The National  Memo Logo

Smart. Sharp. Funny. Fearless.

Monday, December 09, 2019 {{ new Date().getDay() }}

By Kevin G. Hall, McClatchy Washington Bureau (TNS)

WASHINGTON — The rapid plunge in oil and gasoline prices means huge savings for American consumers, but the steep downward swing may ultimately prove dangerously disruptive to energy-producing countries and companies.

If prices remain low for a protracted period, which seems likely, it’ll send shock waves across the energy sector. For oil-producing countries, that could mean budget shortfalls. For energy companies, the lower profits may force mergers and consolidation that will cost thousands of jobs.

Oil prices have tumbled in recent months from their peak at about $105 a barrel in June to their current lows, below $75 on Wednesday. The Energy Information Administration projected last week that gasoline prices would stay under $3 a gallon throughout next year. A gallon of regular unleaded averages $2.86, the motor club AAA said Wednesday, about 25 cents lower than a month ago.

For American consumers, who used 135.4 billion gallons of gasoline last year, that’s a big savings — nearly $34 billion on an annualized basis.

But for companies and countries that depend on oil prices for their income, it’s a trend that makes them nervous.

Already, the oilfield services giant Halliburton, anticipating lower prices, has announced it will buy rival Baker Hughes in a cash and stock deal worth $34.6 billion.

Venezuela, heavily dependent on oil revenue, is looking for a buyer for its U.S. refining operations that run under the Citgo brand. Global giant BP, whose stock has yet to recover after the disastrous Gulf of Mexico oil spill in 2010, is widely viewed as in play. In fact, veteran energy analyst Fadel Gheit thinks that every private oil company except Exxon Mobil Corp., which is twice as large as its competitors, is now potentially a merger target.

“If oil prices remain sub-$80 for a long period of time, we’re going to see a lot of mergers and acquisitions,” said Gheit, who works for the investment bank Oppenheimer & Co. Inc. When Exxon Corp. and Mobil Corp. merged in 1999, the combined company was able to eliminate 50,000 jobs. “Companies are drawing short lists of targets: plan A, plan B and plan C.”

In the past, when oil was too abundant, producers simply left it in the ground. The curtailed production tightened supplies and drove up prices. That’s going to be tougher to do now, analysts say, which explains why oil ministers from nations that belong to the Organization of the Petroleum Exporting Countries have been deep in consultation before OPEC next meets on Nov. 27.

OPEC’s biggest producer and exporter, Saudi Arabia, doesn’t appear keen to cut production, in part because history has shown that most other OPEC members, who depend on oil to fund their governments, won’t reduce production even after they’ve agreed to.

“For those kinds of countries this is a huge shock, and they’re desperate … but Saudi Arabia has made it pretty clear it doesn’t want to cut back to give market share to Iraq and Iran,” said Daniel Yergin, a noted oil historian. “If prices fall further, you’re going to see panic.”

Among the shakiest of OPEC members is Venezuela, grappling with inflation above 60 percent and its government bonds at six-year lows. It’s sure to suffer financial and political fallout if prices drop another $10 or $20 a barrel.

“They can continue at $75 or $80 … anything much lower I don’t see them able to sustain,” said Risa Grais-Targow, a senior analyst who specializes in Venezuela for the Eurasia Group, a political-risk consultant for global corporations. “They’re working with a pretty narrow margin.”

That’s what pushed the government of President Nicolas Maduro to look for a buyer for Citgo, which operates refineries in Illinois, Louisiana and Texas. The asking price reportedly is $7 billion. “The issue is going to be whether there are interested buyers,” Grais-Targow said.

The lost oil revenue is also likely to sting Africa’s largest producer, Nigeria, which is grappling with the Islamist insurgent group Boko Haram in the northeast.

Nigeria didn’t create a rainy-day fund when prices soared, and now it must reduce government spending by a pledged 6 percent to offset the 30 percent decline in oil prices. But it has national elections on Feb. 14, and many Nigerians question whether the ruling party will really cut spending before the elections, meaning the country’s already messy finances could get messier.

Even countries that better manage their oil revenue will feel the pinch. Colombia’s balanced-budget requirement might trigger higher taxes as oil revenue slumps, Andre Loes, global bank HSBC’s chief economist for Latin America, said in a note to investors.

The projected 4.7 percent growth rate for next year, Loes cautioned, “would be under threat in the case of continued weakness in oil prices.”

Less clear is how neighbors Iraq and Iran will fare with slumping oil revenues.

Iraq’s exports have reached levels not seen since before the invasion led by the United States in 2003, but the country needs higher oil prices to fund its many needs.

More complicated is how the falling prices will affect Iran. A temporary arrangement lifting international sanctions that had cut its oil exports will expire Monday, and it’s not clear whether that relief will continue.

If talks with Iran over its nuclear program fail and sanctions are reimposed, that will take more Iranian oil off the global market, which might help keep prices from falling further. But if the nuclear talks are extended, prices might dip even lower.

“Markets will interpret this as Iran will be able to increase its exports,” said Simon Henderson, an expert on energy and the Middle East for the Washington Institute for Near East Policy, a research center. “That will contribute to a further weakening of prices.”

With the United States producing 9 million barrels a day and no sign that the lower price has affected that production yet, the oil market is finding new financial targets.

“Prices will continue lower, bottom out in the low $50s between the first quarter and second quarter next year,” predicted John Kilduff, a veteran energy analyst at investment manager Again Capital in New York. At that point, he said, there could be unrest in some oil-producing nations and a related drop in production. “That should get prices back up to $70,” he said.

Kilduff’s suggestion of $50-a-barrel oil is striking, considering that just a few years ago energy analysts were debating whether the price might reach $150 a barrel.

“The market is really recalibrating,” said Yergin, who wrote an award-winning history of oil, The Prize.

An abundance of oil isn’t the only factor that’s pushing prices lower. Demand also is flagging. Japan, the world’s third-largest economy, was officially classified this week as in recession. Latin America’s biggest economy, Brazil, was already there. The European Union saw its quarterly growth rate register just a blip — 0.2 percent — from July through September.

That’s likely to subvert what’s been the traditional cycle, in which low oil prices boosted consumer spending, raising demand for oil, leading to higher prices. For now, the dynamic appears likely to keep pushing prices down.

AFP Photo/Karen Bleier

Advertising

Start your day with National Memo Newsletter

Know first.

The opinions that matter. Delivered to your inbox every morning

Rep. Bennie Thompson

Photo by Customs and Border Protection (Public domain)

Chairman Bennie Thompson (D-MS) Friday afternoon announced the House Select Committee on the January 6 Attack has issued subpoenas to 14 Republicans from seven states who submitted the forged and "bogus" Electoral College certificates falsely claiming Donald Trump and not Joe Biden won the 2020 presidential election in their states.

The Chairman appeared to suggest the existence of a conspiracy as well, noting the "the planning and coordination of efforts," saying "these so-called alternate electors met," and may know "who was behind that scheme."

Keep reading... Show less

Chris Cuomo

News Literacy Week 2022, an annual awareness event started by the News Literacy Project, a nonpartisan nonprofit dedicated to making everyone “smart, active consumers of news and information and equal and engaged participants in a democracy” has closed out. From January 24 to 28, classes, webinars, and Twitter chats taught students and adults how to root out misinformation when consuming news media.
There’s no downplaying the importance of understanding what is accurate in the media. These days, news literacy is a survival tactic. One study estimated that at least 800 people died because they embraced a COVID falsehood — and that inquiry was conducted in the earliest months of the pandemic. About 67 percent of the unvaccinated believe at least one COVID-19 myth, according to the Kaiser Family Foundation.
It’s not that accurate information isn’t available; people are rejecting reports of vaccine efficacy and safety because they distrust the news media. A third of Americans polled by Gallup said they have no trust at all in mass media; another 27 percent don’t have much at all.
Getting people to believe information presented to them depends more on trust than it does on the actual data being shared. That is, improving trust isn’t an issue of improving reporting. It’s an issue of improving relationships with one’s audience.
And that’s the real news problem right now; some celebrity anchors at cable news outlets are doing little to strengthen their relationships with their audiences and a lot to strengthen their relationships with government officials.
The most obvious example is how CNN terminated Prime Time anchor Chris Cuomo last month for his failure to disclose the entirety of his role in advising his brother, former New York Gov. Andrew Cuomo, on the sexual harassment accusation that unfolded in Albany, a scandal that eventually led to Andrew Cuomo’s resignation.
But there are others. Just this month, the House Select Committee to Investigate the January 6th Attack on the United States Capitol revealed that another anchor on another cable news network, Laura Ingraham of Fox News’ The Ingraham Angle, texted then-White House Chief of Staff Mark Meadows last January, advising Meadows how Trump should react to reports of possible armed protests at state capitols around the country. This revelation followed the story that Sean Hannity, host of the eponymous news hour at Fox News, also texted Meadows with advice last year.
And while he didn't advise a government official, CNN anchor Don Lemon revealed information not available to the public when he texted embattled Empire actor Jussie Smollett to tip him off about the Chicago Police Department’s wavering faith in his story about an assault. That’s from Smollett’s own sworn testimony.
When English philosopher Edmund Burke joked about the press being the Fourth Estate — in addition to the First, Second and Third (the clergy, nobility and commoners, respectively) — his point was that, despite their influence on each other, these “estates” — bastions of power — are supposed to be separate.
The Fourth Estate will always be an essential counterweight to government. But, since Donald Trump was elected in 2016, we’ve been so focused on stopping an executive branch from pressing the press to support an administration's agenda — either by belittling journalists or threatening to arrest them for doing their jobs — that we’ve ignored the ways that it affects and influences other Estates, and not necessarily through its reporting.
That is, we have news personalities-cum-reporters who are influencing government policy — and not telling us about it until it’s too late.
The United States has fostered an incredible closeness between the Second Estate — which in 2021 and 2022 would be political leaders — and the Fourth Estate. About a year ago, an Axios reporter had to be reassigned because she was dating one of President Biden’s press secretaries. Last year, James Bennet, the former editorial page editor of the New York Times and brother of Colorado Senator and 2020 Presidential candidate Michael Bennet, had to recuse himself publicly from the Gray Lady’s endorsement process. In 2013, the Washington Post reported at least eight marriages between Obama officials and established journalists.
To be clear, there aren’t any accusations that anyone just mentioned engaged in anything other than ethical behavior. But I, for one, don’t believe that James and Michael Bennet didn’t discuss Michael’s campaign. I don’t think the Axios reporter and her West Wing-employed boyfriend — or any journalists and their federally employed spouses, for that matter — didn’t share facts that the public will never know. Such is the nature of family and intimacy.
And as long as those conversations don’t affect the coverage of any news events, there’s nothing specifically, technically wrong with them. But that doesn’t mean that they aren’t damaging.
As these stories show, when we don’t know about these advisor roles, at least not until someone other than the journalist in question exposes them, it causes a further erosion of trust in news media.
What’s foolish about the Cuomo, Ingraham, Hannity, and Lemon improprieties is that they don't necessarily need to be the problem they’ve become. Cuomo’s show contained opinion content like 46 percent of CNN’s programming. An active debate rages on as to whether Fox News is all opinion and whether or not it can rightly even be called opinion journalism since its shows are so studded with inaccuracies and lies.
What that means is that Cuomo, Ingraham, Hannity, and Lemon are allowed to take a stand as opinion journalists; Cuomo and Lemon never really worked under a mandate of objectivity and Ingraham and Hannity likely wouldn’t honor it if they did. Indeed, a certain subjectivity — and explaining how it developed for the journalist — is part of an opinion journalist’s craft. To me, little of these consulting roles would be problematic if any of these anchors had just disclosed them and the ways they advised the people they cover.
But they didn’t. Instead, the advice they dispensed to government employees and celebrities was disclosed by a third party and news of it contributes to the public’s distrust in the media. While personal PR advisory connections between journalists and politicians haven’t been pinpointed as a source of distrust, they may have an effect. Almost two-thirds of respondents in a Pew Research poll said they attributed what they deemed unfair coverage to a political agenda on the part of the news organization. No one has rigorously examined the ways in which individual journalists can swing institutional opinion so it may be part of the reason why consumers are suspicious of news.
Cleaning up ex post facto is both a violation of journalistic ethics and ineffective. Apologies and corrections after the fact don't always improve media trust. In other credibility contests, like courtroom battles, statements against one’s interests enhance a person’s believability. But that’s not necessarily true of news; a 2015 study found that corrections don’t automatically enhance a news outlet’s credibility.
It’s a new adage for the 21st century: It’s not the consulting; it’s the cover-up. Journalists need to disclose their connections to government officials — up front — to help maintain trust in news media. Lives depend on it.

Chandra Bozelko did time in a maximum-security facility in Connecticut. While inside she became the first incarcerated person with a regular byline in a publication outside of the facility. Her “Prison Diaries" column ran in The New Haven Independent, and she later established a blog under the same name that earned several professional awards. Her columns now appear regularly in The National Memo.


x
{{ post.roar_specific_data.api_data.analytics }}