GM on the Ropes, an Israeli Air Strike? and Peering Inside the Black Box of the Oil Companies
New York. Signs that the Third Oil Shock is beginning to do real damage to the economy were evident in GM's close below $10 yesterday, its lowest level since 1954, that drove stocks in to solid bear territory. Jobs also declined sharply. The impact of high fuel prices is sure to be a major topic around grills this Fourth of July as people drive or fly to be with friends. Here is the latest on GM and the economy.
The Financial Times has an interesting story showcasing the shadow boxing now taking place between various actors around a potential Israeli raid on Iran's nuclear reactors that some expect this fall. The US Chairman of the Joint Chiefs of Staff worried publicy about opening up a third front in the region in addition to Iraq and Afghanistan while Iran made it known it would retaliate by blocking off oil routes. Israel recently conducted maneuvers that some viewed as a trial run for a raid.
Yesterday, the FT ran another interesting story on Shell Oil. In the US debate over what to do about high oil prices--drill in the Arctic, force the oil companies to explore the federal land they already lease and so forth--conspiciously absent are the views of the oil companies. They are the Black Box of the question, keeping a low profile with the public while funding immense lobbying and advertising campaigns behind the scenes. Their views are presumably known to Dick Cheney and the Bush Administration but whether they are dictating policy to the Republicans or the Republicans are just messaging on their issue is an open question. The FT article gives an interesting glimpse into one company, Shell and the challenges it is facing as Nigerian rebels step up their attacks on facilities in the oil-rich Forcados River delta and now Nigeria's offshore platforms. Shell's overall production is declining as Nigerian oil which had been rising until the violence fails to compensate for declining North Sea oil. Shell's story, if representative, suggests that oil is slowly running out around the world and growing harder to find. Paradoxical, then, that profits have never been higher. And, there is something odd about the way that oil is inevitably interwined with voilence--what in the 19th Century was called the Great Game when the players were Russia and England vying for oil around the Caspian Sea. It is past time to move onto fuels that do not provoke constant wars.
