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THE WALL STREET JOURNAL: Oil-News Roundup

Oil-News Roundup

The WALL STREET JOURNAL ONLINE
May 2, 2006 8:51 p.m.

Oil prices surged to nearly $75 a barrel Tuesday on the New York Mercantile Exchange, approaching their all-time nominal high set recently. Here is today's well of news about oil and fuel prices.

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AUTO SALES STALL: The Big-but-Shrinking Three, General Motors, Ford and Chrysler, said their U.S. sales tumbled in April from a year ago. Continuing a recent trend, high gasoline prices hit GM and Ford especially hard, cutting into demand for the gas-slurping SUVs that have buttered the struggling auto makers' bread in recent years. Ford's F-Series pickups also likely suffered from fuel costs, Ford sales analyst George Pipas said. But the pain was not limited to SUVs: GM's car sales plunged 21%, compared with a 2% drop in light-truck sales. Oddly enough, one of the few bright spots for GM was its massive Tahoe SUV; that vehicle's sales improved, possibly because it caters to small businesses that may need a big vehicle regardless of gas prices.

SUING FOR STANDARDS: California and nine other U.S. states sued the federal government to force the Bush administration to strengthen gas mileage requirements for SUVs and pickup trucks. The states allege that the National Highway Traffic Safety Administration failed to conduct a thorough analysis of the environmental benefits of fuel economy regulations and the impact of gasoline consumption on climate change.

ADM's Ethanol Windfall: Archer Daniels Midland, which recently hired a former oil executive as its CEO, reported a 29% jump in quarterly earnings, thanks in part to demand for ethanol and other corn-based products. The company also said it expects ethanol prices to rise for at least the next two quarters and that it is considering building a second ethanol plant.

From Sugar to Ethanol: Caribbean sugar-cane growers are shifting from grinding their cane into sugar to producing ethanol, the Financial Times reported.

Pump Pain in California: Though gas prices have recently ebbed in some parts of the country, the average price in California has recently surged to more than $3.20 a gallon, the Los Angeles Times reported.

Singing the Blues: A nonprofit group is hosting a Petrocollapse Conference in Washington, D.C., this week, Washington Wire reported. The conference will feature panel discussions, documentary films and music, including one ditty titled, “Have a Global Warming Day.”

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Monday's Roundup:

NATIONALIZING NATURAL GAS: Calling this an “historic day,” Bolivian President Evo Morales renationalized his country's natural-gas industry, taking back control of energy companies privatized in the 1990s and ordering the military to seize gas fields. He also ordered foreign energy companies operating in Bolivia to send their locally produced supplies to the state or get out of the country within six months. Mr. Morales's move followed similar recent actions by his political fellow-traveler, Venezuelan President Hugo Chavez. The major foreign energy companies affected include Brazil's Petroleo Brasileiro SA, the Spanish-Argentine company Repsol YPF, British companies BP PLC and British Gas Group and France's Total SA. Exxon Mobil has a stake in a Total-produced field.

MILITANTS WARN CHINA: The Movement for the Emancipation of the Niger Delta warned oil-thirsty China to stay out of Nigeria, days after Chinese President Hu Jintao signed agreements to swap infrastructure cash for rights to Nigerian oil. MEND, which has already shut down about a fifth of Nigeria's oil production, also took responsibility for a weekend car bombing. It warned that Chinese citizens working in Nigeria would be “in the line of fire.”

PRICES NEAR PEAK? Guy Caruso, head of the U.S. Department of Energy's statistical arm, suggested U.S. gasoline prices might be near their peak, Dow Jones Newswires reported. Mr. Caruso's comments, at a U.S.-Saudi Arabia energy forum in Washington, echoed a prediction he made last month, that gas prices could peak in May and ease in the third quarter. But he also said the EIA would soon have to lift its forecast for summer gas prices a bit. Read some anecdotes from local filling stations, and learn how to save money at the pump.

Nuclear Talks: President Bush rang up Russian President Vladimir Putin to talk about Iran's nuclear program, while Tehran said it had earmarked $243 million to build its first nuclear power plant.

Senate Drops Tax Proposal: Senate Majority Leader Bill Frist dropped a plan that would have boosted oil companies' taxes to pay for proposed $100 gasoline-tax rebates for drivers. The rebate plan has not been popular with voters, the Associated Press reported.

Pipeline Protest: Poland's defense minister railed against a Russian-German oil-pipeline deal, comparing it to the 1939 agreement between Hitler and Stalin dividing Poland in two, the Financial Times reported.

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Friday's Roundup:

CHEVRON'S WINDFALL: For the second in as many days, a major oil company reported blockbuster earnings. Today, it Chevron said its first-quarter profit rose 49% from a year ago to $4 billion. Revenue surged 31% to $54.62 billion. Chevron noted that it just missed a record quarterly profit; only the lingering effects of hurricanes Katrina and Rita, which cost the company about $300 million in the quarter, kept it from setting a new mark. Together, Chevron, Exxon Mobil and ConocoPhillips, which also reported earnings this week, generated $191.5 billion in revenue in the quarter — more than the gross domestic product of 189 different countries, the Associated Press points out. But the AP also notes that those same three companies make just $8.19 in profit for every $100 in revenue; Google, Yahoo and eBay make $19.20 in profit on each $100 in revenue. Is it time for a windfall tax on Internet profits?

BUSH AND BODMAN ON TAXES AND REBATES: President Bush rejected calls by some lawmakers for a windfall tax on Big Oil's big profits. Instead, Mr. Bush said, oil companies should spend their cash on new exploration and production — something most have been loath to do lately. Energy Secretary Samuel Bodman told CBS's “The Early Show” that he thought the idea of a $100 gas-tax rebate had merit.

Construction Begins on Record Pipeline: Construction began on what will be the world's biggest oil pipeline, running from Siberia to China and then to Russia's Pacific coast.

Riding the Rails in Houston: Mass-transit ridership in Houston hit a record last week, the Houston Chronicle reports, thanks in part to high gas prices. Conversion to ethanol-blended gas has led to shortages at some Houston stations.

Venezuela Buys Oil From Russia: Facing a production shortage, No. 5 oil exporter Venezuela was forced to buy oil from Russia to fulfill supply obligations, the Financial Times reports.

Average gasoline prices nationwide Friday were already $2.93, but from Albuquerque, N.M., to Cary, N.C., drivers already are shelling out more than the average. Here are some anecdotes from the local filling stations.

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Thursday's Roundup:

EXXON's PAYDAY: Exxon Mobil reported blockbuster earnings — quarterly profit rose 7% to $8.4 billion. Revenue for the quarter climbed 8.4% to $88.98 billion. But the world's biggest oil company missed Wall Street's more-demanding forecasts, and investors sent Exxon's stock price down 1.1% by the close. The latest bulging profit from Exxon comes at a time when both Wall Street and Washington are criticizing Big Oil for amassing hefty cash piles. For its part, Exxon trumpeted two statistics to indicate it is trying to get more oil and natural gas out of the ground. The company said its capital and exploration spending totaled $4.8 billion in the quarter, 41% more than in the year-earlier period. And it said its fossil-fuel production averaged 4.6 million barrels of oil equivalent a day, up an unusually strong 5% from a year earlier.

TAX BREAKS AND REBATES: Congress is having second thoughts about the tax breaks it gave oil companies just last year, the New York Times reported. Meanwhile, apparently to atone for their sins, lawmakers are considering giving away more money — this time in the form of $100 gas-tax rebates to consumers, MarketWatch reported. (See related article.)

Reservations About Reserves: Oil analyst Daniel Yergin, in a Wall Street Journal opinion piece, raises questions about the way oil companies account for their reserves.

More Stock for Cnooc: Chinese oil company Cnooc plans to sell up to $2 billion in new stock in a secondary offering, MarketWatch reported.

Preferential Treatment: The Financial Times reported that Nigeria is near a deal to give China special rights in bidding for oil-drilling licenses.

Auto Summit: Bush will meet with the leaders of Detroit's Big Three next month to discuss energy and conservation, among other things, the New York Times reported.

Road Rage: Motorists paying up to $3.50 a gallon for gas are lashing out at oil companies, the Los Angeles Times wrote. Among the “high-octane epithets”: “Greedy. Un-American. The new robber barons.”

Outsourcing Oil: Shell admitted to subcontracting work to groups linked to an insurrection that shut down 40% of Nigeria's oil output in 2003, reported the Financial Times.

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