Reuters blog archive
from Tales from the Trail:
After negotiating a tricky stretch of road, the Obama campaign may be easing into the straightaway in the gas-driven presidential race.
News on Monday of a delay in the planned closure of the largest refinery on the East Coast could mean an end to skyrocketing gas prices. And that would effectively take the wind out of a forceful Republican line of attack -- that the president is to be blamed for $4 a gallon gas, arguably the most visible price in the American economy today.
The narrative was working against the president, who currently gets some of his lowest poll marks for his handling of energy prices, even though the causes of higher prices are largely beyond his control. Even so, we shouldn't expect the Republicans to simply drop the rhetoric.
from Tales from the Trail:If you had to pick a name for a deli sandwich in honor of Washington, D.C., there's one clear choice: "The Ruckus." In the city's super-charged atmosphere, politicians, lobbyists and hired aides can barely let anything go by without a fight.
Today it was rising gasoline prices that have Republicans and Democrats at each other's throats. Both parties realize they really cannot do very much about retail prices, but they're scrambling in hopes that voters don't blame them for a pocketbook issue in an election year.
from Global Investing:
The NAHB U.S. homebuilder sentiment index held at 28, below economists' expectations for 30.
Apple will initiate a regular quarterly dividend of $2.65 a share in July and will buy back up to $10 billion of its stock starting in fiscal 2013.
from Global Investing:
Where are the missing barrels of oil, asks Barclays Capital.
Oil inventories in the United States rose sharply last week, with demand for oil products such as gasoline at the lowest in 15 years and crude stockpiles at the highest since last September. Americans, pinched in the wallet, are clearly cutting back on fuel use.
But worldwide, the inventories picture is different -- Barclays calculates in fact that oil stocks are around 50 million barrels below the seasonal average. And sustainable spare capacity in the market is less than 2 million barrels per day. What that means is that the world has "extremely limited buffers to absorb any one of the series of potential geopolitical mishaps." (Barclays writes)
from George Chen:
By George Chen
The opinions expressed are the author’s own.
These days I'm increasingly convinced that inflation is not just a China issue but a global problem and one that is becoming worse.
Yesterday when I posted a photo of rice noodles on my Chinese Twitter-like mini blogging account, I didn't expect it would lead to quite such an active online discussion. I paid HK$16 (about US$2) for the bowl of noodles in the canteen of the University of Hong Kong (HKU). My friends from Geneva to New York to Shanghai "complained" that the price was way too cheap.
from Reuters Money:
There's not much that's good or reassuring that can be said about rising oil prices and their effects on consumers. Crude costs rise halfway around the world, and U.S. drivers and shoppers feel it in their wallets faster than the actual oil could be shipped. On a macro level, analysts frequently suggest that every $10 per barrel increase in the price of oil cuts half a percentage point off of world gross domestic product growth.
The latest hit occurred because of turmoil in Libya, which interrupted production there. Oil prices surged, with prices for U.S. crude futures jumping over $103 a barrel in intraday trading Thursday, up 15 percent from Friday's $89.71 close. That hike was short lived, as Saudi Arabia stepped up to guarantee supplies and oil prices walked part way back to under $97 a barrel.
from Gregg Easterbrook:
Substituting ethanol for petroleum – what could be wrong with that? A lot, it turns out, including a cynical “stealth tax” on drivers.
A few days ago the Environmental Protection Agency announced that soon gasoline can be made from 85 percent petroleum and 15 percent ethanol, up from a current limit of 10 percent ethanol. Such a move to replace imported petroleum with home-grown ethanol sounds great -- until you examine the details.
By John Kemp
LONDON, July 29 (Reuters) - Data presented to yesterday's public hearing on energy markets show the U.S. Commodity Futures Trading Commission (CFTC) and exchanges have granted so many exemptions from hard position limits and soft position accountability levels that the traditional position-limiting system has become meaningless.
CFTC chairman Gary Gensler noted that exemptions have become so numerous they risk "swallowing the rule". There's no danger, the rule has disappeared without trace. The scale and frequency it has been broken has seen to that.
It's clear from the figures that traders' positions can be big enough to raise the risk of distorting prices which set fuel costs across the globe.
Gensler's slide presentation provided the first comprehensive insight into how exemptions have been used -- giving detailed data on the number of times limits have been exceeded since mid-2008 for the Big Four energy contracts on NYMEX (crude oil, natural gas, heating oil and RBOB gasoline).
Last week (July 21) there were 37 exemptions in force in the crude contract for an average of almost 5,700 lots (5.7 million barrels of crude oil), and 43 exemptions in force for natural gas for an average of 2,930 lots (29.3 trillion BTUs or 28.5 billion cubic feet).
These were exemptions from spot-month limits (contracts approaching expiry and therefore most vulnerable to squeezes or settlement failure). They take no account of exemptions in force for contracts further out along the curve.
For the 12 months between July 2008 and June 2009, 43 traders received dispensations from the single-month limit on the NYMEX crude contract, exceeding the notional limit by an average of 10,000 contracts (10 million barrels) and with excursions lasting an average of 87 days. In other words, it was routine practice to run positions in a single month at twice the notional "accountability level" set by the exchange.
For natural gas, 26 traders received dispensations from the combined all-months limit, and exceeded it by an average of 32,000 lots (311 billion cubic feet) (four times the usual limit) with excursions lasting an average of 80 days at a time.
Positions on this scale utterly defeat the objective of setting limits.
As Gensler noted, the CFTC's avowed aim has always been "to ensure that markets were made up of a broad group of diverse participants with a diversity of views. The intent was to avoid the concentration of positions of any single party".
"In 1980, the CFTC reiterated its goal to prevent market concentration. In its rulemaking, the Commission stated that 'a trader's net position has a continued effect on price, and if sufficiently large can become a perceptible market factor'".
"Speculative position limits serve to decrease the potential for positions to influence the general price level".
But massive exemptions have produced the opposite effect. For NYMEX natural gas, the CFTC data shows 13 traders had positions amounting to more than 10 percent of the open interest in a single month at some point over the last year, 4 traders had positions over 20 percent, and 3 traders had positions over 30 percent. With this much concentration, price setting is hardly the result of a "diversity" of views.
For the CFTC, the policy question is whether to make minimal changes to the process for setting limits and granting exemptions to restore public confidence in the system's integrity, or be more aggressive and try to use tighter limits and more narrowly drawn exemptions to reduce the average position size and cut concentration levels.
(Editing by David Evans)
from Shop Talk:
Check out the latest data that could help erase some inflation worries.
U.S. consumer prices rose at a slower-than-expected pace in May, despite higher gasoline costs. Also, consumer prices have fallen over the past 12 months by the most since 1950, according to new data from the Labor Department.
The Consumer Price Index edged up 0.1 percent in May after being flat in April, below market expectations for a 0.3 percent increase. Compared to the same period last year, consumer prices fell 1.3 percent, the largest decline since April 1950.
from Commodity Corner:
With the summer driving season, under way, American drivers are once again feeling the impact of higher gasoline prices on their wallets. Read the full story here. Martin Hogarty, a chauffeur from the Bronx, interviewed near a gasoline station on 46th St. and 10th Avenue near Times Square in Manhattan this week, said he's paying double what he used to pay for gasoline to fill up the car he uses for his chauffeuring business, a GMC Yukon sports utility vehicle. Gasoline prices at the station stood at $2.77 a gallon.
For those who've decided to invest in more fuel efficient cars, however, the choice is now paying off. Jose Ferro, a cab driver who was also filling up at the 46th St. station began leasing a hybrid taxi about eight weeks ago said the higher leasing fee is already paying off as gasoline prices climb higher.