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China Unveils Overhaul of Bloated State Sector

BEIJING—Chinese President Xi Jinping set in motion the overhaul of the country’s bloated state companies just ahead of his U.S. visit , in a bid to show Beijing is committed to change even as the economy slows . A plan released Sunday, however, represents a modest fix to China’s brand of state capitalism. It attempts to enhance state companies’ returns by letting them add private investors. It also tries to improve state companies’ competitiveness overseas by making them bigger, though that risks creating more inefficiency and further stymieing private enterprise. Crucially, the plan doesn’t specify whether underperforming state firms will be allowed to fail, a measure economists say would be critical to its success. The plan reflects Mr. Xi’s belief, according to officials familiar with his thinking, that the state sector, rather than taking a back seat, should be improved to continue to play a dominant role in the […]

Posted On : Published By : Tom Whipple
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Chinese shares fall sharply as economic data undermines mood

Image copyright Chinese shares lead the losses in Asia Mainland Chinese shares fell on Monday after economic data released on Sunday underlined fears growth is slackening. Growth in both fixed-asset investment , up 10.9% in August from a year ago, and factory output, at 6.1%, came in below expectations. The Shanghai Composite index closed down 2.67% at 3,114.80, although Hong Kong’s Hang Seng closed up 0.27% at 21,561.90. The Shanghai index has lost nearly 40% since its peak in mid-June. Shares of four of China’s largest brokerages tumbled as much as 7% following news of fines and penalties from the securities regulator for failing to conduct proper checks on clients. The four were fined 178.5m yuan ($28m; £18m) and had 62.4m yuan of profits confiscated, according to the securities filings by the companies. Regulators have been cracking down on trading firms to stem the volatility that has rocked the […]

Posted On : Published By : Tom Whipple
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U.S. shale crude cash markets offer ray of hope amid global gloom

In shale strongholds of North Dakota and Texas, physical crude grades are trading at the highest premiums to futures prices in years, offering a glimmer of hope that a pickup in global oil markets might follow. While crude futures hover around 6-1/2-year lows, the cash markets, where producers and refiners buy and sell physical barrels of oil, are sending a more optimistic, if short-term, signal. West Texas Intermediate crude delivered to Midland, Texas, at the heart of the Permian Basin, is trading at a record $2.75 premium to benchmark U.S. futures. North Dakota’s Bakken crude fetches more than 50 cents more, the highest in two years. The two areas produce more than 60 percent of U.S. shale oil. Many cash crude traders say the relative strength of these markets most likely reflects local, short-term factors: newly built pipelines in Texas are increasing demand for local crude, while Midwest refiners […]

Posted On : Published By : Tom Whipple
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Write-Downs Abound for Oil Producers

U.S. oil-and-gas producers have written down the value of their drilling fields by more in 2015 than any full year in history, as the rout in commodity prices makes properties across the country not worth drilling. A group of 66 oil and gas producers have taken impairment charges totaling $59.8 billion through June, according to a tally by energy consultancy IHS Herold Inc. That tops the previous full-year record of $48.5 billion set in 2008, IHS says. In 2008, oil prices plummeted from above $140 a barrel at midyear to below $37 by year-end as the financial system’s near collapse sent the global economy into recession. The drop was steep but relatively short-lived as growing demand from China and other emerging economies was expected to suck up global supplies. Now, with China’s economy sputtering and U.S. production at its highest level in decades, prices aren’t expected to return to […]

Posted On : Published By : Tom Whipple
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Truth takes a hit in the battle over U.S. oil export ban

They say that the first casualty of war is truth. And, on both sides of the fight over lifting the ban on exports of U.S. crude oil, the truth has already fallen into a coma. The ban was instituted in 1975 in order to make America less subject to swings in international oil supply after suffering the price shock associated with the Arab oil embargo in 1973 . Last week a committee in the U.S. House of Representatives voted to end the ban after a Senate committee voted in July to do the same . A vote by the full House and Senate could be near. The proponents are careful NOT to say that the United States is energy-independent and so has oil to spare. Such claims made in the past backfired because it is too easy to look this up. Net U.S. imports of crude oil were almost […]

Posted On : Published By : Tom Whipple
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Interest in hybrid vehicles wanes

Interest in hybrid motor vehicles rises and falls with the price of gasoline. Today, with gasoline prices relatively low, some of the steam has gone out of the movement to compressed natural gas vehicles or the hybrids that also use gasoline. Interest was sky high in 2011 when the Legislature authorized two state agencies — the Department of Administration and Information and the Department of Transportation — to retrofit existing vehicles or to buy new ones capable of running on natural gas or a combination of natural gas and gasoline. The Legislature authorized $200,000 for the pilot program, enough to retrofit 10 vehicles for each of the two departments. A report from the state’s Economic Analysis Division issued at that time said the natural gas vehicles reduce carbon monoxide emissions by 90 to 97 percent. But the driving range of the vehicles is limited, the report warned. At the […]

Posted On : Published By : Tom Whipple
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Peak Oil Ass-Backwards: Crashing Oil Prices Aren’t Due to an Oil Glut But to Demand Destruction and Peaking Credit

Read Part 1 of the series. Confusion dawns upon the smartest men in the room (photo by Rafael Matsunaga) As I began to mention at the end of the first part of this three-parter, I’ve only just recently come to the conclusion that oil prices aren’t going to have a tendency to rise due to the tightening of supply imposed by peak oil , but to depreciate. This of course flies in the face of the common logic of supply and demand, but when factoring in the method by which the majority of our money is created, a deflationary effect can be seen to come into play. This has taken me an absurdly long time to clue into, for although I’d steadfastly amassed a bunch of pieces (various information), I hadn’t realized they were actually all part of the same puzzle. With peak oil and fractional-reserve banking being the […]

Posted On : Published By : Tom Whipple
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Oil Price Slips as Market Focuses on Oversupply

Oil retreated Friday as analysts reminded the market of high U.S. inventory numbers and the continued oversupply of crude. Light, sweet crude for October delivery settled down $1.29, or 2.8%, to $44.63 a barrel on the New York Mercantile Exchange. The contract fell 3.1% in the week. Brent, the global benchmark, fell 75 cents, or 1.5%, to $48.14 a barrel on ICE Futures Europe, notching a 3% weekly decline. Data from the U.S. Energy Information Administration on Thursday set the stage for a decline. It showed stocks rose 2.6 million barrels in the week to 458 million barrels, higher than the inventory estimate from industry group the American Petroleum Institute earlier in the week. U.S. investment bank Goldman Sachs piled on by lowering its short- and midterm price forecasts for U.S. oil to reflect a higher-than-expected oversupply. The bank had been among the most bearish in the market already […]

Posted On : Published By : Tom Whipple