
Staff have been told that anyone who applies for redundancy will be offered a severance package, though the airline has not set a formal target for the number of people it wants to shed.
"The airline industry faces exceptionally difficult circumstances," BA's spokesman said. "We'll see what response we get from these managers."
The airline has already unveiled a series of measures designed to counter a crippling rise in its jet fuel bills, which are expected to total £3bn this year, 50 per cent more than in 2007.
Last month, it revealed profits during the first three months of the year were 88 per cent lower than in the same period last year and warned price increases and cuts to capacity were inevitable. http://www.independent.co.uk/travel/news-and-advice/warning-30-airlines-will-go-bust-this-year-928774.html
Head for the hills
U.S. economy collapsing under debt
By LINDA LEATHERDALE, TORONTO SUN
I don't know whether to laugh or cry. Or find a cave to hide in.
As the United States collapses under a mountain of debt worth trillions, another Wall Street investment bank struggles to stay afloat and global economies start to crumble -- the Bay Street guru who warned oil would skyrocket to US$200 a barrel has suddenly changed his tune.
Jeff Rubin, CIBC World Markets chief economist, is no longer talking about $200 oil by 2010 and in his latest Canadian Portfolio Strategy Outlook Report scales back other predictions for crude. Instead of crude averaging $125 this year, followed by $150 next year, Rubin now says it will be at $115 this year and $130 next year.
To me that's still overly optimistic. But peak oil advocates -- who paint a Mad Max future where we kill our fellow man for a drop of precious black gold -- would say I'm wrong.
Rubin says his about-face is only temporary, and once we get through economic downturn (he wouldn't dare utter the "GR" words ... global recession) -- we'll be back to prices heading even higher.
Yesterday, even as OPEC announced it would reduce output by 520,000 barrels a day, prices kept gyrating their way down, with light, sweet crude for October delivery falling 68 cents to $102.58 a barrel in New York -- its lowest level since April 1.
But don't expect a break at the gas pumps. Prices in the GTA today will be up 1.6 cents to $1.237 a litre for self-serve, regular -- while in his Rip-Off Alert Liberal MP Dan McTeague warns major refiners and marketers are now charging 10 cents more than the U.S. wholesale price for gasoline.
In Calgary the mark-up is 15.4 cents, Edmonton 13.2 cents and Vancouver, 12.8 cents, according to McTeague's website.
Meanwhile, an independent study released yesterday by U.S. lawmakers blames institutional investors, who poured $60 billion US into commodity markets from January to May, for the rapid rise in oil which hit a record of $147 US a barrel in July.
"The bottom line here is that with regard to commodities, money going in pushes prices up, money going out pushes prices down," says hedge fund manager Michael Masters, a co-author of the report.
The commodities freefall has hit markets hard, with Bay Street's S&P/TSX index on a losing streak since the first of September, losing more than 1,600 points. But yesterday, markets rebounded sharply -- after Wall Street heavy hitter Lehman Brothers, in a desperate bid to survive after losing almost $4 billion US in the third quarter, said it would sell a majority stake in its prized investment management business. It didn't even rule out a sale of the entire company, after recently cutting 1,500 jobs.
So far this year, the 158-year-old investment bank has lost $6.5 billion US, which CEO Richard Fuld describes as "one of the toughest periods in the firm's history."
In Toronto, the S&P/TSX climbed 350.39 points to close at 12,497.15, as investors shopped for bargains after the index lost almost 500 points Tuesday. In New York, the Dow Jones industrial average was up 38.19 points to 11,268.92, after climbing by as much as 127 points earlier in the day.
Bay Street's Rubin, by the way, has also scaled back his outlook for stocks, lowering his year-end target for the S&P/TSX from 14,300 to 13,000, and cutting his 2009 prediction from 15,250 to 14,000. As recently as June, Rubin was so bullish he predicted a 15,200 TSX by year-end.
Meanwhile, the European Union slashed its economic growth outlook, now admitting that Germany, Spain and Britain have suffered brief recessions. In fact, the euro zone's GDP shrank between April and June, the first quarter of negative growth since the currency bloc was created in 1999.
And the subprime fallout continues, with Washington Mutual Inc. stock losing 30% of its value yesterday sinking to its lowest level in 17 years.
With U.S. debt at $9.6 trillion and growing by billions by the second with the war machine and continuous bailouts, a financial Armageddon is in the works.
Like I said, find that cave and hide.
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