26
BUSINESS
Thursday, May 6, 2010
US stock futures plunge, point to lower opening Fears over ailing European market escalates
LOUSIANA: Oil blobs and oil sheen are seen in the waters of Chandeleur Sound, Tuesday, May 4, 2010. —AP
Oil’s hidden costs visible, but will it matter? HOUSTON: America is seeing the usually hidden costs of fossil fuels - an oil spill’s potential for huge environmental and economic damage, and deaths in coal and oil industry accidents. But America and the world crave more oil and coal, no matter the risky ways they’re extracted. “We are absolutely addicted and we have no methadone. All we have is the hard stuff,” said Larry McKinney, director of the Harte Research Institute for Gulf of Mexico Studies at Texas A&M University Corpus Christi. The United States is increasing its dependence on oil and other fossil fuels. And more domestic oil has to come from offshore because the land is producing less. The alternatives of renewable energy aren’t cheap despite three decades of energy crises and legislation. Oil industry officials, such as former Shell Oil Co. President John Hofmeister, see the well blowout in the Gulf of Mexico as defeat being snatched from the jaws of victory. A Democratic president had just opened up to drilling areas of US coastline that once seemed untouchable. But now, “Drill, baby, drill,” the mantra of those who favor more oil exploration, has been replaced by “Whoa, there.” Myron Ebell of the conservative Competitive Enterprise Institute, which usually rails against too much government intervention, spoke Tuesday of the need for “more scrutiny of the industry” so drilling can continue. BP’s leaking well off the coast of Louisiana has changed the way people talk.
Environmental activists see this as a moment when the public pushes an industry aside - as happened with nuclear energy after the Three Mile Island nuclear plant’s partial meltdown. So, too, the administration of President Barack Obama. “We need a new energy plan for this country ... that begins a transition to renewable and battery technology,” White House energy and climate change senior adviser Carol Browner said Tuesday. In Houston, capital of the American oil industry, those at an offshore drilling technology conference don’t like to say it publicly, but no one is too worried about the public turning its back on oil and coal. America not only has to keep drilling for more oil in places like the Gulf of Mexico, but increase its drilling, said former Shell president Hofmeister, author of the new book “Why We Hate the Oil Companies.” By 2020 if drilling is limited, Hofmeister said: “We will be in a new age in this country. It will be called the age of the energy abyss.” Since 1991, oil production on US land and in Alaska has dropped 40 percent, but it has nearly doubled in the Gulf of Mexico, according to federal statistics. A 2008 International Energy Agency report estimates that reachable conventional oil located in water more than a quarter-mile deep is between 160 and 300 billion barrels, with more than twothirds of that in Brazil, Angola, Nigeria and the United States. “Our energy security is going to hang on whether we can drill offshore,” said Amy
Myers Jaffe, an energy studies fellow at Rice University’s public policy institute. So what are the costs? McKinney’s research institute in Corpus Christi estimated a worstcase scenario cost of the spill to the Gulf of Mexico: $1.6 billion. About one-quarter of that is due to lost fishing and tourism. But the bulk of the cost is in the stuff that’s less easy to quantify: the general wetlands ecology. And lives are lost in getting oil and coal. Another coal miner died in an accident Tuesday in West Virginia, in addition to the 29 who died in a massive explosion April 5 in that state and an accident last week that killed two in Kentucky. More than 29,000 have died of lung diseases since 1968, according to the federal government. The BP PLC oil rig explosion April 20 that caused the spill claimed 11 lives. A refinery fire in Washington state April 2 killed seven. In 2008, work accidents killed 120 people in the oil and gas extraction industry, according to the US Department of Labor. Add to that global warming. Burning oil and coal produces carbon dioxide, which scientists say is changing the Earth’s climate and will eventually change the life of nearly everyone on the planet. This year, after what seemed like a cool winter in some spots, the heat is back on. Already it’s shaping up to be one of the warmest on record. “What we’re seeing is proof positive of our dependence of oil and gas and we’ve ignored that in the past,” McKinney said. “Unfortunately it’s being rubbed in our face right now.” —AP
Sting voices opposition to Amazon dam in Brazil CARACAS: Sting is speaking out against Brazil’s renewed plan for a huge dam in the Amazon that he helped halt two decades ago, saying the project would destroy a river and the lives of thousands who depend on it. The British music star voiced opposition to the Belo Monte dam at a news conference Tuesday, saying: “I stand in solidarity with the indigenous people who are trying to stop it.” He is among a growing number of celebrities, including film director James Cameron and actress Sigourney Weaver, who have joined activists in lobbying against Brazil’s plan to build the world’s third-largest dam on the Xingu River. Sting helped put a temporary halt to the Belo Monte dam in 1989 when he protested alongside Brazilian Indians in an event that helped persuade international lenders not to finance the project. But buoyed by a strong economy, the Brazilian government is now moving ahead with the hydroelectric dam on its own, insisting it is an indispensable energy solution for the country. “All of the reasons I fought against it 20 years ago are still there. It will destroy an entire river system and destroy the lives and culture of the people who live there and have lived there for thousands of years,” said Sting, who was in Venezuela for a concert. “The dam is too far away
CARACAS: Britain’s musician Gordon Sumner, better known as Sting, gestures during a press conference, Tuesday, May 4, 2010. —AP from Sao Paulo to be any use to ordinary Brazilians,” he said. “The plan is for it to be the first of six or seven dams, with even more destruction.” Environmentalists and indigenous groups say the dam would
lay waste to wildlife and ruin the livelihoods of those who live in the area to be flooded. They say the electricity produced would mostly benefit mining companies, and that the dam wouldn’t be financially
viable unless several more dams are built upstream to add to the reservoir storage capacity. Brazilian President Luiz Inacio Lula da Silva insists the dam is essential for the country’s future, saying it will supply the growing population in the Amazon region and will produce clean energy while supporting the expanding economy. Silva says it will displace 16,000 people. Activists argue that 40,000 will be forced to move. Sting has for years advocated land rights for indigenous people and forest conservation through the Rainforest Foundation, which he founded in 1989. When Cameron participated in protests against the project in Brazil last month, he compared the anti-dam struggle by indigenous people to the plot of his blockbuster film “Avatar” - which depicts a fictitious race fighting to protect its homeland from plans to extract its resources. The 11,000megawatt dam would be the world’s third-largest hydroelectric energy producer behind China’s Three Gorges dam and the Itaipu dam on Brazil’s border with Paraguay. Norte Energia, a consortium of nine companies, won the bidding for the contract to build the dam last month after the government prevailed over legal challenges that had temporarily halted the bidding three times. —AP
NEW YORK: US stock futures fell yesterday, a day after major indexes posted their biggest losses in months. European markets were mixed as investors remain cautious about whether a $144 billion aid package for Greece will help stem the growing debt crisis. German Chancellor Angela Merkel asked her country’s lawmakers to rush the approval of Germany’s $29.3 billion share of the Greek rescue program. Stocks plunged around the world Tuesday as fears escalated that Europe might fail to contain Greece’s debt problems. The Dow Jones industrial average fell 225 points, its biggest drop in three months. Investors worry that Europe would have trouble bailing out larger countries like Spain and Portugal because the continent’s governments spent so much supporting Greece. There are also concerns that the large debt among European nations could upend a global economic recovery. Analysts have said that the problems, over the long term, could lead to a collapse of the euro. Sixteen countries use the common currency. The euro fell against the dollar, hitting its lowest level in a year. Market volatility has increased over the past week as investors’ focus alternates between worries about European debt problems and further signs of US economic growth. Tuesday was the fifth time in six sessions the Dow has surged or retreated by triple digits. Investors looking for continued signs of a domestic recovery received another encouraging sign on employment. Payroll company ADP said private employers added 32,000 jobs last month. A separate report due out later is expected to show the service sector expanded again in April. Ahead of the opening bell, Dow Jones industrial average futures fell 41, or 0.4 percent, to 10,851. Standard & Poor’s 500 index futures fell 5.10, or 0.4 percent, to 1,167.30, while Nasdaq 100 index futures fell 9.00, or 0.5 percent, to 1,960.50. The Institute for Supply Management’s service-sector index likely rose to 56 last month from 55.4 in March, according to economists polled by Thomson Reuters. Any reading above 50 indicates growth. Further expansion of the sector would indicate the largest part of the economy continues to rebound. The service sector accounts for 80 percent of the nation’s work force, excluding farmworkers. High unemployment is considered one of the main stumbling blocks for a sustained recovery of the domestic economy. Adding new jobs would provide investors reassurance that the ongoing rebound remains on track. The ADP jobs report showing employers added 32,000 jobs in April was better than the 30,000 jobs economists had forecast would be added. The ADP report is seen an early indicator of the government’s closely watched monthly employment report, though there are often wide variations because the ADP only accounts for privatesector jobs. The Labor Department is expected to report on Friday that the unemployment rate was unchanged at 9.7 percent last month as employers added 200,000 jobs. Meanwhile, bond prices rose yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.56 percent from 3.60 percent late Tuesday. Gold rose, while oil fell. Overseas, Britain’s FTSE 100 fell 0.7 percent, Germany’s DAX index dropped 0.3 percent, and France’s CAC-40 fell 0.8 percent. —AP
GENEVA: A model displays an extremely rare emerald-cut white diamond weighing 52.82 carats during a Sotheby’s auction preview yesterday. The Dcolor, flawless clarity white diamond monted as a ring is expected to fetch in excess of CHF 7.3 milllon (euro 5.1 million) at a spring sales held on next May
Boost intra-African trade, says expert DAR ES SALAAM: African countries, bruised by the global financial crisis, must restructure their economies and boost trade among themselves to ride out economic storms, a top economist said yesterday. Improving infrastructure, governance, financial institutions as well as adopting new technologies can insure African economies against the effects of another meltdown, said Jennifer Blanke, a senior economist with the World Economic Forum, which opened here yesterday. “These are the issues that will enhance Africa’s growth potential and also prepare African economies more for facing any kind of disruption,” Blanke told AFP. She added the slowdown’s limited effect on African economies was a “short-term advantage.” “The lesson is to strengthen your economies so that when this happens again-and it will-you are better placed to ride off the storm,’ Blanke said. Although Africa was spared much of the ravages of the global economic downturn, reduced trade, declining remittances and dwindling foreign investment piled pressure on the continent. “What really affected Africa was a decline in demand and a decline in prices that Africa was getting for its goods. “If Africans are buying more of their own stuff then you have less of a concern over demand from other parts of the world,” she added. Eleven African heads of state and government are expected here for the 20th World Economic Forum (WEF) on Africa, to discuss strategies for the continent in the aftermath of the economic
downturn. “Africa is a continent full of potential. Africa has been growing despite the economic instability that is facing the world today,” Tanzanian President Jakaya Kikwete said. “We will have the opportunity to examine the strategy of Africa for today to ensure that there is a better tomorrow,” he added in remarks posted on the WEF website. South African President Jacob Zuma, Ethiopia’s Prime Minister Meles Zenawi, Kenya’s Prime Minister Raila Odinga and Rwandan President Paul Kagame are expected to attend, along with Mozambique’s President Armando Emilio Guebuza, Gabon’s Ali-Ben Bongo Ondimba and Zimbabwe’s Prime Minister Morgan Tsvangirai. The World Economic Forum is a Swiss-based foundation that gathers world leaders and industry chiefs for talks on a range of political and economic problems. According to the International Monetary Fund April estimates, sub-Saharan Africa is predicted to see stronger recovery this year, with growth forecast at 4.7 percent. That recovery was attributed to rebounding trade, higher commodity prices and government spending to smooth out the impact of the financial and economic crisis. Many African countries’ economies hinge on subsistence agriculture, farm produce and mineral exports to the West, while trade within the continent is underdeveloped. Africa is the continent least prepared for economic crisis, already driven by long-standing conflicts and civil wars as well as by widespread disease and hunger. —AFP
in the news Prudential delays $21 billion cash call LONDON: British insurer Prudential PLC yesterday delayed a planned $21 billion rights issue, raising fears about the $35.5 billion takeover of Asia-based life insurer AIA Group. The insurer had planned to detail yesterday the pricing of the cash call and of the acquisition it is intended to fund, but instead said it was continuing discussions with the Financial Services Authority about the terms of the deal, particularly the capital position of the enlarged group. The announcement, coming amid turmoil in world stock markets, saw Prudential’s shares drop 1.4 percent to 550.5 pence ($8.34) in midday trade in London. Prudential said it does not expect the delay to affect the overall timing for the completion of the AIA purchase, which it plans to close during the third quarter of this year. “We are entirely committed to the transaction and remain on track to complete it within the timing set out on 1 March,” said Prudential Chairman Harvey McGrath. “The work completed since 1 March with the AIA and Prudential teams has convinced me more than ever that the enlarged Group will be in a position to capture sustainable and highly profitable growth and will deliver substantial long term value for our shareholders.”
Swisscom reports 22% drop in Q1 net profit GENEVA: Swisscom AG reported a 22 percent drop in first-quarter net profit yesterday due to provisions for a tax case against its Italian broadband unit Fastweb. The former Swiss telecoms monopolist said net profit attributable to shareholders fell to 377 million Swiss francs ($341 million) from 484 million francs during the same quarter of 2009. Swisscom set aside 102 million francs to cover possible fallout from the Fastweb probe in Italy, where the broadband provider is being investigated for alleged involvement in a §2 billion ($2.7 billion) money-laundering ring. Fastweb denies the accusations and says it was a
victim of a criminal organization. Bern-based Swisscom said revenue increased 1.3 percent to 2.92 billion francs in the first quarter as economies recovered from the downturn and more people signed up to its Internet TV service. Mobile subscriber numbers rose 4.4 percent to 5.7 million in the country of just under 8 million people. The Swiss Competition Commission last month rejected a merger of Swisscom’s smaller rivals Orange and Sunrise, arguing that having only two players in the market would further diminish competition. Consumer groups say mobile prices in Switzerland are far higher than in neighboring Austria.
ABB buys US software firm Ventyx for $1bn GENEVA: Swiss-Swedish engineering group ABB Ltd said yesterday it is acquiring US software firm Ventyx for more than $1 billion in a bid to become a key player in energy management software and smart grids. ABB said Ventyx, based in Atlanta, will become a single unit in its power systems division and provide energy management. A joint statement said Ventyx operates in more than 40 countries, with an emphasis on the United States and Europe. It employs 900 people and reported 2009 revenues of about $250 million. ABB said the acquisition from San Francisco-base Vista Equity Partners would triple the market available to the company in energy management software, including forecasting loads that can help integrate solar, wind and other renewable energy. ABB Chief Executive Joe Hogan said the acquisition would be “cash-generating” in a growth market. The purchase, subject to regulatory approval, is expected to be completed by the end of June, ABB said. It said it would pay for the company in cash, bud did not give an exact amount.