There’s a different feel to Mr. Rogers’ neighbourhood these days.
On the tenth floor of Rogers Communications Inc.’s Bloor St. campus, the corner office that belonged to Ted Rogers before he died last year is being converted into a conference room. Though repurposed, the space will pay homage to the wily, red-haired cable baron who built a single FM radio station into the country’s biggest communications giant.
Further down the hall, the new CEO, Nadir Mohamed, is preparing to move into a new office after spending nine years at the firm, most recently as chief operating officer of its communications division.
Mohamed, 53, is the first to admit he isn’t Ted Part 2. For one thing, he doesn’t share his predecessor’s workaholic bent, a trait common among entrepreneurs that no doubt served Rogers well in his drawn-out battles with entrenched rivals such as Bell Canada.
But Mohamed promises that he shares Rogers’ enthusiasm and drive to run the business.
"The psyche in Ted was that every day you wake up and you gotta improve, you gotta make it better for the customer – because if we don’t, Nadir, they’re going to kill us," Mohamed said during an interview yesterday.
He banged his fist on a glass table to highlight each point in a somewhat unconvincing effort at mimicking a legendary Ted outburst.
"If there’s anything that will be the DNA of this company and that drives this business and we can never afford to lose, it’s that idea that every single day we have to get better."
Mohamed is often described as one of the industry’s brightest stars and one of the few executives capable of working closely with Rogers without getting burnt out. Mohamed says the two immediately hit it off when they first met in 2000 at Rogers’ Forest Hill home.
On the surface, though, the two men could not appear more different. Rogers was known for his larger-than-life personality and wearing suits cut from unnaturally coloured fabrics. Mohamed, by contrast, seems to prefer wearing black and projects an owlish appearance, thanks to a thin, pointed nose and dark-framed eyeglasses.
Rogers was often described as a gutsy risk-taker who didn’t take no for an answer, while Mohamed is the calm, cool, consensus-builder with a knack for running wireless companies. He is credited with helping to transform Rogers Wireless from a growth-at-any-cost formula into the conglomerate’s most valuable business unit, now accounting for more than half of Rogers’ annual revenue.
"He’s an incredibly measured person," said Alek Krstajic, CEO of wireless upstart Public Mobile and a former Rogers executive. "He spends time on things. There’s no knee-jerk reactions with Nadir Mohamed."
Even Mohamed’s office is a cold and sterile place. The desk is glass, not wood, with relatively few personal items on the shelves behind it. A giant framed photograph of a derelict Shanghai building hangs on the other side of the room, a 50th birthday present from his wife Shabin, a fan of contemporary art.
But dig a bit beyond the bookish exterior and there’s more to Mohamed than meets the eye. For starters, take a look inside the black filing cabinet in his office. Slightly embarrassed, Mohamed gingerly opens the door and reveals it is packed full of Goldfish crackers.
An Ismaili Muslim, Mohamed was born in Tanzania and lived in its largest city, Dar es Salaam, until he was a teenager payday loan online. His grandparents had immigrated to East Africa from India in the early 1900s. He says his father’s efforts to build a hardware business from the ground up instilled a work ethic in him from an early age, while his mother taught him to be caring and inclusive.
At age 12 or 13, Mohamed’s parents shipped him off to London to get a Western education. They wanted him to be a doctor or a lawyer. Instead, he received an education in life. He remembers being picked up by a 20-year-old cousin who took him out for a night on the town. "It probably wasn’t a great idea in hindsight, but I remember getting to bed at five in the morning that first night because he was out partying. And then the next morning he woke up and drove me to school, a couple of hours away."
Essentially, he lived on his own in England but Mohamed says he never felt lonely because he was surrounded by his favourite sports – soccer, cricket and tennis. The latter-mentioned he still plays.
A few years later he followed his family to Vancouver, studied commerce at the University of British Columbia, then worked at an accounting firm and earned his CA. He fell into telecommunications by happenstance. A friend of his had a job interview at BC Tel but had accepted another offer. Mohamed went in his place. The rest is history.
Mohamed is CEO at a time when Rogers is undergoing a profound transformation. Once a scrappy debt-ridden cable company, it has emerged as a stable cash-producing communications firm with interests in wireless, cable and media properties. Profits are rolling in and dividends finally are being paid out. In fact, Rogers’ board recently approved a share buyback for $1.5 billion at a time when its rivals disappointed investors with weaker-than-expected first quarter results.
Currently, it’s top dog in wireless after years of heady growth but the market is more saturated as more Canadians sign up for cellphones and an onslaught of new rivals prepares to enter the fray. Rogers is poised to lose its exclusive grip on GSM wireless technology in Canada to Bell, Telus and new entrants.
"There’s a realization that the company is going to be slower growth," said Genuity Capital Markets analyst Dvai Ghose.
So Mohamed’s primary job will be figuring out ways to make Ted’s empire run more smoothly and profitably. That raises questions about less profitable areas of the business, such as the Toronto Blue Jays, but Mohamed says he, like his predecessor, believes in the brand-building, cross-promotional opportunities of owning a Major League Baseball team.
It’s not yet clear how Edward Rogers will fit into the mix.
Edward Rogers is chair of a trust that controls the vast majority of Rogers voting shares, but still holds the same job – head of the cable division – as he did when his dad was CEO. It was no secret that the elder Rogers wanted his son to control the firm one day and encouraged him to put his name forward when the time came, which he did.
Mohamed is vague when asked if some power-sharing plan exists. Similarly, he ducks a question about whether he sees himself grooming Rogers to be CEO one day, saying, "I’d like him to be involved. I actually spend time with him … shaping the business. That’s not to say we’ve got it all right … we are just starting that relationship."
Search engine wars are heating up.
Microsoft is relaunching its search engine with new bells and whistles. Yahoo is getting away from results being generated as straight links and newcomer WolframAlpha has just released an "answer engine," designed to do just that…provide answers.
With a 64.2% market share, according to comScore, Google is the clear leader when it comes to online search. Experts say rivals like Yahoo (20.4% market share) and Microsoft (8.2% market share) will need to find ways of differentiating themselves in order to make a sizable dent.
"If you’re going to compete with Google, you’re not going to do it by being the same," said Carl Howe, tech analyst with Yankee Group.
Microsoft and Yahoo have been in and out of discussions about a potential search tie-up since early last year. Yahoo Chief Executive Carol Bartz told attendees at the All Things Digital conference in Carlsbad, Calif., Wednesday that talks between the two companies have continued "a little bit," but no agreement has been reached.
Sandeep Aggarwal, senior Internet research analyst with Collins Stewart LLC, said he expects an a Microsoft-Yahoo search deal to be reached by the time the companies report their quarterly results in late July.
Google’s dominance in search goes even deeper than the market share numbers generated by comScore, said Aggarwal. Google gets most of its traffic from searches made directly on Google.com, while 98% of Yahoo’s and Microsoft’s traffic comes through portals like MSN and Yahoo Finance rather than searches on Yahoo.com and Live.com, he said.
That means competitors have an even steeper hill to climb, because "googling" has become synonymous with "search."
"We’re creatures of habit," said Susan Feldman, search engine analyst with IDC. "The tech aspects of improving search are not as hard as improving the ‘people’ aspects."
Microsoft. Microsoft (MSFT, Fortune 500) is on the cusp of unveiling its new search engine under the code-name "Kumo" though it is expected to ultimately be called "Bing." Aggarwal, who has tested the new search engine, said Bing improves the relevance of its links and presents search results differently from Google, Yahoo and even from Microsoft’s current search engine, Live.com.
Bing is set up to organize search results in relevant groups rather than as a series of links. For instance, a search for "fly to New York," may yield New York destinations like hotels, restaurants and museums as almost a guidebook page. The same search on Live.com generates straight individual links that users have to go through one by one.
Aggarwal said Bing may have chance at becoming a "destination" Web site like Google, because the site’s technology has been better tested.
"Live wasn’t ready for prime time because the technology was too premature" and users weren’t repeat customers, he said. "Now Microsoft thinks they’re ready."
A Microsoft spokeswoman declined to comment. Chief Executive Steve Ballmer may shed more light on Microsoft’s search plans Thursday, when he is expected to speak at the All Things Digital conference.
Yahoo. Yahoo (YHOO, Fortune 500) is tinkering with the types of results that come up after a search payday loans.
The company is trying to provide information, including images and answers from databases, rather than a long series of links, according to analysts. For example, a search on Yahoo.com for "Star Trek" brings up an image with the movie trailer, a review, and a zip code/address box that will bring up local show times.
The strategy has already been implemented to a degree on a variety of search engines including Yahoo.com. The company has big plans to enhance its results even further and that could ultimately be a winning strategy for Yahoo.
"There’s a staggering amount of information that exists out there, and search companies have to decide how to return the top 10 links and make that useful to people," said Feldman. "Yahoo can really get ahead if people don’t have to click back and forth."
Yahoo was unavailable for immediate comment.
WolframAlpha. When WolframAlpha launched last week, there was a buzz that it could become the next Google "killer." But the company maintains that WolframAlpha isn’t even a search engine. A query on WolframAlpha.com yields calculations and database results rather than links to other Web pages.
"It really is meant to supplement search, not to be a search competitor," said John Ekizian, spokesman for WolframAlpha. "WolframAlpha will always give you the right answer, and that’s a lot different than search."
Still, some say search companies should watch out.
"People’s search queries are getting longer over time," said Andrew Lipsman, director of industry analysis at comScore. "This might bode well for an engine like WolframAlpha, which appears designed to handle more detailed search queries."
Google. While competitors are nipping at Google’s heels, the search giant isn’t standing still.
"Search is not done, and Google (GOOG, Fortune 500) is not the be-all and end-all of search engines," said Howe. "Google would agree, and that’s why they’re constantly making changes too."
Marissa Mayer, Google’s vice president of search products, told CNNMoney that Google released more than 360 relevance changes to improve the search engine last year.
Google continues to explore new ways to grow. "Search is a very competitive space, so for us there’s always pressure to be better," said Mayer. "You need to keep up that pace of innovation."
New innovations like Google Squared, which will allow users to view searches in a matrix form on their screen, and Google voice search are in the works, she said.
Still, some think that Google’s competitors are getting close to taking away some of Google’s dominant market share.
"Microsoft and Yahoo have bridged the technology gap, so now they need to show that not everyone has to follow Google’s philosophy, and not all search needs to look the same," said Aggarwal. "If they keep plugging away, maybe they can do some damage."
– CNNMoney.com’s Poppy Harlow contributed to this story
After 18 months of study the federal government has finally decided to privatize a portion of Atomic Energy of Canada Ltd., but how the problem-plagued nuclear company will be restructured won’t be known for several months.
Natural Resources Minister Lisa Raitt told reporters today that Mississauga-based Atomic Energy faces stiff competition from much larger, better-funded rivals and is simply too small to take advantage of the "nuclear renaissance" taking place worldwide.
An internal ministry review concluded that Atomic Energy’s commercial Candu reactor division "can be best served by a strategic alliance with one or more partners with global scale that can leverage the technology, skills and experience of AECL in Canada and internationally."
The review said a strategic alliance could take the form of a joint venture or merger with another nuclear reactor supplier or the sale of a minority or majority equity interest in Atomic Energy.
"We’re going to review all the options that are put forward," said Raitt. "We can’t speculate on what may or may not be on the table with respect to private equity."
Ottawa also plans to separate the Candu division from Atomic Energy’s research division, which includes its troubled Chalk River laboratory and National Research Universal reactor that produces up to half of the world’s medical isotope supply.
A heavy-water leak shut down the 52-year-old NRU reactor two weeks ago, and the company says it will be out of commission for at least three months. It’s the Chalk River reactor’s second major shutdown in two years.
AECL also scrapped two MAPLE reactors last year due to design flaws car insurance quote. The MAPLEs were meant to replace the NRU reactor. They were millions of dollars over budget and years behind schedule when the Tories pulled the plug.
The research division has been a drain on the commercial division, the review said. "AECL has not been profitable for the last five years as a consolidated entity, a situation that persists despite the commercial revenue it has generated and the infusion of significant government funding."
Raitt said an expert panel will be created that will determine the future management structure at Chalk River, including the possibility of bringing in private-sector management.
The partial privatization of Atomic Energy’s commercial division has been long anticipated, and many companies, including French rival Areva SA, Canadian engineering partner SNC Lavalin Inc., Ontario nuclear operator Bruce Power, and U.S. reactor supplier General Electric have expressed an interest in partnering with or owning a piece of the crown corporation.
Ottawa’s decision to restructure Atomic Energy comes as Ontario weighs bids from reactor supplier for a newly planned nuclear plant at Darlington. Atomic Energy is competing against Areva and U.S.-based Westinghouse Electric for the business.
Energy and Infrastructure Minister George Smitherman was expected to announce a reactor supplier by June 21 but has hinted lately that the decision, originally expected last December, may be delayed for a second time.
With files from The Canadian Press
Even before the official kickoff of the seventh annual annual "D: All Things Digital" conference, Facebook was making waves at the event: Hours after the company announced a $200 million cash infusion from Digital Sky Technologies that values the social media site at $10 billion, Digital Sky partner Alexander Tamas was making the rounds at the Four Seasons Aviara resort and talking up his latest deal.
I caught up with Tamas, along with Facebook Chief Operating Officer Sheryl Sandberg and Washington Post chairman and CEO Don Graham. Tamas’ Digital Sky is based in Moscow and London, and its recent investment in Facebook gives the investment firm a roughly 2% stake in the company.
Tamas says he believes Facebook is worth every cent of the $10 billion valuation. He says he flew to Palo Alto for his first meeting with Chief Executive Mark Zuckerberg several months ago and walked away certain Facebook would be the most important global Internet company.
"A lot of this is about Mark," he said, a grin spreading from ear to ear. "He is somebody who wants to build a real business." It’s a sentiment most of Facebook’s investors have expressed, and Graham, an unabashed Zuckerberg fan, nodded vigorously beside Tamas.
Despite the down economy, Facebook has had no shortage of interested investors. Sandberg reiterates the company wasn’t proactively searching for money - and insists Facebook doesn’t need the funds to maintain its operations. "We always were open to the right opportunities and the right partnership," she said. "And they have good experience across different types of properties."
Indeed, Tamas and his team will bring invaluable knowledge about doing business in Russia and Eastern Europe, where companies are testing different types of business models for social networks. Digital Sky Technologies has investments in several of the largest Internet companies in Russia so the partners are able to evaluate not one strategy, but several strategies in the Russian market place no credit check payday loans.
"The mistake people are making here is to say display advertising does not work in social networking," said Tamas, describing the American marketplace. "That is true, but what does work is much more intelligent ads. It’s much more like television. People have not taken advantage of what Internet as a medium can do."
And he’s not focused solely on advertising. Tamas has a good deal of experience with both virtual goods and different payment models. As Facebook builds out its business, the company must learn as much as possible about different revenue streams.
Of course, the $10 billion valuation may seem high in the current economy. But it is a good deal less than the $15 billion value attached to Microsoft’s $240 million investment for a 1.6% percent stake in the company. Sandberg points out that economic conditions were fairly different a year and a half ago and adds that that was before she arrived at the company. Also: Microsoft’s investment was in large part strategic.
But valuations are hard to arrive at. Which brings us back to Silicon Valley’s other hot social media property: Twitter. What does the Facebook crew think about it?
Sandberg is diplomatic, noting "the world is moving to real-time sharing" and saying there’s room for a number of players.
Tamas is more direct in his opinion of the emerging Twitterverse.
"It’s a very interesting company and has interesting potential - but it’s in a completely different league," Tamas said. He’d better hope he’s right about Facebook’s primacy: After all, he has more than $200 million riding on it.
Sales of U.S. existing homes rose in April compared with the previous month, economists polled by Reuters forecast.
A poll of 66 economists by Reuters produced a median forecast of 4.66 million sales of existing homes on a seasonally-adjusted, annualized basis, in April. That would be up from 4.57 million sales in March.
Analysts noted that the pending sales index rose 3 percent in March, an encouraging sign for April sales.
Meanwhile, the number of existing homes for sale dropped slightly to 3.74 million in March.
Still, economists noted that foreclosures are still on the rise and that there is a large stock of “shadow” inventory, describing when would-be sellers put their houses back on the market when demand seems to be healthier.
“The trend is flat,” concluded Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.
The National Association of Realtors will release the monthly data at 10 a.m. EDT on Wednesday.
A sampling of forecasts and analysis on the upcoming consumer price data follows:
CARL RICCADONNA, DIRECTOR, SENIOR U.S. ECONOMIST, DEUTSCHE
BANK SECURITIES, NEW YORK:
Forecast: 4.65 million units
“We look for a 1 no fax quick cash.8 percent increase in April over March sales. We have seen some evidence that the housing market is bottoming and that things are turning up just a bit. The pending home sales series has had some gains in recent months. While it’s good news that things are turning up, I wouldn’t look for a big rebound here. Sales are just bouncing along the bottom at this point.”
MICHAEL MORAN, CHIEF ECONOMIST, DAIWA SECURITIES AMERICA, NEW YORK: Forecast: 4.7 million units
“We’re looking for a 2.8 percent increase in existing home sales. If you look at the recent pattern of home sales it seems as though they have formed a bottom. In addition to that, a low interest-rate environment has stirred the interest of some potential buyers. Also, Congress has sweetened tax incentives for first-time home buyers. So I look for at least steady, and possibly improved, home sales. There are negative factors to be sure, such as the weak labor market and continued declines in home prices. Both of those factors could have kept potential buyers sidelined.”
RBS SECURITIES:
MEECH LAKE, Que.–The deep recession is wreaking havoc on the government treasury and will cause the deficit to balloon “substantially more" than projected in the budget this year, Finance Minister Jim Flaherty now says.
The finance minister said Monday the recession has hurt government revenues from personal and corporate taxes and raised spending requirements. That means the financial shortfall – originally forecast at $34 billion for 2009-2010 – will be much higher.
In its January budget, Ottawa estimated it would run deficits for five years and predicted a shortfall of $64 billion over the next two years, including $30 billion in 2010-2011.
"I expect we will have a larger deficit than anticipated in the federal budget . . . the deficit will be substantially more," Flaherty told a news conference after a meeting of federal-provincial finance ministers at Meech Lake.
The actual number will be released in a June update when the government reports to Parliament on how the fiscal stimulus is being spent.
Flaherty’s announcement amounts to a catch up for the government to projections already made public by parliamentary budget officer Kevin Page, who in March estimated the deficit would be at least at least $9 billion more over the first two years.
TD Bank chief economist Don Drummond, a former senior finance official, went even further, saying the shortfall would be about $18 billion more.
Flaherty would not elaborate, but said the new reality does not change the picture about when the government will come out of deficit, in the 2013-14 fiscal year.
The minister’s revision, after saying last month he was not changing his forecast, came after meeting with his provincial counterparts over the state of the economy, the issue of employment insurance and the adequacy of Canada’s pension system.
After receiving a briefing from Bank of Canada governor Mark Carney, Flaherty said the economy remains in a "serious recession" despite some encouraging signals.
But he balked at increasing the size of Ottawa’s $40-billion stimulus or expanding employment insurance benefits, as the opposition parties and Ontario have demanded.
Flaherty said once provincial stimulus spending is included, Canada has about $50 billion earmarked to boost the sagging economy saving account payday loan.
Ontario Finance Minister Dwight Duncan, however, said he was not giving up on the issue. He complained that an unemployed person in Ontario makes about $4,000 less from the system than the Canadian average, and that only about 32 per cent of the jobless in Ontario are collecting EI.
"The bottom line is that the rules in place now were designed at a very different time and we need more flexibility," he said.
As well, he called EI the most effective form of economic stimulus because those receiving benefits will spend it, and likely quickly.
The ministers were able to agree on a study group to look at the Canadian private pension plan system. Ted Menzies, parliamentary secretary to Flaherty, will head the group, which will include provincial representation.
Ontario, British Columbia, Alberta and Nova Scotia have been pressing for a national approach on pensions with a view to expanding coverage and benefits of private sector plans.
Corporate pension plans have been in trouble in part because of last year’s collapse of stock markets and other factors that have left many companies – including General Motors Canada and Air Canada – unable to deal with billions of dollars of obligations.
"This issue is going to take on greater and greater significance in the coming weeks and months and years," Duncan said.
"It does require more work to be done. Our preference is to take a pan-Canadian approach to this issue as we explore options that may be available."
Earlier, Flaherty agreed with Duncan that the issue needs a national approach.
Although only about 10 per cent of private pensions are under federal jurisdiction, "we’re all Canadians, we’re all in this together," he said.
Ottawa also announced technical changes to the Canada Pension Plan that would take effect in 2011. The changes would allow retirees under 65 more flexibility, permitting them to work more hours while receiving benefits. As well, the government proposes to exclude up to a year of low or no earnings without impacting benefits.
It’s been a relief while it has lasted. Lower oil prices, that is. But the days of cheaper oil are numbered.
The brief respite from last summer’s record-high crude prices, which aggravated the global economic slump, will soon give way to another oil-price spike that may be more painful than the last one.
"The stage is currently being set for oil prices to skyrocket," says U.S. energy analyst David Fessler in the online investment newsletter Investment U. Fessler cites the decline of such super fields as the North Sea, Alaska’s North Slope, Mexico’s Cantrell Field and Saudi Arabia’s Ghawar Field – largest in the world – along with the extraordinary cost of producing crude from the few remaining newer crude sources such as Alberta’s Athabasca tarsands and reserves six or seven kilometres below sea level off the coast of Brazil.
That’s a view shared by most of the world industry’s veteran experts.
"As the economy picks up, spare capacity will start to erode, and the oil market could tighten up again in the first half of the decade," Daniel Yergin, dean of world oil economists, said in U.S. congressional testimony May 21.
At the same hearing economics professor James Hamilton of the University of California at San Diego added: "If demand in China and elsewhere returns to its previous rate of growth, it will not be too long before the same calculus that produced the oil-price spike of 2007-08 will be back to haunt us again."
Under the worst-case scenarios the experts envision, you can take your pick between $100 (U.S.) per barrel oil in the near term and double that amount by 2014 or sooner.
The recent oil-price recovery to a six-month high of $62 (U.S.) per barrel earlier this month, up from a nadir of about $35 (U.S.) per barrel early this year, is "impressive given the severity of the downturn in global industrial production," says long-time investment analyst Ed Yardeni, chief strategic analyst at Yardeni Research.
"It suggests that oil traders are expecting that once the global economy recovers, supplies will tighten up quickly relative to demand," Yardeni says.
"It will be back to the future."
Then there’s T. Boone Pickens, legendary oilman turned champion of alternative energy sources.
Pickens told Fox News earlier this month, "You’re going to be back to $75 (U.S.) oil by the end of the year, and $200 (U.S.) per barrel within five years."
It’s no less true for being obvious: When oil collapsed more than 70 per cent from its July 2008 record high, many major oil firms slashed their exploration budgets because the lower prices did not cover the expenses of today’s high-cost reserve plays.
The worldwide credit scarcity didn’t help.
In nations within the Organization of Petroleum Exporting Countries (OPEC), as many as 35 new projects have been delayed to 2013. About $100 billion worth of Alberta tarsands expansion projects are on hold. Civil wars continued to rage in Nigeria, America’s fifth-largest source of oil imports free instant credit reports. Conflict has taken the lives of hundreds of people in the west African nation this month. Major disruptions in production in the oil-rich Niger Delta have been routine for the past five years.
All of this means that when global demand comes roaring back – as it will in China, India and other emerging economies –and returns to its pre-recession levels in mature economies in North America and Europe, the needed additional supply won’t be there to satisfy the resurgent demand except at exorbitant prices.
"I’ve often described unsustainably low oil prices as carrying the seeds of future spikes and volatility," Ali al-Naimi, the Saudi oil minister, said recently. "If we place a low priority on preparing for the future, that lack of action can come back to haunt us through supply shortages and another round of high prices."
Officials at the International Monetary Fund are especially concerned about the impact of an oil-price rebound on impoverished economies. They regret that the current period of lower drilling costs was not seized upon as an opportunity to get long-term projects underway.
"The lower that oil prices drop now the greater the negative impact on future supply," John Lipsky, first deputy managing director of the IMF said at an OPEC summit in Vienna in March.
As oil prices were peaking last spring, Yergin’s firm was projecting an increase in world oil capacity to 109 million barrels a day.
The subsequent "capital strike" by exploration companies has forced Yergin to revise that figure down to a current 101.4 million barrels a day. That’s a "squeeze" scenario similar to the recent years of escalating prices, when the gap between supply and demand became been razor-thin.
French oil producer Total S.A., one of the few companies to maintain an aggressive exploration program, including efforts to build a large presence in the Athabasca tarsands, is gloomier still. Christophe de Margerie, Total’s CEO, said the proliferation of project cancellations means the world’s producers will be struggling by the middle of the next decade to keep supply at even 90 million barrels a day.
Noting that oil still accounts for 40 per cent of U.S. energy supplies, Yergin told the U.S. congressional panel that: "We should give clear signals to Canada to develop its oilsands and to Brazil to develop its offshore oil. We should do more research on cleaner uses of coal. We should encourage more domestic natural gas production through hydraulic fracturing. And we should be prepared to use more of our offshore oil and gas deposits by encouraging their development in an environmentally intelligent manner."
Those are fighting words to most environmentalists, who believe no amount of research will yield "clean coal and despair at the pollution risk of U.S. offshore drilling.
The environmentalists are pitted against North American consumers, who promptly lost their ballyhooed interest in small cars once oil prices fell.
dolive@thestar.ca
DENVER — Backyard grillers may get a little steamed this holiday weekend when buying refilled propane tanks: They will be getting less fuel for their money than last Memorial Day.
When oil prices soared in 2008, propane suppliers quietly reduced by two pounds the amount of gas pumped into each 20-pound tank, saying they wanted to avoid raising prices.
Since then, propane prices have been cut in half as the price of oil has dropped. But smaller refills are still being sold nationwide by many dealers, and most buyers are unaware because the tank is the same size.
"It’s a price increase," retired lawyer Stuart Barr said Friday as he swapped a tank at a Home Depot store in Denver. "I’m a great believer in full disclosure. Give me the information."
The problem, consumers say, is that no one tells them they’re getting less.
For the past year, tank exchanges have generally cost $20 to $25. Consumers who refill their existing tanks pay $17 to $20.
Until last year, Blue Rhino and Amerigas, two major suppliers, put 17 to 18 pounds in each 20-pound tank. Tanks should not be filled completely for safety reasons. About a year ago, that was cut to 15 pounds to save consumers a price hike, Blue Rhino spokesman Chris Hartley said fast cash advance loan.
Last year, all energy costs increased sharply, as did the price of steel used in tanks. Crude prices soared past $100 per barrel at the start of 2008 and climbed toward $150 by July. Propane futures hit $1.95 per gallon in the same month. Those prices have all fallen this year, which would suggest bigger profits for propane distributors.
In the last year, propane futures on the New York Mercantile exchange have dropped from about $1.73 per gallon to just above 71 cents. They have climbed 11 cents since January.
Retailers who offer propane say they haven’t increased the tank volume because propane companies haven’t reduced prices.
Home Depot said cutting the amount of propane in the tanks was an industrywide measure. There have been no complaints, spokeswoman Jean Niemi said.
But Jose Rivera of Denver did the math in his head and concluded the extra money spent on propane could have helped pay for other cookout supplies. "That’s some steaks," he said.
The economy will start growing in the second half of 2009, but it will be several years before the positive effects of a turnaround will be felt, the Congressional Budget Office said Thursday.
"Even if the economy returns to positive growth this year, the loss in output, income and employment during the recession and the next few years will be huge," said Douglas Elmendorf, director of the CBO, in testimony before the House Budget Committee.
The CBO is updating its economic forecasts and will release new estimates in August. Elmendorf expects the new numbers will be less optimistic than the estimates the agency released in March.
"CBO’s forecast in August is likely to show even larger shortfalls in output over the next few years," he said.
The agency is expecting that the unemployment rate will continue to rise into the second half of next year and will peak at 10.5%. In March, CBO forecast unemployment would peak in the first half of next year at 9.5%.
The $787 billion economic stimulus package enacted in February is helping to boost GDP this year and, to a lesser extent, will do so in 2010 as well. Thereafter, economic growth will be hindered if private demand does not pick up, he told lawmakers.
And even if private demand picks up, "it still takes a long time to catch up with the weak growth last year and this year," Elmendorf said.
Elmendorf was asked to lay out what he saw as potential risks going forward. "The number of sandpits we see ahead would scare a good golfer," he said.
Among them is the exposure of small- and medium-sized banks to the fortunes of commercial real estate.
"The fundamentals in the market are very weak," Elmendorf said. He said current price declines of between 35% and 45% exceed those of the early 1990s, when commercial property collapsed low cost health insurance. Meanwhile, delinquency rates are up.
With estimates of commercial real estate losses totaling more than $200 billion, that could exceed the revenue small and mid-size banks take in, thereby reducing their capital.
As goes Britain?
This week, Standard & Poor’s lowered its ratings outlook to negative for the United Kingdom, in great part due to its growing debt levels.
House Budget Committee Ranking Member Paul Ryan, R-Wisc., asked Elmendorf to assess whether the United States is likely to suffer the same fate.
The U.S. government and others around the world flood the debt markets with government issues. That, in turn, can cause interest rates to rise as investors start to demand greater reward for the risk they’re taking.
"Certainly in the next several years, there’s likely to be significant upward pressure on interest rates," Elmendorf said. But any increase "is likely to be delayed until the economy comes out of its [downturn]."
CBO projects that, under the current congressional budget resolution for fiscal year 2010, the debt held by the public could rise to more than 60% of GDP over the next 5 years. Under the president’s budget proposals, it could rise more than 80% over the next 10 years.
"This is a grim outlook for the federal budget," Elmendorf said. "At some point investors may decide the United States is not the safest haven. [But there’s great] uncertainty when sentiment will turn." If it does, it could turn more quickly than expected, he noted.
Robert Kidder, a private-equity investor and former consultant who once worked for Ford Motor Co., will become the chairman of Chrysler Group once the automaker emerges from bankruptcy and completes a merger with Italy’s Fiat SpA, the company said Wednesday.
Kidder, who was also the chief executive of battery maker Duracell, also serves as the lead director of Morgan Stanley (MS, Fortune 500) and a board member at Schering Plough Corp. (SGP, Fortune 500)
He will succeed Chrysler’s Bob Nardelli, who is stepping down as the bankrupt automaker’s chairman and chief executive.
Fiat Chief Executive Sergio Marchionne is expected to assume management control of Chrysler when key assets from its operations are sold out of bankruptcy protection to a new operating company in the coming weeks under a deal financed and brokered by the Obama administration payday advance lenders.
Kidder’s appointment was the first announced for the nine-member board that will oversee the new company. The U.S. Treasury will appoint four of those directors while Fiat will appoint three board members.
"I am confident that Chrysler will emerge from Chapter 11 a lean and powerful competitor, combining its own rich history of innovation with Fiat’s technology and expertise to invigorate the American car market and to challenge other car companies around the globe," Kidder said in a statement.
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