During the past week, the world has witnessed a series of events that have influenced the growing global economy’s various sectors. 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, specifically involved.
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 on the world market. Before that, the value of oil kept on increasing due to the disruption of supply in Iraq and Nigeria. According to Mohamed El Baradei, director of the International Atomic Energy Agency, Iraq has been planning to empower its production of nuclear fuel. The news has caused tension and raised concerns regarding nuclear weapons. Discussion about the issue is currently ongoing. The IAEA will talk about the subject at its scheduled 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 price in the world market was caused by a failed terrorist attack at the largest oil plant in Saudi Arabia. The situation was immediately controlled by the Saudi forces that were roused to full alert because of the tension. The oil supply, though, was not disrupted within the country despite the attack. 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. Just recently, the oil price rose to more than $2 per barrel. The sudden increase was influenced by the news of the Saudi terrorist attack. 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 within the region also prompted an increase in the oil price.
According to energy analysts, the improvement of the world market’s oil price would have been even better. However, several factors (like the focus of the oil market on short-term inventory data) prevent more positive results. Currently, the oil price remains close to $61 per barrel due to Algeria’s plea to OPEC for market stability.
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Meanwhile, Shell, which is the third leading oil company, has gained a total of $23 B in profit last year. This should be enough reason to celebrate, but the huge oil company is currently facing the need to improve and expand its oil resources. Otherwise, it will run out of supply in the future. According to reports, Shell was only able to replace between 60% – 70% of the gas used for production last year. In 2004, the percentage was even lower, with only 19% of replacements.
However, Shell is making use of its large assets to meet the stiff market competition. Its oil reserve projects in Nigeria, Sakhalin Island, and the Gulf of Mexico are currently underway. The success of these projects would empower the company’s future possibilities.
Regions in the U.S, particularly the East Coast and Nigeria, are also facing issues about 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. Nevertheless, the use of MTBE led to problems and protests regarding water pollution and the contamination of the water supply. 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 amount of reserves 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. They 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 other economy and government sectors.
The Various Auto Companies Continue to Grow and Expand the World Market.
The discussion regarding oil issues leads us to another important area, which is 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 33-year lease from St. Modwen Properties Plc. The leading Chinese automaker is said to have paid 1.8 M pounds for the 105-acre factory. Nanjing surprised the global car industry last July 2005 when it bought MG roRoveror 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 world’s leading car brands.
Honda Motors Co. is also getting more attention from the international auto market after disclosing 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 would be distributed only on a smaller scale. This is due to the design’s prohibitive production cost. However, Honda is also developing smaller batteries and motors to reduce the hybrid cost in the future. This venture is part of Honda’s goal to beat 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. has dropped its sales by 4% last month. Another company that has followed the same trend is General Motors. According to GM, its sales also decreased by 2.5%. Meanwhile, the total sales of both Toyota and DaimlerChrysler continued to improve this year. Particularly, the Chrysler Group jumped in its sales by 3%, to around 190,367 cars. Some of the most popular automobiles sold by the company are Dodge, Chrysler, and Jeep. 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 a Jaguar decreased last year, the automaker declared no plans to sellaguar Ford repurchased the famous car brand in 1989 for around 1.6B pounds. This year, the car company is positive that Jaguar sales are going to recover and improve. Ford is also set to release a new car model that will be hitting Europe soon. This is part of its strategy to keep up with the strong competition against other auto giants, especially those from Asia.
As part of its move to recover from its losses, General Motors officially tasked Jerry York as its newest board member. York is noted for its remarkable achievements at Chrysler and IBM. Although GM has been receiving negative feedback lately, York is positive that the company will recover. During his January speech, he proposed five things to the GM 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
Intel Corp. recently got official permission from Vietnam to construct a microchip plant within its territory in terms of technology. Earlier, the leading microchip company proposed the $605M project, which will be built at HinChi Minh cityCityetnam would surely benefit from the budget since it is expected to attract more foreign investors to the country.
Meanwhile, the 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 market of computer technology.
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? Does it mean that Apple intends to expand its technological products into Hollywood? AppaITunes has been contributing to the promotion of many TV programs. Again, there’s a possibility that the latest rumors could again turn out to be wrong. Yet thene’s invitation is surely a good sign that the company is up to 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 illegal copying of software, music, and videos. Piracy has been a growing problem in the country for years. Despite several attempts to combat it, the problem continues to spread. In fPiracyChina 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 decided to invest 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 to venture 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 currently booming in India due to the increasing demand for housing projects and office buildings. This economic rise is also attracting many foreign investors now.
In terms of health, Roche finally got the U.S drug regulatory board’s approval to release Rituxan as the newest drug to treat rheumatoid arthritis. The approval of the new medicine promises more profit on the part of Roche. Still, it is like for patients who have not responded to other standard treatments for rheumatoid arthritis.
The U.S faces Several Economic Concerns.
Based on the latest report, the trade gap between exports and imports in the U.S has increased during the past year from 18%-75 % of a trillion dollars because American consumers have continued to demand more imported 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 that the U.S. is a leading exporter of certain goods such as aircraft. Although durable goods decreased during the past year, producing companies such as Boeing hope to improve their sales in the succeeding years.
Meanwhile, the huge damage left by Hurricane Irma 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 would be caused by future catastrophes.
Once again, it’s that time of the week to catch up on the latest happenings in the world of international trade. To start this week’s world trade news roundup, PrProcternd Gamble recently announced that they would cut down jobs that cover technical posts.
About 300 scientists and researchers are expected to be let go from the multimillion-dollar pharmaceutical company’s payroll. The research center located in Ohio will be the most affected by PrProcternd Gamble’s decision. The downsizing will also affect employees in London, Toronto, and New York.
According to Tom Milkin, the spokesperson for ProcProcter Gamble, the decision was not influenced by the desire to cut back on company costs. He said that the company’s move to let its employees go is a business strategy. Milkin added that despite the numerous job losses, this decision would benefit domestic research companies.
Job cuts aren’t the only decisions that the company has made this month. ProcProcter Gamble recently signed a contract with Nastech to sell Nastech’s spray that promises to cure osteoporosis. Aside from expanding Nastach’s nasal spray, ProcProcter Gamble is set to focus on developing pharmaceutical products for women, musculoskeletal problems, and gastrointestinal medicine.
While Tom Milkin denied that the Tor and Gamble are 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 gave the Palestinian Authority a warning about its financial probproblemslestine’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 cripple 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 in letting the PaPalestinianovernment 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 right now 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 donations, and the European Union has warned to stop sending funds.
To make up for the loss, Ismail Haniyeh, the Palestinian Prime Minister, said they would seek aid from African nations instead.
As an answer to the criticism he received from the United States, Hugo Chavez warned that he to halt the oil supply to the US if Condoleeza Rice continues to undermine the administration. Rice previously released statements that the relationship between Venezuela and Cuba endangers the democratic system of other Latin American countries. Chavez also faced accusations of using Venezuelan oil to interfere with the trade of nearby nations. Chavez said that the Americans’ attempt to turn other nations against Venezuela would be a failure. Chavez doesn’t consider stopping the supply of oil to the US as a loss; in fact, the US 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 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 country is still experiencing severe poverty.
This situation caused dramatic oil hikes in different countries, such as Japan, because the export of crude oil from Nigeria has been cut back by twenty percent. Some operations have also been suspended because of this.
Still, on the oil talk, Petroecuador, Ecuador’s national oil company, has decided to suspend its transportation of petroleum products because of the sabotage that the Trans-Ecuadorian pipeline has experienced. The numerous violent demonstrations are held responsible for the sabotage of Petroecuador’s major pipeline.
Eduardo Naranjo, the company’s top executive, said that the pipeline was completely paralyzed, and oil stations have been severely damaged because of the demonstrations. These violent protests, including putting up roadblocks, were participated in by Nin apo (a poverty-stricken province in Ecuador) and other Amazon Indians. This caused the production of 144,000 barrels of oil per day to be discontinued. The suspension of oil exports 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 US Deputy Trade Representative Karan Bhatia, China has gained profits from its US market access. In contrast, the US has yet to benefit from this trading relationship.
Rob Portman, US Deputy Trade Representative, stated that we would assign a task force to monitor China’s observance of global trade policies. There have been proposals made by legislators to lower US trade relations with China. Tariffs will also be imposed on low-priced products from China that are flooding the US market.
Chinese Foreign Ministry Spokesman Qin Gang said that these could prove to be unfavorable for American business interests if such policies are implemented. Analysts agree, saying that these actions could backfire on the United States government.
Although the United States is unhappy with its relationship with China, the same cannot be said for the Anglo-American relationship. The company’s profits reached a 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 is planning on expanding its production of coal and iron ore because the price of metal products is expected to increase this year. The company’s chief executive officer, Tony Trabar, sees indications for the 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 is capable of faxing, copying, and printing documents. The multifunction printer’s design was influenced by a study that shows that a significant amount of time is exhaspentcompanies on printing, copying, and faxing documents.
Currently, there are four models out in the market, each designed for different capacities of workload. The Infoprint 1540 and Infoprint 1570 can be used by small companies. These printers cost $11,542 and $3,259, respectively. Medium-sized companies can use the Infoprint 1560, which costs $12,858, and for large companies, the Infoprint 1580 is designed to handle a rough office environment. The Infroprint 1580 costs around $14,462.
Product expansion isn’t the only growth the world market is seeing these days. The growth of European Union members is set to accelerate by 2006. According to the European Commission’s forecast, 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 projection, projecting a 3.1% boost in their economy. A far second is the United Kingdom with a 2.4% economic growth. Joaquin Almunia, the European Union’s Economic and Monetary Affairs Commissioner, warned that the biggest setback in European nations’ economic growth is the inevitable increase in the price of oil.
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 N’s offer. The biggest European power firm E.ON’s business offer to Endesa, said to be 29% higher the Gas Natural’s previous bid.
If the mergmergerthese these two power companies occurs, 50 million clients in 30 nations will be served by a potentially top power company in the world. The merger also put E.ON in the lead over its competitors and provided the company with 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 US Congress is in opposition to such a deal, President George W. Bush threatened to veto any law that would hinder the deal.
Bush defended the sale of the ports by saying that his administration had thoroughly examined the matter. He also added that if the deal is successful, it will signify that the United States treats other countries fairly. Of course, the issue is 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 back 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. There are a lot of things Vietnam needs to organize before becoming a WTO member.
For the 14th consecutive time, the interest rate of the United States Federal Reserve increased once again. Last month, the meeting held saw Alan Greenspan as the head of the ed States Federal Reserve for the last time after heading the Federal Reserve for 18 years. During Greenspan’s tenure at the Federal Reserve, he encountered numerous low points in the US market history. His administration faced the market crash of 1987, the market crisis of the ’90s, and the September 11 attacks.
Greenspan was replaced by Ben Bernanke, 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, held on March 27. Bernanke’s biggest challenge is ending the increase in interest rates, which economists think will continue to rise because of the current inflation.
A bank robbery saw The Securitas Cash Management Ltd. lose at least $ 43.5 million in a more recent turn of events. 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.
A detailed statement revealed that the robbers dressed as police officers blocked the bank manager’s way home and were ordered to do what he was ordered. Another group of men in cahoots with the bank robbers was successful, making the manager’s family believe he had an accident and agreed to go with the group of robbers.
The manager was cuffed by the posing policemen and 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 depot cash. The incident took over, and hour, fortunately, no one was hurt.
On a more positive note, it seems that an alliance has been formed by international banks, including the World Bank and the International Monetary Fund, to employ carefully thought-out strategies to combat corruption. These organizations have reached an understanding of the need to support each other and to reach a common ground if the corruption is to be stopped. They have decided to form a team responsible for reporting a standardized framework that financial firms should employ to fight fraud. The group has conducted numerous surveys pinpointing countries and sectors that are plagued with widespread corruption.
