Category Archives: Finance

Short-Term Energy Outlook in US

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U.S. weekly regular gasoline retail prices reached a 2015 high of $2.69/gal on May 11, an increase of 28¢/gal from early April. Rising crude oil prices and a series of refinery outages in California have pushed gasoline prices higher in the past month. As a result of these outages, gasoline prices on the West Coast have increased by more than the U.S. average, with prices in Petroleum Administration for Defense District (PADD) 5 averaging $3.44/gal on May 11, an increase of 49¢/gal from the first week in April.

With crude oil prices projected to be relatively flat in the coming months, the U.S. monthly average gasoline price is projected to reach $2.68/gal in May, then decline as refineries in California resolve outages and refineries in the rest of the country increase production of gasoline following the spring maintenance season.

Total U.S. liquid fuels consumption rose by an estimated 70,000 b/d (0.4%) in 2014. In 2015, total liquid fuels consumption is forecast to grow by 340,000 b/d (1.8%).

Motor gasoline consumption, which rose by 80,000 b/d in 2014, increases by a projected 120,000 b/d (1.4%) in 2015 as lower prices and employment growth outweigh increases in vehicle fleet efficiency.

Consumption of distillate fuel, which includes diesel fuel and heating oil, is forecast to rise by 80,000 b/d (2.0%) in 2015 and by 60,000 b/d (1.5%) in 2016. This growth is driven by increasing manufacturing output and foreign trade.

Hydrocarbon gas liquids (HGL) consumption, which fell by 100,000 b/d (4.0%) in 2014, is projected to increase by 120,000 b/d in 2015 and by 60,000 b/d in 2016, as new petrochemical plant capacity increases the use of HGL as a feedstock.

U.S. crude oil production is projected to increase from an average of 8.7 million b/d in 2014 to 9.2 million b/d in 2015 and remain flat in 2016.

EIA expects onshore production to decline beginning in the second quarter of 2015 because of unattractive economic returns in some areas of both emerging and mature oil production regions.

EIA expects U.S. crude oil production to exceed 9.3 million b/d in the second quarter of 2015, then decline by 280,000 b/d through the first quarter of 2016. With forecast WTI crude oil prices rising to an average of $67/b in the second quarter of 2016, drilling activity is expected to increase again. plants, which reached a record high of 3.1 million b/d in October, is projected to average 3.2 million b/d in 2015 and 3.5 million b/d in 2016.

The growth in domestic crude oil and other liquids production has contributed to a significant decline in imports. The share of total U.S. liquid fuels consumption met by net imports fell from 60% in 2005 to an estimated 26% in 2014. EIA expects the net import share to decline to 21% in 2016, which would be the lowest level since 1969.

 US Energy Forecasts

Active Aging? Jobs?

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Asghar Zack writes:  Advances in health and social welfare in the 20th century ushered in a golden age for humanity. We’re living longer and in better health than ever before. Someone born in London today, for example, could expect to live 30 years longer than a counterpart did in 1900 – and will have access to pensions as well as universal healthcare provisions.

These advances have been a victim of their own success, however, and the downside is that ageing populations mean more pressure on resources, particularly on pensions and healthcare.

Amid all of this, we often overlook the idea that the new generation of older persons are a powerful resource. As a healthier group, they have the potential to contribute to not just their own well-being but also to sustain a greater economic and social prosperity for society as a whole.

Central to this is the idea of active and healthy ageing – the process of opening up opportunities and participation for older people and making quality of life better. As the World Health Organisation says: “Active” refers to continuing participation in social, economic, cultural, spiritual and civic affairs, not just the ability to be physically active or to participate in the labour force.  Active Aging

 Which countries are doing best?  The pro-family culture of Italy promotes care provision for grandchildren, while the Fit2Work initiative in Austria helps to maintain and improve the employability of employees and avoid premature withdrawal from the labour market due to sickness and work-related illness. Zero-hours contracts in the UK have come under criticism, but they have contributed to the kind of labour market flexibility that employers prefer in hiring older workers.


The indicators, including three for financial security. AAI

We can also break down this information separately for men and women to see what progress could be achieved simply by closing gender gaps. And, using the AAI toolkit, we can define the goalposts for countries to aspire for.

The figure below illustrates the position of 28 European Union (EU) Member States using the latest data available (corresponding mainly to 2012).

Under-Reporting Bank Risk

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Taylor Begley writes;:  A key regulatory response to the Global Crisis has involved higher risk-weighted capital requirements. This column documents systematic under-reporting of risk by banks that gets worse when the system is under stress. Thus banks’ self-reported levels of risk are least informative in states of the world when accurate risk measurement matters the most.

Following the Global Crisis, there has been a great deal of debate surrounding the risk-taking behaviour and incentives of large, global banks and their potential consequences for the stability of the financial system. Some argue that the privately optimal level of capital for a bank may differ substantially from the socially efficient capital level (see Admati et al. 2011, Thakor 2014). As policymakers consider new micro- and macro-prudential regulations to address these problems, it is important to understand the accuracy of self-reported risk measures generated by the internal models of large banks around the globe.

The measurement of bank risk is a key foundation for both micro-prudential and macro-prudential policy. Effective regulation relies on understanding the location and size of risks in the financial sector. In this column, we highlight a strong relationship between bank capitalisation and the risk reporting behaviour of banks under the current regulatory framework. Banks with low equity capital under-report their trading book risk, and do so more severely in times of system-wide financial stress. These results suggest that banks’ self-reported risk measures are least informative precisely during periods when accurate risk measurement is most important.  Bank Risk

Bank Risk

 

 

Cutting Rates?

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Charles Duxbury writes:   A flickering revival in the Swedish inflation rate fizzled out in April, piling pressure on the central bank to cut interest rates to new record lows.

The Swedish statistics agency said the consumer price index fell 0.2% compared with April last year. That was below the 0.1% rise forecast of analysts.

The Swedish krona dived against the euro, which rose to 9.31 kronor from 9.25 kronor.

The central bank stands ready to act, even between scheduled meetings, to make monetary policy still more expansionary if the inflation outlook warrants it.

The Swedish central bank, the world’s oldest, already has a benchmark interest rate of minus 0.25% and has launched a bond-buying program.

The ECB bond-buying program is good for Sweden’s already fairly bright growth prospects in that it is helping the eurozone, a vital market for Swedish goods, to recover from a drawn-out downturn. But the program has also pushed down the value of the euro against the likes of the Swedish krona, making goods entering Sweden cheaper and choking off a vital source of inflation.

Rebecca Howard and Lucy Cramer writeL  New Zealand’s central bank is now set to cut interest rates due to weak inflation and tough times for dairy farmers, with some economists calling for a reduction as early as June.

The view marks a dramatic shift: as recently as late April the majority of economists predicted the Kiwi central bank would remain on hold at 3.5% for the foreseeable future, making it something of an outlier in a region where interest rates have been coming down.y.

Annual inflation rose just 0.1% in the three months ended Mar. 31 and the central bank forecasts it won’t move toward the middle of the range until September 2016.  Recent numbers, including weak first-quarter wage inflation data and softer-than-expected retail card spending, has added to view rate cuts might be coming.

Do we need a new approach to economic analysis?

Rate Cuts?

Will Big Banks Plea to Crimes?

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Hugh Son, Dakin Campbell, Greg Farrell and Tom Schoenberg write The U.S. Justice Department is seeking criminal guilty pleas from the parent companies of banks that are poised to admit to rigging foreign-exchange markets, said people briefed on the negotiations.Four global banks — Citigroup Inc., JPMorgan Chase & Co., Barclays Plc and Royal Bank of Scotland Group Plc — plan to plead guilty in coming days to antitrust violations related to manipulating currency rates, people familiar with the matter have said. Some of the pleas will be made by the banks’ holding companies instead of individual units, two people said on Tuesday.At least two of the banks sought to make their pleas from overseas subsidiaries, only to have the Justice Department counter that the admissions should come from their main banking units, according to a person briefed on the talks. They are discussing a compromise in which the holding companies would make the pleas, and that would be consistent with other banks, the person said.

 UBS Group AG, the fifth bank that these people have said will reach a settlement, will take a different path: The Justice Department is poised to tear up an earlier agreement not to prosecute UBS in connection with interest-rate manipulation, according to a person familiar with the talks.  US Justice Dept. to Press Charges against Big Banks

Jamie Dimon, Chase

US and Gulf States Confer

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Shawn Brimley, Ilan Goldenberg and Nicholas Heras write:  As President Barack Obama and the leaders of the Gulf Cooperation Council (GCC) sit down at Camp David this week, the White House’s goal is clear: reassure America’s Middle Eastern partners that it remains committed to their security. But the summit is clearly not off to a good start, with only two of the six GCC monarchs planning to attend — and King Salman of Saudi Arabia waiting until the last moment to announce he is not coming.

According to media reports, the Obama administration is preparing to assuage skepticism toward the potential nuclear agreement with Iran by focusing on new security arrangements and billions of dollars in weapons that the United States may offer to sell to the Gulf states. Arms sales and security guarantees may be a piece of the equation — but they won’t be enough. The most effective way for the Obama administration to make headway with the Gulf is by signaling a more comprehensive approach to countering Iranian influence in the Middle East.

What the Gulf states fear most is that in the aftermath of a nuclear agreement, the United States will cut a deal with Tehran to divide the region and abandon its Arab partners. Saudi Arabia has been the most vocal in expressing concerns that the United States is so interested in achieving an agreement on the nuclear question that it is willing to tolerate Iran’s unchecked influence throughout the region. To many of America’s partners, Iranian nuclear ambitions are inextricably linked to Tehran’s aggressive support of its proxies through the Islamic Revolutionary Guards Corps (IRGC), which provides training, funding, and support for Hezbollah, Iraqi Shiite militias, the Houthis in Yemen, and Palestinian Islamic Jihad, among other groups.

In the end, it will not be possible for President Obama to fully reassure America’s regional allies in the aftermath of a nuclear deal with Iran. Their concerns about a “Persian pivot” will remain, and their distrust of the president will make U.S. relations with the Gulf states difficult. But if Obama is able to begin to implement an effective reassurance strategy, he can hand off a better situation to his successor — who will have to do the bulk of the work in repairing some of America’s relations with the Gulf states in the aftermath of a nuclear deal with Iran.  US and Gulf States Confer May 2015

Turkey Plays the Gas Card

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Keith Johnson writes:  During a four-hour helicopter ride over the Black Sea and the Sea of Marmara in early February, Turkish Energy Minister Taner Yildiz and Russia’s Gazprom boss, Alexey Miller, mapped out plans that could potentially rebuild the long-adversarial relationship between their two countries.

But Yildiz and Miller also traced what could be the newest fault line in Europe’s geopolitical landscape. That helicopter ride, and the subsequent formal agreement signed in early May, suggest Turkey’s patience with Brussels is wearing thin—the EU, after all, has been slow-footing the country’s membership for decades now—and Ankara’s willingness to support Europe’s foreign-policy priorities, from diversifying energy resources to isolating Russia, is diminishing. Now, this one pipeline, which could deliver gas as early as next year, could have the power to embolden Russian President Vladimir Putin, endanger a critical alliance the West has spent decades cultivating, and upend Eurasia’s entire energy and security landscape.

Turkey would become a middleman for Europe’s energy buyers, and it would be precisely the linchpin Moscow needs to keep an energy hold on the continent.   Turkey Plays the Gas Game

Global Migration?

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Kenneth Rogoff writes:  Europe’s migration crisis exposes a fundamental flaw, if not towering hypocrisy, in the ongoing debate about economic inequality. Wouldn’t a true progressive support equal opportunity for all people on the planet, rather than just for those of us lucky enough to have been born and raised in rich countries?

Many thought leaders in advanced economies advocate an entitlement mentality. But the entitlement stops at the border: though they regard greater redistribution within individual countries as an absolute imperative, people who live in emerging markets or developing countries are left out.

If current concerns about inequality were cast entirely in political terms, this inward-looking focus would be understandable; after all, citizens of poor countries cannot vote in rich ones. But the rhetoric of the inequality debate in rich countries betrays a moral certitude that conveniently ignores the billions of people elsewhere who are far worse off.

One must not forget that even after a period of stagnation, the middle class in rich countries remains an upper class from a global perspective.

Nor will it do to appeal to moral superiority to justify why someone born in the West enjoys so many advantages. Yes, sound political and social institutions are the bedrock of sustained economic growth; indeed, they are the sine qua non of all cases of successful development. But Europe’s long history of exploitative colonialism makes it hard to guess how Asian and African institutions would have evolved in a parallel universe where Europeans came only to trade, not to conquer.

Many broad policy issues are distorted when viewed through a lens that focuses only on domestic inequality and ignores global inequality. Thomas Piketty’s Marxian claim that capitalism is failing because domestic inequality is rising has it exactly backwards.

By many measures, global inequality has been reduced significantly over the past three decades, implying that capitalism has succeeded spectacularly.

Allowing freer flows of people across borders would equalize opportunities even faster than trade, but resistance is fierce.

As the world becomes richer, inequality inevitably will loom as a much larger issue relative to poverty, a point I first argued more than a decade ago. Regrettably, however, the inequality debate has focused so intensely on domestic inequality that the far larger issue of global inequality has been overshadowed. That is a pity, because there are many ways rich countries can make a difference. They can provide free online medical and education support, more development aid, debt write-downs, market access, and greater contributions to global security. The arrival of desperate boat people on Europe’s shores is a symptom of their failure to do so.  Global Migration

Global Migration

Trade and Jobs

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Jeffrey Frankel writes:  Previous trade agreements have  benefited the US (and its partners). The most straightforward argument for TPP is that similar economic benefits are likely to follow.

The economic arguments for the gains from trade go back to David Ricardo’s classic theory of comparative advantage. Countries benefit most from producing and exporting what they are relatively best at producing and exporting, and from importing what other countries are relatively better at producing.

Trade boosts productivity, which is why exporters pay higher wages than other companies, on average – an estimated 18% higher in the case of US manufacturing. And the purchasing power of income is enhanced by households’ opportunity to consume lower-priced imported goods. The cost savings are especially large for food and clothing, purchases that account for a higher proportion of lower-income and middle-class households’ spending.

American trade debates have long been framed by the question of whether a policy will increase or reduce the number of jobs. This concern is a first cousin to the old mercantilist focus on whether a policy will improve or worsen the trade balance. A “mercantilist” could be defined as someone who believes that gains go only to the country that enjoys a higher trade surplus, mirrored by losses for the trading partner that runs a correspondingly higher deficit.

Even by this sort of reasoning, one could make an “American” case for the ongoing trade negotiations. The US market is already rather open; TPP participants such as Vietnam, Malaysia, and Japan have higher tariff and non-tariff barriers against some products that the US would like to be able to sell them than the US does against their goods. Liberalization would thus benefit US exports to Asia more than Asian exports to the US.  The Essence of Trade

Trade

How to Achieve Gender Equity in Pay

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Jena McGregor writes:  Salesforce.com CEO Marc Benioff is tackling yet another social issue: the gender pay gap.  Benioff says he’s methodically combing through the pay of all 16,000 employees of his cloud-based software company to make sure his male and female employees are compensated fairly.

He’s already given some women raises after finding differences in their pay, and he expects to hand out more.  Benioff’s move has been called a “radical step” and a “brilliantly simple” way to close the gap. Yet research has also shown that it’s likely quite effective at improving the overall ranks of women at the company, too — perhaps even more so than traditional benefits designed to attract and retain women.

In a study released in November, the consulting firm Mercer asked 164 companies about their benefits and human resources tactics. One of the big findings from its results was that companies with flexible work policies or maternity leave benefits were actually linked with a slower promotion of women into top ranks. The explanation: Such benefits can lead to a check-the-box mentality, in which companies think they’ve done enough to help women along.

Two variables appear to have a positive impact on both current and future gender diversity. One was the involvement of company leaders and men in diversity programs; the other was having a team responsible for pay equity and a process that statistically examines any wage gaps
they discover.

Benioff’s pay initiative is reportedly part of a program called Women’s Surge, designed to help improve the ranks of women at the company, where 85 percent of leaders and 71 percent of the overall workforce are men. The program includes efforts to ensure that women make up at least 30 percent of all meetings and that female  candidates are evaluated for new hires and promotions. A team at Salesforce is also using its own analytics software to examine the salary data, determine whether there is a gap
and surface the factors influencing it, according to Business Insider.

Salesforce isn’t alone in methodically reviewing the company’s potential gender pay gap. Mercer’s study found that 52 percent of the 164 companies that responded said they have a dedicated team for analyzing any salary differences between men and women.

Still, the combined punch — having not only a rigorous process for analyzing gender pay data, but an involved CEO who is willing to talk openly about the issue — could end up being very powerful.

Benioff’s public leadership on this from the CEO perch sets the highest bar yet for more companies to reach.

Gender Equity in Pay