Friday PM May 23rd, 2008
by: Ed Mayberry, May 23, 2008 9:05:33 pm
AAA and the Oil Price Information Service says the price of a gallon of regular rose more than four cents overnight to over $3.87. But it's worse for drivers in Alaska, Connecticut, California, New York and Illinois. In those five states, the average price is already more than $4 a gallon. Alaska is tops at $4.18. Analysts say with global oil prices continuing to climb to new highs, pump prices everywhere could soon rise well above the $4 barrier. The latest numbers mean that filling an empty tank on a Ford Explorer would cost $87, while filling up a Honda Accord would run you about $72. The weekly AAA Texas Gas Price Survey finds regular self-serve is averaging $3.73 per gallon--five cents more than last week. Houston's average is up almost a nickel to $3.63 per gallon. The survey showed the most expensive gasoline in Texas is found in Amarillo, where the average price rose five cents this week to $3.75. The cheapest gasoline is in El Paso, where the average price rose four cents to $3.67 per gallon.
AAA spokeswoman Rose Rougeau says higher prices could mean slightly fewer Memorial Day travelers on the roads of Texas this weekend, compared to last year. The auto club estimates more than 31.5 million drivers will take to the highways. That's just slightly lower than last year despite the fact that the price of gasoline is more than 60 cents a gallon higher this year. The auto club says oceans and beaches seem to be the favorite destination. Analysts predict the average price could rise as high as $3.90 a gallon this Memorial Day weekend and easily blast past $4 in coming weeks. Some motorists say they are staying closer to home.
Sales of previously-owned homes have declined for the eighth time in nine months. The National Association of Realtors reports existing home sales fell one percent in April, matching the all-time low seen in January. The records go back to 1999. Analysts say additionally troublesome is word of growing backlog of unsold single-family homes. It rose to nearly 11 months supply at the current sales pace. The trade group's chief economist says there is some reason for optimism for the second half of the year. He says more types of mortgages will become available as the industry and the government respond to the severe credit crunch that began last August.
United Airlines ratcheted up the pressure on fliers ahead of the holiday weekend by raising most domestic fares. The suburban Chicago-based airline raised fares by as much as $60 roundtrip to offset the runaway cost of fuel. A spokeswoman for the nation's second-largest airline also says it's "seriously considering" following Fort Worth-based American Airlines in charging passengers to check their first piece of luggage. The ticket price increase took effect late Thursday. It'll leave travelers paying $10 to $60 more, depending on how far they fly and the competition on the route. The biggest increase affects routes of 750 miles or more that low-cost carriers such as Dallas-based Southwest Airlines don't serve. That's less than the distance between New York and Chicago. United has been among the most aggressive carriers in pushing fares and fuel surcharges higher in recent months. Its increases are often rapidly matched by competitors. Airlines are prohibited from agreeing to simultaneously raise fares, but nothing prevents them from following the lead of other airlines. American Airlines, the biggest U.S. carrier, said it matched the increase. Delta Air Lines also matched the increase, according to airfare research site farecompare.com. The Atlanta-based carrier did not respond to multiple calls seeking comment. Separately, Airtran raised leisure ticket prices by $30 and business class fares by $50 roundtrip. Such a large change is unusual for a budget carrier.
American Airlines breaks ground next month by charging $15 for the first checked bag. American is already dealing with confusion over this week's announcement about the new fee for the first checked bag, as the carrier faces higher fuel prices. Spokesman Tim Wagner says passengers whose carry-on must be checked because the overhead bins are full--won't be charged. Eagner says only about half of U.S. travelers check at least one bag. Other airlines are studying American's new fee. Southwest Airlines, CEO Gary Kelly says he doesn't like hitting travelers with extra fees. Kelly says Southwest does not want to "nickel-and-dime" customers because they'll complain and they won't come back.
ExpressJet Holdings will reduce its fall schedule by 30 percent to help offset rising fuel costs and excess capacity. The Houston-based regional carrier serves Austin, San Antonio and El Paso.
Increased fares and new fees are irritating air travelers, but airlines still can't raise money or cut flights fast enough to cover ever-higher fuel prices. The Associated Press reports--in the view of airline executives and analysts--the industry is facing its toughest challenge, with little prospect that carriers can return to profits anytime soon. Most of the big airline companies have large cash stockpiles. But analysts suggest some airlines could burn through their cash and go bankrupt by early next year. Already, several smaller airlines have filed for bankruptcy protection or simply shut down in recent months. Analyst Ray Neidl with Calyon Securities says, that after the 2001 terror attacks, "at least you knew passengers were coming back. Oil at over $130 is unsolvable.'' AP reports that among the largest airlines, analysts rate US Airways as the most likely to be pushed into bankruptcy, followed by United Airlines.
An internal audit of billions of dollars paid to U.S. and Iraqi contractors found that nearly every transaction failed to comply with federal laws or regulations aimed at preventing fraud. In some cases, there weren't even basic invoices explaining how the money was spent. That's according to results released of an investigation by the Defense Department inspector general. The probe said that during the five-year period from 2001 through 2006, nearly $8 billion in payments skirted billing rules with some violations egregious enough to invite potential fraud. The findings provided fresh fodder for anti-war Democrats, who say the Bush administration has turned a blind eye to the problem of corruption and fraud by relying too heavily on contractors to manage the war.
World rice prices may come down after tripling in Asia over the past year, but a United Nations agency warns that food prices overall will stay high for years to come. It says high oil prices, increasing demand, flawed trade policies, buying panic and speculation have all combined to send food prices soaring around the world. The Food and Agriculture Organization does have some good news. It says world prices of most agricultural commodities have begun to come down. Even so, it says prices are unlikely to fall back to pre-2007 levels. It says there is risk that millions more people will go hungry.
Halliburton has made a conditional bid of $3.36 billion for Expro International Group, the British oil services firm. Halliburton's all-cash proposal of $30.14 per share is richer than the $28.36-per-share offer made in April by a consortium led by Candover Partners, valuing the company at $3.16 billion. An Expro statement said the Halliburton proposal "does not yet constitute a firm intention to make an offer" and was subject to preconditions. Houston-based Halliburton, which provides services and equipment to oil and natural gas companies, said it considers Expro's sub-sea and flow management sector to be an area of potential expansion. Expro's primary focus is providing services and products to measure and control the flow of oil and gas from wells.
Chesapeake Energy intends to appeal an $11 million jury verdict awarded to TXD Services in a breach-of-contract dispute involving drilling rigs. Oklahoma City-based Chesapeake had claimed that four Schramm drilling rigs it leased from Fort Worth-based TXD did not meet lifting-capacity rating specifications and were unsafe. U.S. District Judge Robin Cauthron of Oklahoma City granted a summary judgment to TXD, ruling that Chesapeake was aware of the rigs' limitations before executing the contract. TXD attorney Terry Tippens says the company incurred more than $30 million in costs in building the rigs before Chesapeake decided to reject them.
Clear Channel Communications says it'll get full funding for the debt financing needed for its $17.9 billion private buyout. That clears one hurdle in the path of the privatization of the San Antonio-based radio station chain. Clear Channel struck a deal to go private about a year and a half ago. The company decided earlier this month to take a lower price and slightly higher lending rates to settle a dispute with its lenders. Clear Channel's lenders include CitiGroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland and Wachovia. They agreed to place all financing into an escrow account, pending the deal's closing. The bank syndicate had until Friday to comply with a settlement agreement related to lawsuits filed in March in the state courts in Texas and New York. The acquisition's private equity sponsors and certain shareholders investing in the new company are required to fund the equity financing into escrow by Wednesday. Clear Channel struck the original deal to be taken private by the buyout firms Bain Capital Partners and Thomas H. Lee Partners in November 2006.
A farm workers advocacy group and Burger King have agreed on a deal to help boost wages and improve conditions for Florida tomato pickers. The plan ends a bitter dispute between the Coalition of Immokalee Workers and the Miami-based fast-food company. It is the nation's second biggest hamburger chain. Burger King agreed to pay 1.5 cents more per pound of tomatoes it buys from Florida growers, with the understanding that a penny of that will be passed to workers. The rest will go to growers to help cover additional payroll taxes and administrative costs, to encourage their participation. The coalition says that roughly doubles the earnings of the workers while they are picking.
A Roswell, New Mexico, aircraft paint shop's top official has been fined $300,000. Carl Baldwin pleaded guilty to knowingly hiring illegal immigrants. Federal charges against Baldwin were filed last November after an August 2006 immigration raid on the shop owned by San Antonio-area-based Dean Baldwin Painting.
The number of rigs actively exploring for oil and natural gas in the United States increased by 27 this week to 1,889. Houston-based Baker Hughes reported that of the rigs running nationwide, 1,493 were exploring for natural gas and 386 for oil. Ten were listed as miscellaneous. A year ago, the rig count stood at 1,760. Of the major oil- and gas-producing states, Texas gained 21 rigs. Baker Hughes has tracked rig counts since 1944. The rig tally peaked at 4,530 in 1981, during the height of the oil boom. The industry posted several record lows in 1999, bottoming out at 488.