Peak demand leaves refineries idle
– John Kemp is a Reuters columnist. The views expressed are his own –
U.S. refiners have emerged as the biggest losers from the previous surge in oil and push for cleaner energy. The industry’s brief golden age has swiftly given way to a prolonged dark period of adjustment and decline.
What went wrong? Like other sectors, refiners have been hit by the cyclical downturn, which has cut trade volumes and the related demand for transport fuels such as aviation fuel and marine diesel especially hard.
But cyclical factors are compounding a structural decline in consumption that began around 2007 and has continued through the recession, as high prices and legislative responses force greater conservation and a shift towards biofuels.
Even as the economy recovers, U.S. consumption of petroleum-derived gasoline and distillate fuels is unlikely to exceed the record set in 2007. The resulting “demand peak” has left up to 10 percent of total U.S. refining capacity (around 1.8 million barrels per day) surplus to requirements.
FALLING UTILISATION RATES
No new refineries have been built on greenfield sites since the 1970s because permitting regulations are so strict. But there has been substantial brownfield growth at existing sites as well as increases in potential throughput as a result of debottlenecking and improvements in operations and maintenance.
China must avoid a Japanese-style bubble
– Wei Gu is a Reuters columnist. The opinions expressed are her own –
Everyone agrees that China’s economy must be rebalanced, but few have bothered to delve into the costs. Japan’s experience has shown that even well-meant changes could sow the seeds for a bubble.
China cannot stay with its current economic model forever. But as the economy has become extremely unbalanced, to some extent even more so than Japan’s in the 1980s, rocking the boat too much risks tipping it over. Instead of rushing into changes, it would be better to make reforms gradually.
Most observers believe an extremely loose monetary policy was the root cause of Japan’s bubble. But Tomo Kinoshita, an economist at Nomura, reckons that efforts to liberalise the economy, such as sharply revaluing the yen, developing a deeper bond market and deregulating interest rates were among the fundamental reasons behind the bubble.
The challenges facing China’s economy are similar to those seen in Japan in the 1980s. Foreigners are calling for a currency revaluation because the undervalued yuan gives China’s exports an extra boost. Capital markets need to play a bigger role because investment has been directed mostly by state-owned banks.
True, property price increases appear to be milder than in the Japan of the 1980s. Household loans only account for 30 percent of disposable incomes in China, versus about 90 percent in Japan in 1989, according to Nomura. But there are warning signs. New mortgages recently hit a record. And ratings agency Fitch has cited China’s property market as a cause for concern.
The Chinese stock market also looks less overvalued than Japan’s did. The ratio of Chinese stock prices to earnings is only a third of the peak levels reached in Japan. Stock market capitalization as a percentage of GDP is 62 percent, much lower than Japan’s 150 percent at end of 1989. But China is catching up fast, and the ChiNext market, China’s long-awaited Nasdaq-style market, debuted last week with a speculative surge.
It’s true in a sense, but I doubt it’s appropriate to compare China with Japan.
The world cannot exist without China-made products at the moment. Many companies invest too much in China for it to fail. Many countries have overhauled the economic model, since China becomes the manufacturing plants of the world.
If the economy of China collapses like what Japan did, then the world suffers a depression!
It’s better for China to make many small and cautious steps forward, then one big economic reform.
from The Great Debate UK:
Ghosts of Germany’s communist past return for election
- Erik Kirschbaum is a Reuters correspondent in Berlin. -
Will the party that traces its roots to Communist East Germany's SED party that built the Berlin Wall soon be in power in a west German state?
Or is the rise of the far-left "Linke" (Left party) in western Germany to the brink of its first role as a coalition partner in a state government with the centre-left Social Democrats (SPD) simply a political fact-of-life now so many years after the Wall fell and the two Germanys were reunited?
Will a "red" government in Saarland scare away investors and doom the state, as its conservative state premier Peter Mueller argues in a desperate fight to his job?
Or will the new leftist alliance in Saarland be able to better tackle state's woes, as the SPD state premier candidate Heiko Maas insists?
Depending on your Weltanschauung, that's what Sunday's election in three German states boils down to -- an emotional debate about whether the ex "Communists" in the form of the Left party should be allowed to be part of the next Saarland government or not.
It doesn't matter that the Left has already been in eastern state governments and will probably also be part of the next state government in the eastern state of Thuringia, which also elects a new state assembly on Sunday.
The results tonight came in as expected with the SPD and Left winning enough to form new leftish governments in Saarland and Thuringia states. http://www.reuters.com/article/worldNews /idUSTRE57T1I020090830
How the bailout feeds bloated banker pay
– James Saft is a Reuters columnist. The opinions expressed are his own –
Rising pay in the finance sector in the wake of the global financial crisis is no surprise and is driven partly by the government’s bailout itself and the underwriting of banks that are too big to fail.
News that some financial firms benefitting from government largesse actually increased the share of revenue they pay their employees sparked a lot of outrage but more heat than light.
The good news is this new bulge in pay may not be sustainable.
The bad news is it will probably only be stopped by further regulation, regulation which may never come.
To understand what is going on you need to understand the economic concept of “rents”, essentially the extra money a given individual or industry is able to extract from its clients above what it would be able to if there was perfect competition.
A monopoly will charge a very high price for goods or services because, well, they can. Needless to say economic rents are not a good thing, unless of course you are in receipt of them.
Well, if you think about it – maybe they do deserve more money than before. After all, the bankers and the media had a stellar performance hyping up the “meltdown”, and subsequently were rewarded with fantastic bailout programs (the exact details of which is a subject for a whole other discussion). Thus, not only did the bankers avoid the “noose”, they did so *without spending a dime of their own money*. With a great success like that can you really blame them for paying themselves more?
Recession at half time?
– Christopher Swann is a Reuters columnist. The views expressed are his own –
Recession historians on Wall Street often consider a downturn over when job declines fall to half their peak.
The July employment report, with its revisions, takes us past this milestone. The numbers were better than expected in almost every respect. There was even a tick up in hours worked, especially in manufacturing. The output component of the recession has probably already ended.
Even so, the labor market is likely to remain grim for a very long time. That a decline in payrolls of 247,000 should be taken as good news is an indication of how bad things have become. Such falls were close to the average in most postwar recessions, not an indication that the worst was over.
In the recession of the early 1980s, the peak job loss was 389,000. In this recession it has been around 740,000. So we are still on a different trajectory. The United States may continue to bleed jobs at a fast pace for some time to come.
There has seldom been more slack in the labor market. Businesses have plenty of room to increase the working hours of existing employees — which have declined far faster than in previous downturns.
Part-time workers can be brought fully on board. Only then might companies add to payrolls.
Mr Swann – go back to school and this time stay awake. You said;
“Under an optimistic scenario, in which job creation rebounds to about 100,000 a month, it will still take five years to recover the more than 6.6 million jobs lost during the recession.”
Ummm are you aware of the fact that 150,000 to 175,000 NEW WORKERS enter the labor market EVERY MONTH? So adding only 100,000 jobs a month means you’re STILL going further in the hole EVERY MONTH and so you regain NO jobs.
This recession/depression is far from over. Since it’s not an economic recession, but a financial recession, there will be NO improvement until the broken financial system is fixed. There needs to be appropriate regulation enacted and enforced, the Criminal Enterprise Banks holding class 3 “assets” need to be shut down so the market can be cleared, and the Fed needs to mop up all that excess US Dollar liquidity that the world is now awash in.
Until these things happen, you won’t see a recovery – we’ll just hobble along, getting by and waiting for the next two elections.
Pensions and the coming savings boom
– James Saft is a Reuters columnist. The opinions expressed are his own –
The explosion in company pension fund shortfalls in Britain nicely illustrates issues which will dominate economics and investment in coming years: the re-pricing of risk, a disillusionment with equity markets, and the boom in savings these shortfalls will help to drive.
Under current accounting rules, the pension funds of companies in Britain’s FTSE 100 index are together 96 billion pounds ($170 billion) underfunded, more than double the deficit of a year ago and an all-time record, according to a report from pension fund consultants Lane, Clark & Peacock.
This is partly for the very positive reason that people are living longer but principally because of the dire performance of financial markets, especially equities, over the past year.
To make matters worse, the surge in corporate bond spreads, which are used to calculate the current value of pension plans’ future liabilities to retirees, has actually minimised how underfunded British pension plans look when accounting measures are applied. Minimised how underfunded they look, but not how underfunded they are.
One of the net results of all this is that companies are getting out of the pension providing business as fast as they can, pushing employees into plans where the saver takes all of the investment risk and the company is purely a contributor and a facilitator.
Individuals are less able to take the long view and hold riskier assets like equities during downturns, meaning they are more likely to hold more in cash and bonds than are company pension plans.
Of course, the folly of the savings premise is that it is that cash or cash equivalents at the low interest rates of today, are not savings at all, but acquiescence to the loss of value implicit in inflation caused by the Fed printing money and the government soaking up so much of the capital with programs that have reverse productivity. In short, the currency is being debased.
Today, savings is not a risk management strategy, it is the acceptance of loss. Because the entire spectrum of institutions has been corrupted by conflict of interest, misfeasance, malfeasance and outright larceny, the only hope for pensioners is to try to determine the next bubble and get on board. Until the corruption and self-dealing are attacked, we are doomed to suffer financial insecurity. But since the political institutions have also been corrupted, I would not hold my breath waiting for things to change.
The only savings worth the name is actually expenditures made to reduce living costs. Get on solar energy. Drive hyper fuel efficient vehicles. Invest in durable products before the hyper inflation hits. How far we have fallen! Bush/Cheney were the coup de grace.
BoE extends QE, fears 1930s re-run
– John Kemp is a Reuters columnist. The views expressed are his own –
The Bank of England’s decision to continue with its asset purchase programme, or quantitative easing (QE), at the rate of 50 billion pounds per quarter in Oct-Dec, unchanged from Jul-Sep, shows bank officials are more worried about ending support for the recovery too soon than about risking inflation by leaving it too late.
The problem with QE is that you have to keep buying the same amount of assets each month to maintain the same monetary stance. With interest rates, the Bank can cut them and they stay cut. If asset prices drop with QE, it represents a tightening of monetary policy.
The Bank initially bought 75 billion pounds in the first 3 months (Apr-Jun) and then tapered this to 50 billion in the second three months (Jul-Sep) as the crisis engulfing the banking system and the rest of the economy eased. A cautious approach might have tapered the QE programme again to 25 billion in the final three months of the year before ending it entirely at the start of 2010. But the Bank opted to stick at 50 billion.
Critics point out that the programme has not achieved its announced objective of increasing bank credit and the amount of money in circulation. The rate of growth in M4, the broadest money supply measure, has risen only marginally. But that ignores the counterfactual of what would have happened to M4 in the absence of the programme — it might have fallen sharply.
Growth in the monetary aggregates is, in any event, mostly endogenous. It depends on demand for credit. In the current environment, where many households and businesses have little or no collateral, credit is impaired, and most are focused on paying down debt rather than adding to it, limited growth in M4 is not surprising. Trying to make it grow faster is like force feeding a duck to make foie gras — possible but unnatural.
Cheer up John, it could be worse…
“After the last Great Depression, Keynesian economists emerged victorious in proposing that a nation must spend its way out of crisis. This time around, they will be proven wrong. The world is a very different place now. Loose credit, easy spending and massive debt is what has led the world to the current economic crisis, spending is not the way out. The world has been functioning on a debt based global economy. This debt based monetary system, controlled and operated by the global central banking system, of which the apex is the Bank for International Settlements, is unsustainable. This is the real bubble, the debt bubble. When it bursts, and it will burst, the world will enter into the Greatest Depression in world history.”
from http://www.globalresearch.ca/index.php?c ontext=va&aid=14680
Obama, Elvis and America’s birthers
– Bernd Debusmann is a Reuters columnist. The views expressed are his own. – Nobody ever landed on the moon, the televised images are a hoax. John F. Kennedy was murdered in a complex plot involving the Mafia and the CIA. Elvis Presley lives. Barack Obama was born outside the United States and therefore is ineligible to be president.
All these claims stem from conspiracy theories and myths born in the U.S. and they throw a question mark over the long-held view of experts that such ideas flourish most in societies where news is controlled, access to information difficult and barriers to independent inquiry difficult to overcome.
This kind of restrictive environment applies to many Third World countries – conspiracy theories are particularly abundant in the Middle East and Africa — but not to the technologically and economically advanced United States. Yet there is a parallel universe inhabited by millions and millions of Americans immune to facts, logic and common sense.
Some of the myths are harmless, such as the notion that rock-and-roll king Elvis Presley did not die in 1977 and instead went into hiding. (The reasons vary depending on who tells the tale).
There have been thousands of supposed Elvis sightings and a 2005 book says there’s DNA evidence that he is still alive. While the Elvis-in-hiding theory appears to fading (though it is far from dead), the hoaxed moon landing continues to run long enough to prompt a Newsweek magazine article that debunked the story on the 40th anniversary of the Apollo mission to the moon in July. Perhaps not surprisingly, early skepticism about the moon landing came from the Flat Earth Society, based in California.
The Flat Earthers have their own website, unlike the latest addition to America’s wide variety of conspiracy cults, the “birthers.”
They insist that President Barrack Obama was born in Kenya and that the certificate attesting to his birth in Hawaii is a forgery. Unlike the Flat Earthers, the birthers managed to find Congressional sponsors, all Republicans, to introduce a bill meant to block non-eligible Americans from becoming president in future.
Hawaii uses two, and only two forms of authentic papers concerning someone born in Hawaii. Sorry birthers.The two are Certificate of Live Birth and Certification of Live Birth. I’ll repeat this…both are acceptable. The difference between the two is readily available, do the research if you wish. Google State of Hawaii. Go from there. There is no form called “birth certificate” in Hawaii. No one is guarding some vault somewhere, hiding a mysterious paper, saying “Barack Obama’s birth certificate”, some form that no one else in Hawaii ever got.The President’s certificate is the only documentation there is. It’s the only documentation needed. Where his mom lived, where his dad lived, where the certificate says they lived is unimportant as long as his mom, a United States citizen from Kansas, was in Hawaii at the moment of the President’s birth. She was. Endo. Fini.Right wing pundits earn their living on the backs of others. It’s a small group, hayseed in nature, and easily led around.People who cannot and will not accept a black Democrat as President are desperately grasping to a straw that leads nowhere. right wing pundits, charlatans to the core, cruelly feeds on their ignorance, their hate, and their fear of a black president. It’s their way of making a living. It’s what they do.I’m not defending the morons that buy this schlock. They are lazy beyond imagination and beneath contempt because a tiny bit of education would allow them to see the President’s documentation is adequate…indeed it’s all there is.Or….their ignorance is purposeful. It’s the last hope they have to hold on to their vision of “America the way it should be”. You can easily figure out what that means.The second possibility is more likely.
The rich are not an easy quarry
– Christopher Swann is a Reuters columnist. The views expressed are his own –
Cash-strapped politicians are more willing to play Robin Hood than at any time in a generation. Tax rates on the rich may soon hit levels not seen since the 1980s. The wealthy, alas, are not easy prey. Backed by highly paid lawyers and accountants, no other group is better able to run circles around the taxman. As a result, America’s politicians may get less cash than they bargained for and more economic distortions.
There are many easier and less disruptive ways to get the cash.
Of course, the temptation to launch a direct strike on the rich is understandable. The past three decades have been very good to the affluent. The top 1 percent of earners now account for 19 percent of America’s income, up from 9 percent in 1980. This elite group has also been quiescent, dutifully paying 40 percent of all income tax, according to the non-partisan Congressional Budget Office.
It has been many years since the rich had a powerful incentive to test the limits of the tax code. The top rate of income tax has fallen with only minor interruptions since its vertiginous peak of 92 percent in 1953. But a foretaste of what might be expected was offered by Maryland’s ill-fated creation of a millionaires-tax bracket in 2008.
A year later 1,000 millionaires had disappeared — a third of the total — and revenues from this group had fallen by $100 million. Some may have left the state while others may have found ingenious ways to reduce their reported income.
The U.S. tax code is replete with legal dodges for the wealthy, whether you are a top executive, independent business owner or the lucky recipient of inherited wealth.
Dear author,
very good article on American riches thoughts to their tax systems.
On running governments,taxes are other sources of revenues.
Now a days ,many !New rich! segments are created in all countries,because of double or thrice income by working,on line trade,part time jobs are not covered by any notable tax deductions by concerned authorities.
For example,a man or woman educated can work as a teacher in pay system,at the same time,they will be getting considerable unaccounted tuition fees from students.
Many part time works income will not be noticeable by many
In order to bring a good tax revenues for further nation building,she has to get more money from top riches,growing rich brackets, and increasing usercharges for sustaining, and for further growth.
Cool, refreshing legislation for Philip Morris
– This article by Paul Smalera originally appeared in The Big Money. The views expressed are his own. – Indulge me in a thought experiment. Pretend that drinking something called “lethalcoffee” has been found to cause cancer. There are five or six kinds of gross-flavored lethalcoffees that hardly anyone drinks, like chocolate, cherry, banana, and vanilla. But there’s one flavor, mint, that 30 percent of all lethalcoffee drinkers are hooked on. And there’s one particular group of lethalcoffee drinkers—let’s call them investment bankers—who drink mint lethalcoffee like there’s no tomorrow.
Allow 40 years for several million lethalcoffee-related deaths to pile up before the pandemic is taken seriously by the government. (Try to put aside any negative feelings you harbor about investment bankers.) Finally, Congress introduces a Lethalcoffee Safety Act that has a chance of becoming law. Would you imagine that law would:
A) Order the FDA to regulate lethalcoffee but withhold from the agency the power to ban it? B) Ban every flavor of lethalcoffee except mint, the one most people drink? C) Make it really hard for people to sell badcoffee, a new but much less hazardous cousin of lethalcoffee? D) Be co-authored by Starbucks (SBUX)?
How about “E,” all of the above? Because that’s what Congress is proposing to do in the Family Smoking Prevention and Tobacco Control Act, probably soon to head to President Obama’s desk for a signature. Mint-flavored lethalcoffees are menthol cigarettes. The 80 percent of investment bankers who prefer menthols are African-Americans. And the bill was largely shaped by Philip Morris (now called Altria), which sells more cigarettes than nearly every other American tobacco company combined.
“It is a dream come true for Philip Morris,” Michael Siegel, a professor at the Boston University School of Public Health, told me. “First, they make it look like they are a reformed company which really cares about reducing the toll of cigarettes and protecting the public’s health; and second, they protect their domination of the market and make it impossible for potentially competitive products to enter the market.” Other tobacco companies have taken to calling the bill the “Marlboro Monopoly Act of 2009.”
It’s hard to fathom where Congress is finding the political cover necessary to pass an industry-sponsored love letter like this one. But it’s coming from Philip Morris’ partner in crafting the legislation: a nonprofit anti-smoking organization called Campaign for Tobacco-Free Kids.
As early as 1998, Philip Morris executives were worried about the continued existence of their industry. Big Tobacco was locked in a battle with Congress over advertising and product regulations. And it was reeling from the $264 billion settlement in the lawsuit brought against it by 46 state attorneys general over Medicare costs for smokers. The future was hazy, and the tobacco companies’ ability to fight costly legal battles for the indefinite future was in doubt.
Smoking should be cast, and no matter what it is cigarettes. With or without menthol. Just take and throw. Cigarettes cause cancer, why provoke it? Contrived about his life.
Very interesting article. I recall at the height of the recent oil price move (i.e. with oil > $100 barrel) I suggested that this spike would see the greatest fall in oil prices within the next 10 years and that I wouldn’t be surprised to see oil at $5 a barrel by 2017. The drive down in prices would be generated fuel efficiencies and new technology advances.
In light of these efficiencies and the new fuel cell release from Bloom energy what do think might happen to the carbon markets ?