Daily Archives: June 8, 2008

Creating A $200 Billion US Credit For High Oil Prices

South Korea has decided that the oil crisis is doing so much to undermine its economy that it has put together a $10 billion package to aid consumers and small businesses whose financial prospects are being ruined by rising energy prices. According to Bloomberg, "Prime Minister Han Seung Soo yesterday announced income-tax rebates for three-quarters of South Korea’s 13 million workers, and subsidies for truckers, farmers and fishermen struggling with soaring fuel costs".

The problems in the US are as bad, if not worse, than they are in Korea and clearly operate on a much larger scale. Because most of the world relies on US agricultural output, the fact that some farms cannot operate due to high gas and fertilizer prices has ripple effects well beyond local economies. Entire industries from automotive to airlines to newspapers could be nearly destroyed by the rising prices of jet fuel, oil, ground transportation, and ink.

With oil spiking by almost $8 in one day and the economy besieged by inflation and a recession, the federal government already knows that the tax rebates approved earlier this year and recently distributed were not nearly adequate to solve the slowdown in consumer spending.

Figures from the IMF, World Bank, and CIA World Factbook indicate that the US GDP is about fifteen times greater than that of South Korea. That means an aid package similar to the one being adopted by the Asian country would have to be on an order of magnitude of over $150 billion here.  An American program might cost the government closer to $200 billion since the US has a much greater percentage of its land used for farming, a higher percentage of workers who commute by car, and a comparatively greater number of cities served by air.

If the US is to avoid what now appears to be a period of terrible fuel price inflation, the government has a limited number of options. Cutting fuel taxes may be among these, but each state has a tax of its own on top of the federal burden. And, cutting the federal tax does more for the consumer than business.

Now that it is clear that the elements which would bring crude prices down, especially help from OPEC or sharply falling demand in the emerging nations,  are not likely to improve, the only viable way to protect the US economy may be a massive aid package for consumers and businesses which can no longer live with oil and gas prices which could cripple America’s ability to operate financially.

Douglas A. McIntyre

Posted on: June 8, 2008 – 6:42 pm in Oil & Gas

Looking For Huge Untapped Oil Reserves

The sight of the gallows focuses the mind.

Now that oil is close to $140 a barrel, a number of potential solutions for the crisis that were not options a year ago, have suddenly become attractive.

The first source of new crude is oil shale. The US has a trillion tons of the stuff and companies like Chevron (CVX) haves started the process of producing it. In 2005, according to The NY Post, the US Department of energy said that 10 million barrels a day in a little over a decade.

The second source which is readily available is oil under protected lands. The Department of the Interior estimates that these resources total 31 billion barrels of oil according to The Heritage Foundation. The reserves offshore are closer to 86 billion barrels.

Finally, oil deposits in Montana could bring in 3.65 billion barrels of oil because new of new drilling technology.

The oil is there.It is a question of deciding to put in the effort, and change some government regulations.

Douglas A. McIntyre

Posted on: June 8, 2008 – 6:00 pm in Oil & Gas,

O2 May Give Free Apple (AAPL) iPhones In UK

O2, which has the exlusive distribution rights to the Apple (AAPL) iPhone in the UK, may give away free 3G versions of the handset when it comes out next week.

Why? If a customer is willing to take out a huge contract for cellular voice and data service, it may make sense for O2 to throw in the handset. Based in industry information, the cost of the new iPhone will be about $400. The carrier can charge its customers some portion or even all of that. Or, it can offer discounts or free phones to those who will shell out enough in user fees.

The London Telegraph writes that "O2, which has an exclusive agreement to distribute Apple’s iPhone in this country, is set to give away the 3G version of the handset to its highest-spending customers when it launches here next month."

O2 may find that the economy of giving away a $400 phone for a subscriber who will take out a $1,500 annual subscrition plan makes all the sense in the world.

Maybe AT&T (T) will do the same in the US.

Douglas A. McIntyre

Posted on: June 8, 2008 – 6:10 am in Wireless, ,

Goldman: BRIC Nation’s Will Take Larger Share Of Global GDP

Due to slowing GDP growth in the West, especially in the US, and constant and rapid GDP growth in the BRIC nations, their portion of the global economy will be much larger than estimated during the next few years.

BRIC stands for Brazil, Russia, India and China.

According to Reuters, "Jim O’Neill, the Goldman Sachs economist who originated the term in 2003, said the financial crisis that began in U.S. mortgage security markets was allowing the BRIC countries to take a bigger share of world gross domestic product".

Posted on: June 8, 2008 – 5:37 am in China

Reader Comment: Wang Jianzhou, Head Of China Mobile Will Be At Apple (AAPL) WWDC

We rarely publish reader comments or letters, but we want to pass along one from  Kirit Vora, who has an MIT e-mail address, and may be the same man who is president of staff at William Beaumont Hospital-Troy and a well-known urinary incontinence expert.

In his note he claims he has heard that the CEO of China Mobile, Wang Jianzhou, will be onstage with Apple’s (AAPL) Steve Jobs at WWDC on Monday.

We just thought we should let people know. The Vora we found is a member of the American Urological Association and American Association of Clinical Urologists.

Douglas A. McIntyre

Posted on: June 8, 2008 – 5:31 am in Wireless,