Thursday PM September 4th, 2008
by: Ed Mayberry, September 4, 2008 11:09:55 am
A limited amount of oil and gas production has been restarted in the Gulf of Mexico with growing evidence that the nation's energy complex avoided a disaster in Hurricane Gustav. Damage also appeared limited at the crucial Louisiana offshore oil port, which handles about 12 per cent of the nation's crude imports. But more than a million customers in the region are without power, including some refineries that process oil into gasoline and diesel. In Louisiana, New Orleans and Baton Rouge were particularly hard hit. Inspections are continuing, but oil companies were hopeful to begin some production in the next few days. For refineries, it could take a week or even more, depending on their size. But Hurricane Ike and Tropical Storm Josephine are headed west across the Atlantic Ocean.
The Department of Energy has received a second request for a withdrawal from the Strategic Petroleum Reserve. This time, Houston-based Marathon Oil is asking to tap the stockpile because of disruptions caused by Hurricane Gustav. The first request to arrive in Gustav's wake came from Venezuela's government-controlled Citgo Petroleum. But that request was withdrawn late yesterday with larger ships being allowed to pass through the Calcasieu ship channel to Citgo's Lake Charles, Louisiana, refinery. The southwestern Louisiana channel had been closed completely during Gustav. But larger and larger ships have been allowed to pass through when it became clear that the channel floor was mostly free of large debris. But marathon says it's having difficulty getting crude to its Robinson and Catlettsburg refineries in Louisiana. The Energy Department continues to review the request. The reserve is an emergency depot the Energy Department maintains in southeast Texas and southwestern Louisiana.
The Energy Department reports one million customers remain without electricity due to Gustav, including nearly 926,000 customers in Louisiana. Gustav offered New Orleans a reprieve, but Entergy reports the Baton Rouge area took a hit. The last storm that caused damage close to Gustav was in 1992 when Hurricane Andrew hit south Florida, crossed the Gulf of Mexico and then slammed Louisiana. Entergy and Baton Rouge-based Dixie Electric Membership have said it may be weeks before all power is restored. Louisiana Governor Bobby Jindal says power continues to be the most critical obstacle to the recovery of his state.
American Airlines is notifying 469 employees at airports in five U.S. cities that they could be out of work starting in November. The job losses are a result of the airline's reductions in flights due to high oil prices and the softening economy. A total of 353 workers at Chicago O'Hare International Airport received the notices. The remaining notices went to workers in Los Angeles; San Francisco; Raleigh-Durham, North Carolina, and Columbus, Ohio. American spokeswoman Tami McLallen tells the Fort Worth Star-Telegram letters went to gate and ticket agents, ramp workers, automotive mechanics and airport-based management and support staff. American's vice president of employee relations, Mark Burdette, said in a letter last week to the Transport Workers Union, that fewer people would be needed to operate the airline as the operating schedule is cut. Airline officials hope to reduce the number of layoffs with a voluntary early retirement program.
The U.S. government says the number of people signing up for jobless benefits increased unexpectedly last week, reversing three weeks of decline. The Labor Department reports that new applications for unemployment insurance rose to a seasonally adjusted 444,000, up 15,000 from the previous week. Economists had expected a slight drop in the level of claims to 420,000. The number of people continuing to receive unemployment benefits also rose slightly to 3.44 million for the week ending August 23rd, up 6,000 from the previous week.
Americans' productivity soared in the spring while labor costs declined, two welcome outcomes that should relieve concerns that inflation is getting out of hand. The Commerce Department says productivity, the amount of output for every hour of work, jumped 4.3 per cent at an annual rate in the April-June quarter, a full percentage point higher than economists expected. At the same time, labor costs fell at an annual rate of 0.5 per cent—slightly better than expected.
A private research group says the U.S. service sector grew unexpectedly in July for the first time in three months as new orders increased and inflation moderated. The Institute for Supply Management, a trade group of purchasing executives, said the services sector index rose to 50.6 in August from 49.2 in July. It beat economists' prediction of a reading of 50. A reading below 50 signals contraction, while a reading above 50 indicates growth.
Comcast is appealing an FCC ruling that the company is improperly blocking customers' Web traffic, triggering a legal battle that could determine the extent of the government's authority to regulate the Internet. In a precedent-setting move, a divided Federal Communications Commission last month determined that the company is violating a federal policy that guarantees unfettered access to the Internet. Comcast challenged the FCC decision in the U.S. District Court of Appeals in Washington, D.C. Comcast Executive Vice President David L. Cohen says the company is seeking “review and reversal” of the FCC order and that the commission's action was “legally inappropriate and its findings were not justified by the record.”
The European Central Bank and the Bank of England are keeping their key interest rates unchanged in the face of mounting inflation fears and slowing growth across Europe. The decisions by both banks to leave the benchmark rates at 4.25 per cent in Europe and five per cent in Britain were largely expected. The ECB's rate is at a seven-year high while the Bank of England has left its rate unchanged at five per cent since April when it lowered the figure by a quarter of a percentage point.
Many of the nation's retailers are reporting a sluggish start to the back-to-school season as shoppers focused on buying essentials in August amid persistent worries about high gas and food prices, a slumping housing market and a weak job market. Consumers continue to largely stick to purchases of necessities. As merchants report their August sales results, discounters such as Wal-Mart were among the few bright spots. It posted higher August sales, topping Wall Street forecasts. But mall-based apparel stores and department stores such as Stage Stores, Saks and Wet Seal recorded same-store sales declines. Same-store sales, or sales in stores open at least a year, are considered a key indicator of a retailer's health. The monthly sales numbers bode poorly for the holiday shopping season. Many merchants entered the fall season with slim inventories, but larger reductions may now be required in the face of weak sales.
Target says august same-store sales fell 2.1 per cent as consumers shopped cautiously, mainly for essentials like food. The discount retailer says results were within its planned range and analysts polled by Thomson Reuters, on average, expected a larger drop of 2.6 per cent. For the four weeks ended August 30th, total sales rose three per cent to $4.85 billion. Target says health care and food items were the strongest sellers while more discretionary items such as apparel and home products were weaker. Minneapolis-based Target expects September same-store sales to be within the range of down one per cent to up one per cent, but says current and expected tropical storms could lead to greater volatility during the period.