Archive for the ‘costs’ Category

Piracy Spurs Threats to Shipping Costs

November 19, 2008

The seizure by pirates of a giant Saudi oil tanker far off the coast of Kenya could enlarge the “war risk” zone that already is lifting insurance costs for thousands of ships heading west of Africa, further raising the cost of piracy to world-wide shipping.

More vessels have begun avoiding the direct passage most often attacked by pirates and taking a much longer route around the southern tip of Africa. They’re hoping to pressure governments along the direct route, through the busy Gulf of Aden, to crack down more effectively on piracy or lose revenues from cargo-ship traffic.

By John W. Miller
The Wall Street Journal

But the unprecedented attack disclosed Monday on the MV Sirius Star, carrying $100 million worth of crude hundreds of miles from shore in the Indian Ocean, is undercutting that strategy. It could raise the cost of insurance and crews for ships that take the longer route, which already costs far more in fuel.

The boldness of the attack on the 1,080-foot Sirius Star may prompt insurers to require special “war risk” insurance costing tens of thousands of dollars a day to cover travel across a much greater area of water. It also could spur shippers to hire more onboard security for their vessels, which many have resisted because of costs and the fear of escalating armed conflicts with the pirates.

“This could be a game-changer,” says Peter Hinchliffe, maritime director of the London-based International Chamber of Shipping. “It’s no secret the whole industry is looking into this.”

Governments and shippers have sparred over who should bear responsibility for fending off the pirates, who seized 26 ships in the region during the summer alone and have collected up to $30 million in ransom so far this year, according to the International Maritime Bureau.

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http://online.wsj.com/article/SB122701864743437147.html

Jobless ranks hit 10 million, most in 25 years

November 8, 2008

The nation’s jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It’s only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

By JEANNINE AVERSA, AP Economics Writer

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Barack Obama, in his first news conference as president-elect, said the nation was facing the economic challenge of a lifetime but expressed confidence he could deal with it.

“Immediately after I become president, I’m going to confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity,” he said after meeting with economic advisers in Chicago. “I’m confident a new president can have an enormous impact.”

Wall Street revived somewhat after two days of big losses. The Dow Jones industrials rose 248 points.

Still, the Labor Department’s unemployment report provided stark evidence that the economy’s health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.

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http://news.yahoo.com/s/ap/20081108/ap_on_bi_ge
/financial_meltdown;_ylt=Aj1J5vsTtXduBFFeCnZz7Sqs0NUE

Pentagon Expects Cuts in Military Spending

November 3, 2008

After years of unfettered growth in military budgets, Defense Department planners, top commanders and weapons manufacturers now say they are almost certain that the financial meltdown will have a serious impact on future Pentagon spending.

By Thom Shanker and Christopher Drew
The New York Times
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Across the military services, deep apprehension has led to closed-door meetings and detailed calculations in anticipation of potential cuts. Civilian and military budget planners concede that they are already analyzing worst-case contingency spending plans that would freeze or slash their overall budgets.

The obvious targets for savings would be expensive new arms programs, which have racked up cost overruns of at least $300 billion for the top 75 weapons systems, according to the Government Accountability Office. Congressional budget experts say likely targets for reductions are the Army’s plans for fielding advanced combat systems, the Air Force’s Joint Strike Fighter, the Navy’s new destroyer and the ground-based missile defense system.

Even before the crisis on Wall Street, senior Pentagon officials were anticipating little appetite for growth in military spending after seven years of war. But the question of how to pay for national security now looms as a significant challenge for the next president, at a time when the Pentagon’s annual base budget for standard operations has reached more than $500 billion, the highest level since World War II when adjusted for inflation.

US Secretary of Defense Robert Gates said that Afghanistan's ...
Above: U.S. Secretary of Defense Gates. AFP/Pool/File/Haraz N. Ghanbari

On top of that figure, supplemental spending for the wars in Iraq and Afghanistan has topped $100 billion each year, frustrating Republicans as well as Democrats in Congress. In all, the Defense Department now accounts for half of the government’s total discretionary spending, and Pentagon and military officials fear it could be the choice for major cuts to pay the rest of the government’s bills.

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http://www.nytimes.com/2008/11/03/washington/
03military.html?_r=1&hp&oref=slogin

China: Global Financial Turmoil Hits “World’s Factories”

October 15, 2008

By Tim Johnson, McClatchy Newspapers

GUANGZHOU, China — Global financial turmoil has sent gale-force winds across some factory floors in China , and barely a breeze across others. The differing fates of factory owners such as David Xu and James Jiang illustrate why China Inc. displays some resilience in the face of the global crisis.

Xu’s factory makes television sets of such low quality that they can’t sell in the United States and Europe . So he markets them in the Middle East , and sales are brisk.

“We don’t feel much,” Xu said of the financial turmoil. “I’m not worried.”

It’s a different story for Jiang. His factory makes low-cost musical keyboards for hobbyists and students. They sell in Target’s Australian stores and Fred’s Inc. , a discount store chain in America’s Southeast and Midwest. Orders now only trickle in.

“Nobody has money,” Jiang grumbled. “I think the orders may drop in half.”

Over the past few years, China has opened up vast new markets. Today, only half of its exports go to the United States , the European Union and Japan . The rest go to expanding markets in places such as South Africa , Russia , India and oil-rich Middle Eastern states. So in times of crisis, some factories may suffer severely while others escape unscathed.

A stroll Wednesday through the opening day of the Canton Trade Fair, the largest such fair in China and one of the biggest in the world, underscores the acumen of China’s strategy of diversifying markets. Arab merchants in dishdashas walked beside Russian vendors, German middlemen and Sudanese importers. Chatter occurred in a dozen languages. Translators were a hot commodity.

Some vendors reflected on the….

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http://news.yahoo.com/s/mcclatchy/20081015/wl_mcclatchy/3073360_1

All that money you’ve lost — where did it go?

October 11, 2008

By ERIC CARVIN, Associated Press Writer

NEW YORK – Trillions in stock market value — gone. Trillions in retirement savings — gone. A huge chunk of the money you paid for your house, the money you’re saving for college, the money your boss needs to make payroll — gone, gone, gone.

Whether you’re a stock broker or Joe Six-pack, if you have a 401(k), a mutual fund or a college savings plan, tumbling stock markets and sagging home prices mean you’ve lost a whole lot of the money that was right there on your account statements just a few months ago.

A money changer counts out US dollars at a currency exchange ... 

But if you no longer have that money, who does? The fat cats on Wall Street? Some oil baron in Saudi Arabia? The government of China?

Or is it just — gone?

If you’re looking to track down your missing money — figure out who has it now, maybe ask to have it back — you might be disappointed to learn that is was never really money in the first place.

Robert Shiller, an economist at Yale, puts it bluntly: The notion that you lose a pile of money whenever the stock market tanks is a “fallacy.” He says the price of a stock has never been the same thing as money — it’s simply the “best guess” of what the stock is worth.

“It’s in people’s minds,” Shiller explains. “We’re just recording a measure of what people think the stock market is worth. What the people who are willing to trade today — who are very, very few people — are actually trading at. So we’re just extrapolating that and thinking, well, maybe that’s what everyone thinks it’s worth.”

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http://news.yahoo.com/s/ap/20081011/ap_on_bi_ge/where_s_
the_money;_ylt=AkKucZ8sq3OvinoJZ3KzHyms0NUE

Passers-by stop to view a screen displaying markets news, with ...
Passers-by stop to view a screen displaying markets news, with Moscow’s Micex index displayed, Friday, Oct. 10, 2008, Paris. Regulators in Russia ordered Moscow’s MICEX not to open for regular trading at the usual time, and the opening of the RTS was also postponed until further notice, the state-run RIA-Novosti news agency said.(AP Photo/Thibault Camus)

Playing Frisbee on a Precipice: Seriousness of American Politicans in Doubt During Economic Crisis

October 10, 2008

By Peggy Noonan
The Wall Street Journal

There are 3½ weeks to go. Life, and political campaigns, can turn on a dime. But I think it just turned on a lot of dimes.

There was an October surprise, and it has all but certainly decided the race. On the left, a smug triumphalism is setting in. On the right, anger rises: the finger pointing is about to begin. In parts and pockets of the middle, we have Americans who aren’t thinking about politics because they’re busy trying to imagine what a modern depression would look like and wondering, for the first time ever, if it is possible that they may wind up living in their cars.

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http://online.wsj.com/article/SB122359863551021415.html

Economists Expect Crisis to Deepen

October 10, 2008

By Phil Izzo
The Wall Street Journal

The U.S. economy has sunk into a recession and government action is critical to stem the damage, according to economists in the latest Wall Street Journal forecasting survey.

“We’re in the middle of a very dark tunnel,” said Brian Fabbri of BNP Paribas, referring to the worsening credit crunch. “Each day we see another crack in the system.”

Those cracks are quickly adding up. On average, the 52 economists surveyed now expect U.S. gross domestic product to contract in the third and fourth quarters of this year, as well as the first quarter of 2009.

This is the first time that survey forecasts for those periods have turned negative. If those predictions bear out, it would mark the first time U.S. GDP — the total value of goods and services produced — has contracted for three consecutive quarters in more than a half century. Economists put the odds of recession in the next 12 months at 89%, up from 60% in last month’s survey.

It is a challenging scenario for the next president, as the election moves into the homestretch. Either Sen. John McCain or Sen. Barack Obama likely will face an economy in the midst of recession on Inauguration Day, even if the credit crisis begins to ease. The new administration will have to get up to speed quickly, taking over the largest government intervention since the Great Depression.

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http://online.wsj.com/article/SB122349368554816267.html

Oil plummets below $83 on global slowdown fears

October 10, 2008

By ALEX KENNEDY, Associated Press Writer

LONDON – Oil prices plummeted to a one-year low below $83 a barrel Friday in European trading as investor fears of a severe global economic downturn caused by the crisis in credit markets sparked a panicked sell-off of both crude and equities.

Light, sweet crude for November delivery was down $3.85 to $82.74 a barrel in electronic trading on the New York Mercantile Exchange by midmorning in Europe, the lowest since October 2007. The contract fell $1.81 overnight to settle at $86.62.

In this Oct. 3, 2008 file photo, an oil pump seen in the desert ...
In this Oct. 3, 2008 file photo, an oil pump seen in the desert area of Sakhir, Bahrain, in the Persian Gulf. Oil prices rose off earlier lows on a rate cut by the world’s major central banks Wednesday, recovering after investor concerns that the U.S. credit crisis was enveloping the globe — and would hurt crude demand — drove prices down.(AP Photo/Hasan Jamali, file)

“The whole market has lost confidence in everything,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “Everyone is worried about global growth, and oil is the front line commodity for that. There’s just a lot of panic and fear in the market.”

Investors have been unimpressed by interest rate cuts by the U.S. and other leading central banks this week to help unclog the credit markets and promote lending. A credit crisis that began last year in U.S. sub-prime mortgages has spread across the globe, forcing governments to spend hundreds of billions of dollars to bail out banks, brokerages and insurance companies, and fears are growing it will sink the wider economy.

All European stock markets were deep in the red, following sharp losses in Asia and the U.S. Britain’s FTSE 100 was down 5.3 percent, while Germany’s DAX was 7.9 percent lower. The Dow Jones industrial average closed down 7.3 percent to fall below the 9,000 mark for the first time since 2003 as Japan’s Nikkei 225 plunged 9.6 percent.

“The problem is no one really knows how far and deep this will go,” Pervan said. “But we can see from the size of the rescue packages, this is a really serious deal. This isn’t a normal bear market.”

What was initially a seizure in credit markets has now become a real threat to economic growth around the world, causing an energy watchdog to slash its forecasts for oil demand over the next two years.

The International Energy Agency cut its forecast for oil demand by 240,000 barrels per day this year and by 440,000 barrels per day in 2009. It also said the credit freeze is hurting the supply side of the oil industry,”with independent producers and, potentially, several Russian operators seen as particularly at risk.”

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http://news.yahoo.com/s/ap/20081010/ap_on_bi_ge/as_
oil_prices;_ylt=AroqZfeIeswyQhPA0BVRsY.s0NUE

Oil soars to record above $117

April 21, 2008

By Ikuko Kao

LONDON (Reuters) – Crude oil prices surged above $117, setting a new record high on Monday because of worries of supply disruptions from major producers and comments by OPEC reiterating there is no need to raise output.

U.S. light crude struck a record high of $117.40 a barrel. It was trading 27 cents higher at $116.96 by 1155 GMT (7:55 a.m. EDT).

File photo shows an aerial view of new oil platforms P-52 for ...
File photo shows an aerial view of new oil platforms P-52 for the oil company Petrobas at Campos basin in Rio de Janeiro, 28 November, 2007.(Bruno Domingos/Reuters)

London Brent crude also struck its all time peak of $114.65. It was trading at $114.20, up by 28 cents.

The Organisation of the Petroleum Exporting Countries (OPEC) sees no need to raise oil production to counter high oil prices, the group’s president Chakib Khelil said on Sunday.

His remark was followed by Iranian oil minister Gholamhossein Nozari, who said on Monday oil prices were not too high in real terms.

“OPEC’s assertion that an increase in its oil production will not help to bring down prices should be put to the test,” the Centre for Global Energy Studies said in a research note.

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http://news.yahoo.com/s/nm/20080421/bs_nm/markets_oil_dc;_ylt=
AgIP06EfqKIHJBMCg4mNjQqs0NUE

OPEC chief: Oil prices would go higher regardless of supply

April 20, 2008

By MARIA GRAZIA MURRU, Associated Press Writer

ROME – OPEC Secretary-General Abdullah el al-Badri said Sunday oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply — something he doubted.
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“Oil prices, there is a common understanding that has nothing to do with supply and demand,” al-Badri said on the sidelines of an energy conference in Rome.

Laborers check pipes in front of the oil tanks at a refinery ... 

Oil prices reached a new high Friday at $117 a barrel.

A host of supply and demand concerns in the U.S. and abroad, along with the dollar’s weakness, have served to support prices, even as record retail gasoline prices in the U.S. appear to be dampening demand. Crude prices have risen as much as 4 percent last week.

The OPEC chief said the Organization for Petroleum Exporting Countries “will not hesitate” to increase production if the group thought the higher prices were due to shortages. But he said more oil will not solve the high prices.

Petrol pumps at a petrol station in New Delhi. Oil-consuming ... 

OPEC’s production levels were just one of many factors, he said.

“But how much higher it will go, of course it depends on a number of things: the political situation, whether there is a natural catastrophe, whether there are speculations in the market, whether there are strikes in certain producing countries. So there are many other factors other than OPEC production,” al-Badri said.