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What We Read Today 31 December 2014

Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.

Brent falls towards $57 as demand concerns outweigh supply disruptions (Seng Li Peng, Reuters)  Early Wednesday trading  (31 December 2014) saw crude oil prices slipping lower again after Tuesday produced a slight rebound from a sharp decline on Monday.  Prices fell despite fires destroying millions of barrels iof oil in Libya.  (See article under Libya in reading list below.)  U.S. inventory numbers also depressed oil prices.  See next article. 

NYMEX-U.S. crude falls to $53.55 on US export permission, stock build (Meeyoung Cho, Reuters)  The U.S. reported an unexpected increase in crude oil inventories, the Obama administration issued two policy guidance statements expected to increase significantly oil exports by the U.S. and global crude oil prices continued to move lower.  Read also Obama administration issues guidance on oil exports (Jennifer A. Dlhouy, Hearst Newspapers, Alaska Dispatch News)


Articles about events, conflicts and disease around the world

AisiaAir Flight 8501

Searchers Pull AirAsia Plane Debris and Bodies From Java Sea (The New York Times)

Who Will Get AsiaAir 8501’s Black Boxes? (The Daily Beast)

AsiaAir owner bought company for less than a buck (Associated Press, New York Post)

The quick growth of Asian airlines creates challenge: how to safely train enough jet pilots (Fox News)

Ebola

Where Does Ebola Come From? (Scientific American)

First Ebola boy likely infected by playing in bat tree (BBC News)

Doctor exposed to Ebola patient attacks ‘utterly illogical’ quarantine system (The Guardian)

Ebola Setback: Dozens of New Cases Reported in Liberia (NBC News)

Libya

Libya in $6 mln push to tackle oil port fires (Reuters, Al Arabiya)

Libya's losses mount as oil terminal burns (Daniel J. Graeber, UPI)  This Monday report says about 1.8 million barrels lost ($100 million worth) and fires have continued since.

Libyan oil output shrinks further as oil tanks blaze (Times of Malta) Libya currently shipping only 128,000 barrels a day, about 1/3 of shipments earlier this year and 8% of output before the 2011 civil war.

First air strikes hit Libya’s militia-held Misrata (AFP, Al Arabiya)

Greece

Europe Braces for Economic Fallout as Greece Heads to Early Elections (The New York Times)

Greece’s threat to the European economic recovery (American Enterprise Institute)

Hardships frustrate Greeks as recession persists (USA Today)

Cuba

The Econiomics of Normalization with Cuba:  Kiss the Embargo Goodbye? (War on the Rocks)


Oil Prices Are Having A Brutal Summer (Rob Wile, Business Insider)  It is sometimes amusing to look back in time to see what was thought to be a big deal then.  This is from 21 August 2014.

oil-decline-2014-aug


Saudi Arabia Is OK With Lower Oil Prices. Here’s Why That Could Be a Bad Thing for Both Russia and the U.S. (Zach Noble, The Blaze)  Well $10 down was a big deal in August, and then $25 down was a big deal in October.

oil-decline-2014-oct


Crude Oil Interactive Chart (Investing.com)  Below we have a chart showing the situation today with oil down $59.  Is this a big deal?  Not as big as it will be if oil goes all the way to the 2009 low below $40.  We keep seeing people who say that is possible.  If it does go down that low (or even if it doesn't) don't forget to notice what happened the necxt two years after the 2009 bottom.

oil-2009-2014


Saudi Arabia doesn't care about volatile oil (Holly Ellyatt, CNBC)  We took a stab at a couple of conspiracy theories yesterday (see next article) and here are some perspectives in that regard from Holly Ellyatt:

A number of analysts believe that Saudi's move not to cut production was part of an effort to challenge its non-OPEC competitors, such as Russia and shale oil producers in the U.S., in a bid to maintain its long-standing market share.

There is, however, another theory: that it is no coincidence that a lower oil price would be beneficial to Saudi Arabia by destabilizing rival political regimes closer to home.

"Saudi Arabia is a very low-cost producer and it is now claiming, from recent speeches from the oil ministry, that it's driving out higher-cost producers, but the fallout of that is not just Russia," Tom Elliott, international investment strategist at DeVere Group, told CNBC.

"Russia has keenly felt the drop in prices but (so too have) the high-cost regimes, many of which are Shia—and it is not a coincidence that, perhaps, Saudi is driving down the cost of oil in order to disrupt Shia regimes in Syria, Iraq and Iran."

Stakes are high as US plays the oil card against Iran and Russia (Larry Elliott, The Guardian)  Hat tip to Dig Deep.  Repeated from yesterday WWRT. This article is nearly two months old but remains a valuable part of the debate about who is driving the oil price collapse.  Elliott thinks it is the U.S. trying to establish improved positions vis a vis Iran and Russia.  Some others have expressed a similar opinion, but a larger cohort suggests it is Saudi Arabia trying to reduce U.S. fracking.  Still another group thinks the price decline is against Russia and Iran but is instigated by Saudi Arabia rather than the U.S.  Not seen anywhere by us would be the argument that the U.S. and Saudi Arabia are in a secret alliance.  And if we are going to open conspiracy theories what about the U.S. government somehow getting money to the oil patch to keep unprofitable drilling underway at some level to try to keep the price of oil below $60 in a price war aimed at all of the above.  With ideas like these maybe we should write a novel. :-)


Greek Yield Curve isd Steeply Inverted (Walter Kurtz, The Daily Shot email, no url) Kurtz points out that the Greek depression has exceeded the depth of the U.S. Great Depression of the 1930s.  And the yiled curve is indicating expctations that it will get worse before it gets better.

greece-yield-curve-daily-slot-2014-dec-30


A Greek Revival of Anxiety, Some Say Without Foundation (Lanndon Thiomas Jr., The New York Times)  The problem for the rest of Europe is not so much Greece but how actions in Greece will affect the rest of Europe.  From the article:

A haircut would really help in terms of putting a dent in that number,” said Hans Humes of Greylock Capital, a hedge fund that specializes in distressed debt.

Although the cost of reducing Greek debt to a more manageable level would be minimal to European taxpayers, Mr. Humes says that for the moment, the politics of such a step remain formidable.

For countries like Italy, which relies on global bond investors to finance its ever increasing debt obligations, the arrival of Mr. Tsipras at center stage — brief as it may be — is worrisome indeed.


Thomas Piketty Won 2014 (Jordan Weissman, Slate)  Not everyone buys the French economist’s ideas about wealth. But they’re debating the issues on his terms now.  There had been some discussion previously about income inequality, although Piketty raised that discussion to a new level with his data compilations and anlysis.  But he brought wealth inequality into the arena in a way it simply had not been before his book. 


Will the Labor Force See a Resurgence? The Question Divides Economists (Josh Zumbrun, The Wall Street Journal)  For what will happen over the next three years there is a noticable divergence of opinions.

labor-force-projections-zumbrun-wsj-2014-dec-29


U.S. Equities Running Away from the World (Walter Kurtz, The Daily Shot email, no url)  Kurtz says:

Here is an interesting fact: without the US, global equities are down for the year. And the performance gap between the US and non-US stock indices seems to be widening.

stocks-us-vs-MSCI-daily-shot-2014-dec-30


Other Economics and Business Items of Note and Miscellanea

Japan Inc. to Get Tax Cut as Abe Looks to Boost Economy, Wages (Bloomberg Businessweek)

Forecasts for 2015 look remarkably like forecasts for 2014 (The Economist)

Euro Falls to Two-Year Low Amid Greek Concern as Yen Advances (Bloomberg Businessweek)

Ads for Ford’s F-150 Pitch Toughness Before Fuel Economy (Bloomberg)  It's called attention deficit disorder.

ObamaCare fines rising in 2015, IRS prepares to collect (Fox News)

Barbarians at the farm gate (The Economist)  Investing in agriculture for high return and risk diversification.

Does the cloud mean big data centers are dead? Economics says no (ZD Net)


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