Tag Archives: Global markets

BP OIL SPILL: ECONOMIC IMPACTS WILL BE FAR AND WIDE

 

The continuing BP oil spill disaster has grabbed headlines around the world for weeks, but estimates of its economic impacts are only beginning to be assessed, and many will stretch out for years to come. The oil disaster is already being labeled the worst in American history, and with hurricane season fast approaching in the Gulf, the additional moniker of “Oilzilla” has also been coined to communicate its potentially monstrous effects.

BP oil leak  – Obama and BP

The Exxon-Valdez polluted 1,300 miles of coastline with 11 million gallons of oil. In the first year, the state of Alaska lost over $5 billion in diverse economic activity. Eventually, Exxon was forced to pay $3.5 billion in clean-up costs and fines. Within the first week, local wildlife was decimated, a loss valued at more than $218 million.

Bp poil leak  Obama economic 

However, the Exxon-Valdez proved that the first year of losses is only the tip of the “oil-berg”.  Twenty years later, some Alaskan species, primarily the herring, have yet to recover, and the commercial fishing industry continues to struggle. Thousands of gallons of oil still remain trapped in the sand and will require many decades to degrade.

The BP oil leak has already defiled the Gulf with over 30 million gallons of crude, nearly three times the Exxon-Valdez amount, and with no end in sight. The economic devastation to Louisiana has been immediate. It has contaminated 100 miles of coastline, polluted coastal wetlands, and threatens national wildlife refuges, the home for many endangered species. The state of Louisiana was also forced to shut down fishing in the area. Commercial fisherman that harvest nearly one billion pounds of fish and 3.2 million recreational fishermen were shut down in the process.

The economic carnage does not stop there. The Gulf States, from Mississippi through Florida, have suffered from both curtailed fishing operations to severely reduced tourism when most were counting on a favorable travel season to overcome the recession. The Gulf accounts for over 70% of the nation’s shrimp output, according to federal statistics. Due to the spill, roughly 22% of the Gulf is closed to seafood harvesting, thus idling oyster and shrimp boats that operate within the 55,000 square miles of sea now off-limits. Restaurants as far away as New York are already feeling the rise in fresh seafood prices. However, large grocery chains buy their shellfish from as far away as Thailand and Indonesia, but demand for those products should increase very soon.

While seafood prices are rising, tourism is unfortunately falling. Occupancy rates are down 90% in some regions along the Florida panhandle, and the threat of a dismal summer travel season will only increase when higher gasoline prices at the pump curtail family travel plans. While financial pundits have focused lately on Euro to Dollar charts, they soon will be decrying the impacts of rising transportation costs, which affect nearly everything from the food you buy to all retail products in general.

Major concerns do not stop with inflation. Of larger concern to Louisiana are the lost jobs from the oil industry if their operations are curtailed or if they decide to move their rigs to other locales. $70 billion alone has been assigned to that impact, far greater than the $15 billion figure tossed around for current economic damages and clean-up expenses. The Gulf shipping industry is also threatened. If the Gulf becomes a barrier to commerce, the tax and revenue impacts on local port authorities and import/export businesses will be devastating.

And what about BP Oil? The company is the largest oil producer in the United States and fifth in the world, but its stock has plummeted 34% since the explosion in April, destroying $96 billion in wealth in the process. BP PLC has thus become a likely takeover candidate by another oil industry giant.

Although investors may be searching the Indonesian stock exchange for growth opportunities, Gulf fishermen are pondering another long-term issue. Fish spawn in deep water, and future generations of fish are already being destroyed by current contamination. Glen Brooks, president of the Gulf Fishermen’s Association, recently opined, “All that larvae is up in that water. Those are fish we’d probably be catching six to 10 years from now.”

Todays world market update And news

EUROPEAN MARKETS… London’s FTSE 100 fell 32.11 to 5,302.99, the Paris CAC-40 dropped 41.38 to 3,820.78, Frankfurt’s DAX fell 51.65 to 5,695.32, Zurich dropped 84.99 to 6,493.96, Madrid fell 7.05 to 1,185.30, and Oslo dropped 5.84 to 405.64. The FTSEurofirst 300 index of leading European shares closed down 1.1pc at 1,024.95 points.

US DOLLAR… is changing hands at 90.29 yen (pre 89.86), against the euro it is US$1.4161 (1.4137) against sterling US$1.6108 (1.6112) and against the Swiss franc US96.17c (95.99).

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The largest gains in positive sentiment came from households with lower incomes and lower wealth in terms of home values and stock portfolios.
Commodities were hammered, especially February gold, down $13.50 to $1089.70 oz while oil tumbled $1.54 to $74.54 barrel for March crude, traded on the New York Mercantile Exchange.

The Asian markets closed lower with Hong Kong down 0.65pc, China 1.24pc, Taiwan 2.47pc, Australia 1.59pc, Singapore 1.10pc, South Korea 2.42pc and India 1.12pc.
WALL STREET…

The Dow Jones Industrial Average settled 216.90 lower at 10,172.98 and the S&P 500 index ended 24.72 points lower at 1091.76. The Nasdaq Composite index fell 60.41 points to 2205.29 and the Nasdaq 100 index finished 55.75 behind at 1794.82. In Treasuries, the 10-year note fell 4/32 to 98 7/32 while the yield rose 1.5 points to 3.59pc. The 30-year bond yield rose 1 points to 4.50pc and the two-year note yield fell 2 points to 0.803pc.

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AUSTRALIAN DOLLAR… is changing hands at US90.37c compared with US90.29c on yesterday’s close. Offshore the Aussie posted a high of US90.92c and low of US90.08c. Against the yen it is at 81.60 (81.44) at 63.82 euro cents (63.94) and 56.10 British pence (55.63).

AUSTRALIAN MARKET… will likely lose ground after Wall St’s stumble. The March futures contract is showing an 87 point decline to 4619. On Friday the ASX 200 index ended 76.6 points behind at 4750.6 and for the week retreated 149 points, while the All Ordinaries index dropped 77.7 points to 4771.9 and lost 157.6 points over the five trading days.

Today the Australian Bureau of Statistics will publish December quarter producer prices. Tomorrow is the Australia Day holiday and when the market resumes on Wednesday the key December quarter CPI will be published. Macquarie Infrastructure is trading ex a bonus issue today while Ozgrowth and Westoz are ex dividend. Profit reporting season will start on Wednesday with Coal & Allied and GUD Holdings slated to release results.

METALS… spot gold is currently $1091.65 oz. The COMEX gold Feb contract fell $13.50 to $1089.70 oz, the Apr contract fell $13.40 to $1090.80 oz. Jan silver was down 57.8c to $16.918 oz. Jan platinum fell $56.40 to $1552.90 oz. and Jan copper fell 5.35c to 333.85c lb in New York.

OIL… March crude contract was down $1.54 to $74.54 a barrel with a high of $76.50 and a low of $76.50. The April contract finished down $1.61 to $74.94, with a high of $76.95 and low of $74.96. Brent ICE for March dropped $1.75 to $72.83, with a high of $75.15 and a low of $72.78.

London Metal Exchange official cash ask prices were: copper $7240 tonne (pre $7347), tin $17,725 (pre $17,910), lead $2227 (pre $2273), zinc $2324 (pre $2449), aluminium $2189.50 (pre $2229.50) and nickel $18,455 (pre $18,805).
The 3-month ask prices were copper $7395 (pre $7,290), tin $17,730 (pre $17,950), lead $2240 (pre $2300), zinc $2345 (pre $2409), aluminium $2248 (pre $2245) and nickel $18,475 (pre $19,000).