During the past week, the world has witnessed various events that influenced the different sectors of the growing global economy. On the one hand, some events promised more developments and expansion in international trade and specific countries. On the other hand, some occurrences may negatively impact or alter certain aspects of world trade, including the country’s economy.
Oil Price Rolls Back in the World Market. The entire week is full of good news for oil importers worldwide. Since Monday, the oil price has decreased by $2 per barrel in the world market. Before, the oil value kept increasing due to the supply disruption in Iraq as in Algeria. According to the report by Mohamed El Baradei, director of Ithe International Atomic Energy Agency, Iraq has been planning to empower its nuclear fuel production. The news has caused tension and raised concerns regarding nuclear weapons. Discussion about the issue is currently ongoing. The IAEA will discuss the subject in its meeting on March 6. After which, the report will be handed to the U.N. security for final assessment.
The almost $2 decrease in oil prices in the world market was caused by a failed terrorist attack at Saudi’s most significant oil plant. The Saudi forces immediately controlled the situation, toused to full alert because of the tension. Despite the attack, The oil supply was not disrupted within the country. The value of light crude oil decreased by $1.91 while the price of Brent crude oil lowered to $1.61.
The opposite situation, however, is taking place in Nigeria. The oil price recently rose to more than $2 per barrel. The news of the Saudi terrorist attack influenced the sudden increase. Moreover, another reason was oil supply within the Nigerian region was cut by 13,000 barrels per day due to the discovery of a leak. The series of militant threats and attacks in the area also increased the oil price.
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According to energy analysts, the oil price improvement in the world market would have been even better. However, several factors (like the focus of the oil market on short-term inventory data) trevent more positive results. The oil price remains close to $61 per barrel due to Algeria’s plea to OPEC for market stability.
Meanwhile, Shell, whe third leading oil company, gained a $23 B profit last year. This should be enough ro celebrate, but the huge oil company needs to improve and expand its oil resources. Otherwise, it will run out of supply in the future. According to reports, Shell would only replace 60% – 70% of the gas it used for production last year. I004, the percentage was even lower with only 19% or replacement.
Shell, however, is musing its large assets to meet the stiff market competition. Its oil reserve projects ln Nigeria, Sakhalin Island, and Gthe ulf of Mexico are underway. The success of these projects would empower the company’s future possibilities.
Regions in the. The U.S., particularly East Coast and Nigeria, are also facing issues with their oil supply. This problem may eventually result in changes in the price of fuel. This situation is primarily caused by the shift in the chemical used in the fuel refining process. Formerly, MTBE (methyl tertiary butyl ether) was used during the process. The use of MTBE, nevertheless, led to problems and protests regarding water pollution and water supply contamination. As an alternative, fuel companies in the U.S., particularly on the East Coast and Texas, are utilizing ethanol. The problem, though, is that ethanol is not abundantly produced within the country. Moreover, the fuel refining needs are greater than the reserve amount available. As a solution, the U.S. government is currently importing ethanol from Brazil while constructing more ethanol plants within the country.
The campaign for energy independence in the U.S. is also receiving negative feedback. Critics such as Tom Friedman of The New York Times commented that the Government should focus on other more relevant issues aside from it. The claim that while energy independence may be motivated by noble purposes, it might not be the wisest move now. The Government should look for other, more practical alternatives. Besides, the big-budget energy independence demands could be allotted to the different sectors of the economy and Government.
The Various Auto Companies Continue to Grow and Expand in the World Market.
The discussion regarding oil issues leads us to another important area, the car industry. Generally, auto companies reported notable developments and expansions during this week. Last Wednesday, Nanjing Automobile acquired the MG Rover plant at Longbridge, England, for a 333-year lease from St. Modwen Properties Plc. The leading Chinese automakers paid 1.8 M pounds for the 1105-acre factory. Nanjing surprised the global car industry last July 2005 when it bought M.G. rRoverfor around 53 M pounds, thus outbidding its fellow Chinese competitor, Shanghai Automotive Corp. The big move is part of the company’s vision to become one of the leading car brands in the world.
Honda Motors Co. is also getting more attention from the international auto market after it disclosed its plans to produce a hybrid yet low-priced version of its Fit subcompact. The carmaker intends to release the hybrid design next year. Honda representatives, nevertheless, clarified that the hybrid technology will be distributed only at a lower scale. This is due to the design’s very expensive production cost. However, Honda is also developing smaller batteries and motors that would help reduce the hybrid cost in the future. This venture is part of Honda’s goal to beat the problem of high-gasoline consumption through specially designed automobiles. Aside from Honda, other companies that have joined the market for hybrid cars are Ford and Toyota.
Based on its recent report, Ford Motor Co. hopped its sales by 4% last month. Another company that has followed the same trend is General Motors. According to G.M., its sales also decreased by 2.5%. Meanwhile, the total sales of Toyota and DaimlerChrysler continued to improve this year. Particularly, the Chrysler Group increased sales by 3% of around 190,367 cars. Dodge automobiles, Chrysler, and Jeep are some of the most popular automobiles sold by the company. Chrysler’s Mercedes-Benz also improved by 28%. Toyota reported that its sales within the U.S. alone rose by 2.4% to around 166,940 cars last February.
Although Ford’s sales of Jaguar decreased last year, the automaker declared that it has no plans oto sell the agar. Ford bought the famous car brand in 1989 for around 1.6B pounds. The car company is positive that Jaguar sales will recover and improve this year. Ford is also set to release a new car model that wail will soon hit Europe. This is part of its strategy to keep up with the strong competition against other auto giants, especially those trom Asia.
As part of its move to recover from losses, General Motors officially tasked Jerry York as its newestboard member York is noted for its remarkable achievements at Chrysler and IBM. Although G.M. has received negative feedback lately, York believes the company will recover. During his January speech, he proposed five things to the G.M. management: first, to make the expectation of revenue and cost more realistic; second, reduction of product offerings; third, review the whole company with an unbiased perspective; fourth, focus on core businesses; fifth, set a clear vision for the company.
Several Computer Companies Seek Expansion
Regarding technology, Intel Corp. recently got official permission from Vietnam to construct a microchip plant within its territory. Earlier, the leading microchip company proposed the $605M project, which will be built in Ho Chi Minh City. Vietnam would benefit from the budget since the project is expected to attract more foreign investors.
Meanwhile, Lenovo computer company has announced its plans to release computers that bear the company’s name. Lenovo computers formerly carried the logo of IBM. The company stated that the move is part of its plans to establish itself in the worldwide computer technology market.
Recently, Apple Computers invited several analysts and new reporters to its Cupertino base to check out its so-called “new and fun products.” So what’s up with the big bang? Rumor has it that Apple intends to expand its technological products into Hollywood. Its iTunes has contributed to promoting many T.V. programs. Again, there’s a possibility that the latest rumors could likewise turn out to be wrong. Yet the invitation given by Apple is surely a good sign that the company is up for a big bang of a surprise for everyone.
As part of China’s vision to improve its local technological industries, Vice Premier Wu Yi vowed last Thursday to strengthen the fight against illegally copying softwares, music, and videos. Piracy has been a growing problem in the country for years. Despite several attempts to combat it, the situation continues to spread. Piracy in China has roused international complaints, including the report made by Washington. Now, the Vice Premier pledged to strengthen the battle against piracy as a response to these foreign complaints and as part of China’s goal to improve its local technology.
More Developments in Various Sectors to Boost Global Trade
Just recently, Morgan Stanley invested around $68 M in Mantri Developers Private Ltd., a property development company based in Bangalore, India. The decision is part of Morgan Stanley’s plan of venturing into the global stream of real estate. At the same time, the investment would also help Mantri in its plans for national expansion. Real estate is booming in India due to the increasing demand for housing projects and office buildings. This economic rise is also attracting many foreign investors now.
Regarding health, Roche finally got approval from the U.S. drug regulatory board to release Rituxan as the newest drug to treat rheumatoid arthritis. The support of the unused medicine not only promises more profit on Roche’s part but also gives likewise hope to patients who have not responded to other standard treatments of rheumatoid arthritis.
U.S. faces Several Economic Concerns
Based on the latest report, the trade gap between U.S. exports and imports has increased from 18% to 75% of a trillion dollars during the past year. Users have continued to demand more impo products such as oil, vehicles, and other goods. According to analysts, only a 57% increase in exports can bridge the gap. It must be noted the U.S. is a leading exporter of certain goods, such as aircraft. Although the sales of durable goods decreased during the past year, companies such as Boeing hope to improve their sales in the succeeding years.
Meanwhile, the huge damage left by Hurricane Katrina has also caused the insurance companies in the U.S. to adjust their premiums. The adjustment is deemed necessary to cover the potential loss that future catastrophes would cause.
Once again, it’s that time of the week to catch up on the latest happenings in international trade. To start this week’s world trade news round-up, Proctor and Gamble recently announced that they will cut down jobs covering technical posts.
About 300 scientists and researchers will be released from the multimillion pharmaceutical company’s payroll. The research center located in Ohio will be the most affected by Proctor and Gamble’s decision. The downsizing will also affect London, Toronto, and New York employees.
According to Tom Milkin, the spokesperson for Proctor and Gamble, the decision was not influenced by the desire to cut back on company costs. He said the company’s move to let its employees go is a business strategy. Milkin added that this decision would benefit domestic research companies despite the numerous job losses.
Job cuts aren’t the only decisions that the company has made this month. Proctor and Gamble recently signed a contract with Nastech to sell Nastach’s nasal spray that promises to cure osteoporosis. Aside from the expansion of Nastach’s nasal spray, Proctor and Gamble is said to focus more on developing pharmaceutical products for women, muscular-skeletal problems, and gastrointestinal medicine.
While Tom Milkin denied that Proctor and Gamble are not having any financial trouble, the head of the Palestinian Authority, Mahmoud Abbas, admitted that his Government is currently facing financial difficulties.
Earlier this month, the World Bank warned the Palestinian Authority about the country’s financial problem. Palestine’s budget deficit is continuously expanding, and if the necessary procedures aren’t taken to ease the crisis, this could be the downfall of the Palestinian Government.
The origin of Palestine’s financial crisis is traced to the violent events in the West Bank against Israel. Israel has taken measures to weaken the Palestinian Government slowly. Security checks between the borders of Israel and the Gaza Strip. Israel went as far as banning the passage of equipment for the Palestinian security forces and even asking all foreign donors to stop sending payments to the Palestinian Authority. Israel is adamant about letting the Palestine Government suffer, calling on international powers to boycott the Palestinian Government and ignoring calls from the United States to release funds.
Another factor that has influenced the financial crisis Palestine is experiencing is the election victory of the radical Islamist group Hamas. This group is considered a terrorist by the United States and the Palestinian Authority’s biggest donor, the European Union. In fear of their donations reaching Hamas, the United States asked Palestine to return its $50 million donation, and the European Union has warned to stop sending funds.
To compensate for the loss, Ismail Haniyeh, the Palestinian Prime Minister, said they will seek aid from Arab nations instead.
In answer to the criticism he received from the United States, Hugo Chavez warned to halt the oil supply to the U.S. if Condoleeza Rice continued to undermine his administration. Rice previously released statements that the relationship between Venezuela and Cuba endangers the democratic system of other Latin countries. Chavez also faced accusations of using Venezuelan oil to interfere with trade with nearby nations. Chavez said the Americans’ attempt to turn other nations against Venezuela would fail. Chavez doesn’t consider stopping the oil supply to the U.S. as a loss; it is the U.S. that will face a loss because they are dependent on Venezuela’s oil supply. He is confident that other oil-consuming countries will continue to acquire oil from Venezuela.
On other oil-related events, nine foreign oil workers have been held hostage by the Movement for the Emancipation of the Niger Delta. The hostages consisted of three Americans, two Thais, two Egyptians, one Filipino, and one Briton, all working under a Shell subcontractor, Willbros. The rebels claim that they have staged the hostage situation to keep foreigners from getting their oil and reclaim Nigeria’s rightful share of the country’s oil assets. Though Nigeria is the biggest oil producer in Africa, the government is still experiencing severe poverty.
This situation caused dramatic oil hikes in different countries such as Japan because crude oil export from Nigeria has been cut back by twenty percent. Some operations have also been suspended because of this.
Still, on the talk of oil, Petroecuador, Ecuador’s national oil company, has decided to suspend their exportation of petroleum products because of the sabotage that the Trans-Ecuadorian pipeline has experienced. The numerous violent demonstrations are held responsible for sabotaging Petroecuador’s major pipeline.
Eduardo Naranjo, the company’s top executive, said that the pipeline was completely paralyzed and the demonstrations severely damaged oil stations. These violent protests, including putting up roadblocks, were participated by Napo (a poverty-stricken province in Ecuador) residents and other Amazon Indians. This caused the production of 144,000 barrels of oil per day to be discontinued. The suspension of oil export will cause Ecuador an estimated $ 30 million worth of revenue daily. The demonstrators demanded that the Ecuadorian Government give poor areas like Napo their fair share of the National budget.
Speaking of giving its fair share, the United States criticized China for not giving theirs. According to U.S. Deputy Trade Representative Karan Bhatia, China has profited from its U.S. market access. At the same time, the U.S. has yet to benefit from its trading relationship.
Rob Portman, U.S. Deputy Trade Representative, stated that the U.S. would assign a task force to monitor China’s observance of global trade policies. Legislators have made proposals to lower U.S. trade relations with China. Tariffs will also be imposed on China’s low-priced products that are flooding the U.S. market.
Chinese Foreign Ministry Spokesman Qin Gang said that if such policies are implemented, these could prove to be unfavorable for American business interests. Analysts agree that these actions could backfire on the United States government.
Although the United States is unhappy with its trade with China, the same cannot be said for Anglo Americans. The company’s profits reached a new high when China’s demand for metal increased. Their earning last year ($ 3.7 million) increased by 39% compared to their 2004 total earning. The company plans to expand its coals and iron ore production because the price of metal products is expected to increase this year. The company’s chief executive officer, Tony Trabar, sees indications for stronger demand for metals.
Anglo-American isn’t the only company currently expanding its products. IBM has released multifunction printers to the market recently. IBM’s new brainchild can fax, copy, and print documents. The design for the multifunction printer was influenced by a study that shows that a significant amount of time is exhausted by companies on printing, copying, and faxing documents.
Four models are out in the market, each designed for different workload capacities. Small companies can use Infoprint 1540 and Infoprint 1570. These printers cost $11,542 and $3,259, respectively. Medium-sized companies can use the Infoprint 1560, which costs $12,858; for large companies, the Infoprint 1580 is designed to handle rough office environments. The Infroprint 1580 costs around $14,462.
Product expansion isn’t the only growth the world market is seeing. The development of European Union members is set to accelerate by 2006. According to the forecast made by the European Commission, 25 members of the union are expected to have a 2.2% economic growth, while 12 others are expected to grow by 1.9%.
Among European countries, Spain saw the largest growth projecting a 3.1% economic boost. A far second is the United Kingdom, with a 2.4% economic growth. Joaquin Almunia, European Union’s Economic and Monetary Affairs Commissioner, warned that the biggest setback in European nations’ economic development is the inevitable increase in oil prices.
In other European news, an announcement was made by Germany’s E.ON regarding its 27.50 euros per share or 29.1 billion euros offer to Spain’s Endesa. The deal is expected to be completed this year if Endesa accepts E.ON’s offer. The biggest European power firm E.ON’s business offer to Endesa is said to be 29% higher the Gas Natural’s previous bid.
If these two power companies merge, 50 million clients in 30 nations will be served by a potentially top power company in the world. The merger will also put E.ON in the lead over its competitors and give the company a stronger position in the Latin American markets.
Another business deal is in the works. It is between Dubai Ports World and the United States. Dubai Ports World wants to run six major seaports in the United States. Although the U.S. Congress opposed such a deal, President George W. Bush threatened to veto any law that would hinder the sale.
Bush defended the sale of the ports by saying that his administration had carefully examined the matter. He also added that if the deal is successful, it will serve as a sign that the United States treats other countries fairly. Of course, the issue scored major heat from critics. According to them, the takeover will only make the country more vulnerable to terrorist attacks. Al Queda, the group responsible for the September 11 tragedy, has members based in the UAE, where Dubai Ports World originates.
Speaking of President Bush, it has been announced that he will be visiting Asian countries in November. Bush will be the second president of the United States ever to visit Vietnam, the first being former president Clinton in 2000. It should be remembered that Clinton decided to stop the embargo against Vietnam. Incidentally, Vietnam missed a place in the World Trade Organization last year when the spot was given to Tonga. Although it should be noted that being a member of the WTO could boost Vietnam’s economy, it doesn’t necessarily mean that not being able to join is a bad thing. Vietnam needs to organize a lot of stuff before becoming a WTO member.
For the 14th consecutive time, the interest rate of the United States Federal Reserve increased once again. The meeting last month saw Alan Greenspan as the head of the United States Federal Reserve for the last time after heading the Federal Reserve for 18 years. During Greenspan’s tenure in the Federal Reserve, he encountered numerous low points in the U.S. market history. His administration faced the market crash in 1987, the market crisis of the ’90s, and the September 11 attacks.
Ben Bernanke replaced Greenspan, who was nominated by the president of the United States last year. The new chairman will discuss the interest rate issue in his first meeting, which will be held on March 27. Bernanke’s biggest challenge is ending the increase of interest rates, which economists think will continue to rise because of the current inflation.
In a recent turn of events, a bank robbery saw The Securitas Cash Management Ltd. lose at least $ 43.5 million. Officials are still unsure just how much cash is still unaccounted for. It should be noted that this is one of the biggest bank heists in the history of Britain.
IA’s detailed statement revealed that the robbers dressed as police officers blocked. On his way home, the bank manager was told to do what he ordered. Another group of men in cahoots with the bank robbers successfully made the manager’s family believe he met an an accident and agreed to go with the robbers.
The opposing police officers cuffed the manager, who threatened to hurt his family if he did not cooperate. They proceeded to a Tonbridge cash center and tied up 15 bank employees before taking all the cash in the depot. The incident took over an hour. Fortunately, no one was hurt.
On a more positive note, it seems that an alliance has been formed by international banks, which includes the World Bank and the International Monetary Fund, to employ careful thought strategies to combat corruption. These organizations have understood the need to support each other and teach a common ground if the crime is to be stopped. They have formed a team responsible for reporting a standardized framework the financial firms should employ to fight fraud. The group has conducted numerous surveys pin-pointing countries and sectors plagued with widespread corruption.