Archive for June, 2010

Storm could be latest problem in spill cleanup (AP)

Saturday, June 26th, 2010 | Finance News

NEW ORLEANS – A tropical storm churning in the Caribbean could be the latest bad news for BP crews trying to contain and clean up the massive oil spill in the Gulf, an effort that has been plagued by setbacks for more than two months.

It is still too early to tell exactly where Tropical Storm Alex might go, or how it might affect oil on and below the surface of the Gulf of Mexico, forecasters said. An armada of ships is working on the spill. That includes those drilling two relief wells, projected to be done by mid-August, which are the best hope for halting the crude that has been gushing since an April 20 explosion touched off the biggest offshore oil spill in U.S. history.

BP's effort to drill through 2 1/2 miles of rock is on target, the oil giant said Friday. But BP's stock tumbled anyway over the mounting costs of the disaster and the company's inability to plug the leak sooner.

The crew that has been drilling the relief well since early May ran a test to confirm it is on the right path, using a tool that detects the magnetic field around the casing of the original, blown-out well.

"The layman's translation is, 'We are where we thought we were,'" said BP spokesman Bill Salvin.

Once the new well intersects the ruptured one, BP plans to pump heavy drilling mud in to stop the oil flow and plug it with cement.

Despite the encouraging news, BP stock tumbled 6 percent in New York on Friday to a 14-year low on news that BP has now spent $2.35 billion dealing with the disaster.

BP has lost more than $100 billion in market value since its deep-water drilling platform blew up, and its stock is worth less than half the $60 or so it was selling for on the day of the explosion.

If the bad weather heads toward the Gulf, it could add to BP's problems.

Forecasters can't say yet if Alex — which blew into a tropical storm early Saturday — will hit the northeastern part of the Gulf, where the spill has spread over the past 10 weeks.

Somewhere between 69 million and 132 million gallons of crude have spewed into the water since the Deepwater Horizon drilling rig exploded April 20, killing 11 workers.

Most storm prediction models show it traveling over the Yucatan Peninsula over the weekend and into the southern Gulf by Monday. Where it goes next is the question.

Jack Bevins, a forecaster with the National Hurricane Center in Miami, said early prediction models Saturday morning no longer had it going across the oil spill. But Alex's track could quickly change in the coming days as conditions shift.

The effort to capture the oil gushing from the sea bottom could be interrupted for up to two weeks if a storm forces BP to move its equipment out of harm's way, said Coast Guard Adm. Thad Allen, the government's point man on the crisis.

BP would need about five days to secure or move all its equipment to safety from an approaching storm but is working to shorten that to two days, Salvin said. The equipment includes ships that are processing the oil sucked up by the containment cap on the well and the rigs drilling the two relief wells.

In other news:

• A financial disclosure report released Friday shows that the Louisiana judge who struck down the Obama administration's six-month ban on deep-water drilling in the Gulf has sold many of his energy investments. U.S. District Judge Martin Feldman still owns eight energy-related investments, including stock in Exxon Mobil Corp. Among the assets he sold was stock in Transocean, which owned the rig that exploded. The Justice Department asked a federal appeals court Friday to delay Feldman's ruling "to preserve the status quo" during the government's appeal.

• Labor Secretary Hilda Solis slammed BP — along with Massey Energy, owner of the West Virginia coal mine where 29 workers died in an explosion in April — saying they need better safety measures. "We are not saying go out of business," she said. "Do your job better. Make an investment in your employees. We want you to make a profit, but not at the expense of killing your employees."

• Vice President Joe Biden will head to the Gulf on Tuesday to visit a command center in New Orleans and the oil-fouled Florida Panhandle.

• The IRS said payments for lost wages from BP's $20 billion victims compensation fund are taxable just like regular income. Payments for physical injuries or property loss are generally tax-free.

BP is capturing anywhere from 840,000 to 1.2 million gallons of oil a day. Worst-case government estimates say 2.5 million gallons a day are leaking from the well, though no one really knows for sure.

BP is working to develop a different containment system that would be easier to disconnect and hook back up if a storm interrupted the work.

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Associated Press writers Lisa Leff and Cain Burdeau in New Orleans, David Fischer in Miami and Seth Borenstein in Washington contributed to this report.

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Romania to raise VAT to 24 pct to curb deficit (AFP)

Saturday, June 26th, 2010 | Finance News

BUCHAREST (AFP) –
Romania will raise the VAT tax levied on goods and services to 24 percent from 19 percent to curb the public deficit and obtain a crucial IMF loan disbursement, Prime Minister Emil Boc said on Saturday.

The move comes after a court on Friday blocked the government's plan to cut pensions by 15 percent in 2010, leading the International Monetary Fund to postpone the unlocking of a new tranche that was due on Monday.

"The government has decided to raise the VAT tax by five points", Boc told a press conference.

"Under these conditions, the agreement with the IMF will continue", he said, adding that the IMF board was now expected to meet on Wednesday to give the green light to a new disbursement for the crisis-hit Balkan country.

Romania has previously agreed with the IMF and the European Commission to narrow its public deficit from 7.2 percent of output to 6.8 percent in 2010.

The VAT-tax hike will be implemented from July 1, Boc said. It should ensure between 3.5 to 4 billion-lei extra revenues in 2010 (820 to 940 million euros), Finance minister Sebastian Vladescu told reporters.

It will be coupled with a 25-percent slash of salaries in the public sector, a key plank of the initial austerity plan validated by the Constitutional court but that still needs to go through parliament.

The flat-rate income tax will remain unchanged at 16 percent.

Boc underlined that he still considers his initial austerity plan "the best solution for Romania's economy."

Several economists have warned that a VAT hike could hamper an already sluggish Romanian economy.

"An increase of VAT will be bad for consumption", Nicolae Chidesciuc, chief economist at ING Bank Romania told AFP, stressing the need to "adjust spending in the public sector."

The prime minister said the VAT-tax rise would be "closely coordinated with the National Bank of Romania in order to avoid inflationist effects."

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Obama prods Congress to finish financial overhaul (AP)

Saturday, June 26th, 2010 | Finance News

WASHINGTON – President Barack Obama prodded Congress on Saturday to send him financial overhaul legislation, saying the landmark compromise lawmakers have crafted would be a boon to consumers and help deflect the next global financial crisis.

"We're still digging ourselves out of an economic crisis that happened largely because there wasn't strong enough oversight on Wall Street," Obama said in his weekly radio and online address. "We can't build a strong economy in America over the long-run without ending this status quo, and laying a new foundation for growth and prosperity."

He also pressed legislators to send him another proposal they omitted from the compromise financial package — a tax on big banks supporters say would recoup some of the billions taxpayers spent to bail out the ailing institutions.

House-Senate negotiators approved the overall deal Friday, and Democratic leaders hope to muscle it through Congress next week. The bill creates an independent agency to monitor mortgages and other consumer financial products, restricts trading in complicated derivatives that helped ignite the financial meltdown and forces failing giant firms to liquidate, making it the widest reaching revamp of the nation's financial rules since the Great Depression.

"We now stand on the verge of victory," the president said.

Republicans say the measure ignores Fannie Mae and Freddie Mac, the mortgage giants who have received huge federal bailouts and whose bad loans helped trigger the housing and economic meltdowns.

In their weekly address, they argued that Obama must focus on "creating more jobs, not more debt," by embracing GOP efforts to cancel unspent Wall Street bailout funds and stimulus money and to help small businesses.

"Instead of growing government, we need to restart the engine of economic growth," said Rep. Paul Ryan, R-Wis.

Obama's address came with the president in Toronto, Canada, for a weekend economic meeting of world leaders. Their session is aimed at finding ways countries can coordinate their policies to help avoid a future economic collapse.

The financial measure is nearing enactment at a time when polls show widespread public anger at bankers and Wall Street, who are widely blamed for irresponsible practices that helped cause the recession.

"Getting this far on Wall Street reform hasn't been easy," Obama said, playing on that populist theme. "There are those who've fought tooth and nail to preserve the status quo. In recent months, they've spent millions of dollars and hired an army of lobbyists to stop reform dead in its tracks."

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Online:

Obama address: http://www.whitehouse.gov

GOP address: http://www.youtube.com/republicanconference

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