Thursday PM January 8th, 2009
by: Ed Mayberry, January 8, 2009 10:01:18 pm
Schlumberger, the world's largest oilfield services company, says it's eliminating up to 1,000 jobs in North America, or about five per cent of its work force, and is looking at cuts elsewhere globally. Schlumberger and other service companies have seen business fall off as crude prices have tumbled and producers large and small scale back operations. "We do expect reductions in other parts of the world, but I have no specifics in terms of timing or numbers," spokesman Stephen Harris said. The company, whose principal offices are in Houston, Paris and The Hague, employs 19,000 in North America and 84,000 worldwide. Oil companies hire service providers like Schlumberger and rival Halliburton for a variety of well-site jobs that can include seismic tests, directional drilling and reservoir management.
New claims for unemployment benefits dropped unexpectedly last week, but the number of people continuing to seek aid rose sharply. The Labor Department says initial applications for unemployment insurance dropped by 24,000 to a seasonally adjusted 467,000 for the week ending January 3rd. Wall Street economists expected initial claims to increase to 540,000. The figure partly reflects seasonal volatility that occurs around the New Year's holiday. Still, the number of people continuing to claim jobless benefits jumped unexpectedly by 101,000 to 4.61 million. That was above analysts' expectations of 4.5 million and the highest level since November 1982.
Galveston officials are pleading with legislators to help rescue the city from dire financial straits nearly four months after Hurricane Ike. Mayor Lyda Ann Thomas and City Manager Steve Leblanc painted a bleak economic picture of their city for members of a legislative committee meeting on the island. They told lawmakers that despite a hiring freeze and a three per cent pay cut for all employees — layoffs are imminent and that property tax revenues will be down by up to 40 per cent. Thomas and Leblanc want lawmakers to let the city temporarily keep most or all of the sales tax revenue. Officials with the University of Texas Medical Branch at Galveston originally estimated the state's oldest medical school sustained about $710 million in damages from Ike. That's now been updated to more than $1 billion. Only about $100 million is covered by insurance.
The 2009 Consumer Electronic Show is underway in Las Vegas. Some 130,000 attendees will check out the latest in electronics from 350 exhibitors, as the show's Colleen Lerro explains.
"One really cool product I saw last night is LGN announced the first broadband-enabled LCD and plasma HD TVs with streaming Netflix capability built right in. So you don't need an extra set-top box or wires or anything. It is just right there in your TV. You, you know, click on your remote and it brings up the site that you would normally see on your, you know, computer, for those who already have Netflix, and you pick what you want and it's up on your TV and then you can watch it."
More than 24,000 industry and corporate buyers are looking at the latest gadgets.
"It's a trade-only audience, so we have manufacturers, buyers, through different distributors, obviously, showing all their products. The buyers are the ones that'll decide what products that you're gonna to see in the Best Buys and different stores like that. Some of these products are available right now, too, but you're going to start seeing them trickle out right after the show into the stores."
New offerings include 3-D television, green items and smaller gadgets like mobile devices, video games and personal navigation systems. Polaroid will unveil a digital camera that produces prints right on the spot. The $200 Pogo is a camera that contains a built-in color printer. It produces 2-by-3 inch photos by selectively heating spots on specially treated paper. Windows 7 is almost ready for prime time. That message comes from Microsoft CEO Steve Ballmer at the opening of the CES show. The operating system could be available on new PCs within a year. It uses much the same underlying technology as the much-maligned Vista. But Windows 7 is supposed to make it easier to install add-on devices and spit out fewer annoying warnings.
Consumer borrowing was cut back by a record amount in dollar terms in November, another sign of trouble for the rapidly weakening economy. The Federal Reserve says borrowing on credit cards, and for such things as auto loans, dropped at an annual rate of $7.94 billion in November, the biggest decline in 65 years of record keeping. That represented a decline of 3.7 per cent from October, which was the biggest fall in percentage terms since a 4.3 per cent plunge in January 1998.
Retailers are reporting dismal sales for December, confirming fears that the holiday season was the weakest in four decades. As merchants report their sales figures, the big exceptions to the gloom were discounters and warehouse clubs. Sears Holdings, which operates Kmart and Sears stores, and Limited Brands are among the many stores that are reporting steep declines in sales at stores opened at least a year. Shoppers, grappling with tightening credit and rising layoffs, focused on smaller purchases and the deepest discounts. But Costco Wholesale is reporting a four per cent gain when the effect of lower gas prices is excluded.
Mortgage giants Fannie Mae and Freddie Mac will extend the suspension of foreclosure sales and evictions from single-family homes through the end of January. The companies had suspended foreclosures through the holidays, but were expected to resume proceedings after January 9th. The government-controlled home loan giants said the extension will allow borrowers facing foreclosure to stay in their homes as the companies work with mortgage servicers to find options for troubled mortgage holders under the streamlined modification program. The program aims to create a more affordable mortgage payment for borrowers at risk of foreclosure. It applies to borrowers who have missed three payments or more.
A survey indicates nearly one in ten Latino homeowners fell behind in mortgage payments last year, and about three per cent of those surveyed said they had received a foreclosure notice. The Pew Hispanic Center says the figures show that Latinos are being impacted by the housing market downturn. The center's survey of 1,540 Hispanic adults was conducted in English and Spanish last November. The strain felt by Hispanic homeowners seemed consistent with that of all U.S. homeowners. The Mortgage Bankers Association, reported last month that a record one in ten American homeowners with a mortgage was at least one month behind on payments or in foreclosure at the end of September 2008.
A preliminary report from a state advisory committee says oil and gas producers got a $78 million tax break last year under Texas' current state business tax. Energy firms paid out $411 million in 2008, down from nearly $489 million in 2007. The Houston Chronicle reports the figures are from a draft of the business tax advisory committee's report to the legislature which is scheduled to be released soon. The report says while the energy industry got a break, other industries didn't. In fact, most other industries shelled out more last year than in 2007. A spokesman for the state's leading oil and gas industry trade group disputed the notion that the industry had gotten a tax break, saying that other taxes paid last year increased due to record-high gasoline prices. The legislature passed the restructured business tax in 2006 to replace the previous loophole-ridden franchise tax.
Gasoline prices at the pump halted their months-long decline and jumped an average 16 cents this week in Texas. AAA Texas reported the average retail price of a gallon of gas reached $1.62. The cost of gasoline across Texas is still 13 cents less than the national average. AAA Texas also says gasoline statewide is still about $1.30 lower than in early January 2008. A statement from the group says a stronger dollar and hope for economic gain under President-elect Barack Obama may have helped push up the price of gasoline. AAA Texas says other factors could be the fighting in Gaza and OPEC's recent announcement on cutting production. Houston's average is at about $1.65 a gallon—up from last week's $1.70 per gallon. Amarillo had the most expensive gasoline in Texas at an average $1.68 per gallon — up 22 cents from one week ago. The survey found San Antonio with the least expensive per-gallon price, at $1.59 — up 15 cents.
The auto industry is criticizing a decision by the Bush administration not to finish putting new fuel-economy rules, into effect. The administration decided instead to leave the issue to the incoming Obama administration. In a statement, the Transportation Department said the financial troubles being faced by automakers will require the next administration to conduct a "thorough review." But the auto industry says any delay in implementing the new rules could cost it some money. A spokesman says what the manufacturers need is some "certainty." The head of an environmental group, Clean Air Watch, says it's "stunning" that the Bush administration would "walk away" from the issue — after first putting forward a proposal that environmentalists said was not aggressive enough.
President-elect Barack Obama is spelling out the key elements of an "American recovery and reinvestment plan" that he is touting to treat a sick economy. Obama told an audience at George Mason University that the plan includes a host of programs to revitalize the economy and create jobs. Specifically, he said he wanted to double the production of alternative energy in the next three years, modernize more than 75 per cent of federal buildings and improve medical record-keeping. He also said that the initiative includes giving the country "21st century classrooms," expanding internet access in rural areas and investing more in science in research.
Obama's proposed tax cuts are running into opposition from senators in his own party who say they won't do much to stimulate the economy or create jobs. Senators from both parties agreed that Congress should do something to stimulate the economy. But Senators emerging from a private meeting of the Senate Finance Committee said that tax portion of Obama's stimulus plan is unworkable. They were especially critical of a proposed $3,000 tax credit for companies that hire or retrain workers. Democratic Senator Kent Conrad of North Dakota described it as "misdirected." The cost of the economic rescue package Obama wants is expected to swell to more than $800 billion or more. About $300 billion of that would be tax cuts or refunds for individuals and businesses.
The head of the government's $700 billion financial rescue program says the effort has made the nation's financial system more stable. Neel Kashkari, the Assistant Treasury Secretary in charge of the bailout program, says the effort had made remarkable progress since it was passed by Congress on October 3rd. Kashkari called the financial system "fundamentally more stable" than when the legislation was passed, and says the rescue program helped to stem a series of financial institution failures.
The Treasury Department says it has disbursed $266.9 billion from the financial rescue program. In its latest update to Congress, the department says it closed $65.4 billion in transactions since its last report on December 2nd. Under the law that Congress passed on October 3rd, Treasury must provide a report summing up its activities once its commitments pass certain milestones. The new report included $187.5 billion provided to banks in an effort to get them to resume more normal lending, and $19.4 billion in support for the auto industry.
The Bank of England has cut official interest rates by half a percentage point to 1.5 per cent — the lowest level in its 315-year history as it attempts to ward off a prolonged recession. The cut means British central bankers are moving closer to the limits of conventional monetary policy after trims totaling three percentage points since the beginning of October. Britain faces its bleakest year since the early 1990s recession. House prices have suffered their worst year on record, the huge services sector is shrinking at a record pace and several major retailers have collapsed as consumers curb spending. Inflation is expected to fall from 4.1 per cent currently to well below the government's two per cent target, heading toward destabilizing negative inflation.
Ukraine's natural gas chief says he wants Russia to provide extra fuel to boost the flow of gas before his company can allow Russia to send the fuel back into a freezing European Union. Russia's Gazprom has announced it will resume pumping gas toward Europe once international monitors are in place to check the flow through Ukraine's pipelines. Oleh Dubina of Ukraine's Naftogaz said his company will ship Russian gas to Europe on the condition "that Russia restores supplies and provides technical gas for Ukraine's gas transport system." Gazprom Chief Alexei Miller and Dubina met twice Thursday and are continuing to talk as they fly back to Moscow, trying to resolve the dispute that has caused an energy crisis in Europe.
The European Union says Gazprom is insisting that Russians be included in the monitoring mission overseeing Russian natural gas as it flows through Ukraine pipelines. Moscow's insistence to have Russians checking the gas flow through Ukraine goes against an agreement the EU had with Kiev to limit the group to EU observers alone. Agreement on an observer mission would speed up the return of gas supplies from Russia to Europe, which is suffering a bitter winter cold snap. Ukrainian officials have denied Russian accusations that they have siphoned off gas intended for Europe, saying instead they needed to use some of the Russian gas to keep the pipelines running.
An Iraqi oil official says Iraq's oil revenues were up over 30 per cent last year — to about $60 billion — despite the sharp decline in world prices in the last half of the year. Falah al-Amiri, the head of the State Oil Marketing Organization, also told the Associated Press that Iraq's oil exports averaged 1.85 million barrels a day in 2008--a 13.5 per cent increase from 2007. He says December's export levels reached about 1.815 million barrels per day. He expects Iraq to export two million barrels per day this month. Iraq depends on oil revenues for nearly 95 per cent of its budget. It has suffered as oil prices have plunged roughly 70 per cent from record highs of almost $150 last July.
Kuwait's commerce and industry minister says the government of this small oil-rich state is confident it will not have to pay a penalty for withdrawing from a $17.4 billion joint-venture with Dow Chemical. In comments published in al Watan Daily, Ahmed Baqer says Kuwait has taken all measures to deal with a possible lawsuit and "avoid" a $2.5 billion break-up fee. He did not elaborate. Baqer's remarks have been the only official response to a Dow statement Tuesday that it would pursue legal action against its state-owned Kuwaiti partner in K-Dow. Kuwait's cabinet—succumbing to lawmaker pressure — scrapped the D-Dow deal days before its January 1st launch. Some lawmakers argued it was too expensive given the current economic climate.
Some of the nation's top financial journalists believe the media dropped the ball as the nation's economy lurched toward crisis mode. But in a survey, they were split on who deserved the most blame for the financial problems. The new research firm started by former MSNBC chief Dan Abrams surveyed 100 financial journalists from CNBC, the Wall Street Journal, the New York Times and other outlets. They split almost evenly on who deserved the most blame for the crisis: 45 said banks and 44 said regulators. Only nine journalists pointed the finger at consumers. Sixty-two of the journalists criticized the media's performance leading up to the crisis, while the rest defended their work.
President-elect Barack Obama is urging Congress to postpone the February 17th switch from analog to digital television broadcasting. In a letter to key lawmakers, transition team co-chair John Podesta warned that too many Americans who rely on analog TV sets to pick up over-the-air broadcasts won't be ready. The incoming administration is pushing for a delay in part because the Commerce Department has run out of money for the coupons that subsidize digital TV converter boxes for consumers. People who don't have cable or satellite TV or a new TV with a digital tuner will need the converter boxes to keep their analog TVs working. Obama officials are also concerned that the government is not giving consumers enough help with the TV transition.
Dell announced that it'll slash its Irish work force and shift its European manufacturing to Poland. Managers told Dell's 4,300 Irish employees that 1,900 of them — overwhelmingly assembly-line workers--would lose their jobs between April 2009 and January 2010. The Round Rock-based computer maker's move is certain to undermine Ireland's recession-hit economy. Dell is Ireland's second-largest corporate employer and its biggest exporter. In recent years, it's contributed about five per cent to Ireland's gross domestic product. Economists warn that each Dell job underpins another four to five jobs in Ireland. By then, Dell says it plans to have transferred the entire Irish production of laptops and desktop computers to a new Dell plant in Poland's third-largest city of Lodz and to subcontractors chiefly in Asia.