TUESDAY, AUGUST 24, 2010


KLMNO ECONOMY BUSINESS &


DOW 10,174.41 DOWN 39.21, 0.4%


NASDAQ 2159.63 DOWN 20.13, 0.9%


S&P 500 1067.36 DOWN 4.33, 0.4%


GOLD $1,226.90 DOWN $0.30, 0.02%


CRUDE OIL $73.10 DOWN $0.72, 1.0%


Gasoline prices hit eight-month low


ANALYSTS CITE WEAK ECONOMY


Drivers should get slight break at pump


by Steven Mufson


With the end of the summer driving season just around the corner, traders and investors on Monday drove gasoline prices to an eight-month low on U.S. com- modities markets, providing the latest sign of pessimism about the economic recovery. The sagging commodity mar-


ket price for gasoline is good news for American motorists, promising a mild easing in pump prices. It also marks the end of a summer of relative stability for retail gasoline prices, which have fluctuated by about 20 cents per gallon since the beginning of the year and have stayed in an 8-cent range for the past 69 days. Prices have been stuck in neu-


tral because of the continuing weak global economy and funda- mental shifts in the U.S. gasoline market, the world’s biggest. The surge in U.S. consumption


that many refiners expected ear- lier this year has not materi- alized. Last week, the American Petroleum Institute reported that in July, U.S. gasoline deliver- ies (a measure of demand) were 9.3million barrels a day, down slightly compared with July 2009. Except for 2008, it was the lowest July gasoline demand number since 2003. A lack of consumer confidence and continuing high unemploy- ment have kept people cautious about spending and traveling. “With unemployment high and July regular gasoline prices more than 20 cents a gallon above those a year ago, consumers like- ly have been shopping and vaca- tioning less and trimmed their gasoline purchases accordingly,” said John Felmy, the institute’s chief economist.


But long-term trends — such as improvements in the fuel effi- ciency of American autos — played a part too, other analysts said. A steady increase in the bio- fuels component of U.S. motor fuel is another reason; the four week average for ethanol produc- tion ending Aug. 13 was 854,000 barrels a day, up nearly 18 per- cent from a year ago and now more than 9 percent of the vol- ume of motor fuel, according to the Renewable Fuels Associa- tion.


With consumption lackluster, JUSTIN SULLIVAN/GETTY IMAGES


Jason Glavis stops for gas at a Chevron station in San Rafael, Calif. Prices at the pump have been stuck in neutral for months because of the weak global economy and shifts in the U.S. gasoline market.


“The trading community failed to understand that the gasoline season ended at Memorial Day weekend.”


— Edward Morse, Credit Suisse


U.S. oil companies have been left holding much bigger than usual inventories of gasoline. That, combined with renewed pessi- mism about U.S. economic pros- pects, has prompted traders to increase their short selling of gasoline — betting on a further decline in prices. Short positions jumped 20 percent in the week ended Aug. 17, according to fig- ures compiled by Barclays Cap- ital.


Crude oil prices have also tum-


bled after a brief surge. The price of a barrel of the benchmark West Texas Intermediate type of crude for delivery next month stood at $72.70 at the end of Monday, down from $82.55 on Aug. 3. “What is amazing is the degree to which the trading community failed to understand that the gas- oline season ended at Memorial


Weekly retail gas prices For all grades


0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 $4.50


0 2006 2007


Day weekend,” said Edward Morse, a veteran oil analyst at Credit Suisse who has been pre- dicting stable prices for months. “All the evidence was in sight that the market was going to be oversupplied.” Morse said that refinery out- put was “too high, Europe was exporting too much [fuel], bio- fuel blending components were rising, and the fuel efficiency of the fleet has grown remarkably in the past four years.” The American Automobile As-


sociation said Monday that the average retail price of a gallon of regular gasoline eased to just un- der $2.71 a gallon, down more


2008 SOURCE: Energy Information Administration, Department of Energy 2009 2010 THE WASHINGTON POST


than 4 cents from a week ago and up only 8 cents from a year earli- er, when the economy was more deeply mired in recession. There have been some signs of economic recovery, however, in petroleum statistics recently. The Petroleum Institute said that there was an 11.6 percent in- crease in deliveries of low sulfur distillates, which are primarily diesel fuels used in trucking, and a 6.9 percent increase in kero- sene jet fuel deliveries. The price of diesel fuel also fell 4 cents a gallon in the past week, but it has climbed 28 cents from a year ago. mufsons@washpost.com


MERGERS & ACQUISITIONS July 7, 2008: $4.17 Monday: $2.76


10-YEAR TREASURY UP $1.60 PER $1,000, 2.60% YIELD


CURRENCIES $1 = 85.24 YEN; EURO = $1.266 DIGEST LEGAL Fed loses review bid on bailout disclosure


A U.S. appeals court refused to reconsider a ruling that requires the Federal Reserve Board to dis- close documents identifying fi- nancial firms that might have failed without the largest U.S. government bailout. The U.S. Court of Appeals in


New York, in a docket entry dated Aug. 20, denied a May 4 request by the Fed to review its unani- mous March 19 decision requir- ing the agency to release records


of the unprecedented $2 trillion U.S. loan program begun primari- ly after the 2008 collapse of Bear Stearns. The Fed may still ask the U.S. Supreme Court to reverse the ap- peals court. The Clearing House Association LLC, an organization of 20 commercial banks that joined the Fed in defense of the lawsuit, has already said it will appeal to the high court. — Bloomberg News


Guilty plea in Disney insider-trading case A man charged with selling se-


crets about finances at Walt Dis- ney Co. pleaded guilty in federal court Monday to wire fraud charges and conspiracy to com- mit securities fraud. Yonni Sebbag, 30, a citizen of


Morocco, and his girlfriend, for- mer Disney employee Bonnie Hoxie, were arrested in California in May in the insider-trading case filed in New York. The government said the pair arranged for anonymous letters


S


A9


to be sent in early March to doz- ens of hedge funds and other in- vestment companies offering to sell secrets. Most of the compa- nies notified the FBI. Federal agents then posed as


hedge fund traders and offered to buy the information from Sebbag and Hoxie, prosecutors said. Sebbag’s sentencing was set for


Nov. 16. Hoxie’s case is still pend- ing.


— Associated Press


Jan. 2, 2006: $2.28 Dec. 29, 2008: $1.67


DERICK E. HINGLE/BLOOMBERG NEWS


Potash votes down BHP Billiton offer Potash Corp. of Saskatchewan said its board voted unanimously to re- ject a hostile $38.5 billion takeover offer from BHP Billiton, calling the offer inadequate in light of the strong growth the company expects. — Associated Press


ALSO IN BUSINESS


AIG pays back $4 billion of bailout debt Insurance giant still


owes government about $21 billion in loans


by Brady Dennis American International Group


said Monday that it had used $4 billion from a recent debt sale to pay back the U.S. government, marking the single largest cash repayment so far from the bailed out insurance giant. The money came from a


$4.4 billion debt sale completed last week by AIG’s massive air- craft leasing unit, International Lease Finance Corp. ILFC re- turned $3.95 billion to its parent company, which promptly used the proceeds to pay down out- standing loans from the Federal Reserve. “This is continuing tangible


evidence of AIG’s progress in re- paying the American taxpayers,” chief executive Robert Ben- mosche said in a statement. “AIG is getting stronger every day. We still have more work to do, but we will finish the job and make sure we repay the American taxpay- ers.” The payment reduces AIG’s outstanding balance on the Fed loans to about $21 billion, includ- ing interest and fees. If AIG fails to repay the loans in full, the Fed’s losses will ultimately fall on taxpayers. The Fed also invested tens of billions of dollars more to help AIG rid itself of troubled de- rivatives contracts that were bleeding it dry. In addition, the Treasury De-


Westar pursues ex-execu- tives in civil court: Westar En- ergy said it will continue to pur- sue civil claims in arbitration against two former executives who were accused of looting the Kansas utility, even though the Justice Department is dropping criminal charges. The company plans to pursue civil claims against former chief executive David Wittig and his top strategy officer, Douglas Lake, in an arbitration proceed- ing that had been put on hold un- til the criminal proceedings were completed.


— Associated Press


 1 Day Acuvue lenses recalled: Johnson & Johnson recalled mil-


that is due to close by year’s end and will help to further chip away at the company’s federal debt. At the same time, a planned


ANDREW HARRER/BLOOMBERG NEWS


AIG chief executive Robert Benmosche after a panel hearing in May. “AIG is getting stronger every day,” he said in a statement.


partment has pumped more than $40 billion into the company since September 2008 and given AIG access to an additional $30 billion, of which the com- pany has tapped $7.5 billion. AIG must repay a total of more than $90 billion before the com- pany can regain its full independ- ence. That’s far less than the gov- ernment committed to the com- pany at the height of the financial crisis but still a significant hole. “It’s better than not paying it


back. . . . It suggests things are moving in the right direction,” said Morningstar analyst Bill Bergman. He said improvements in the housing and insurance markets had helped stabilize AIG in recent months, but it remains an open question whether the company can pay back its federal


debt, and how quickly. The federal government stepped in to rescue AIG with a massive bailout in September 2008. The company was teetering on bankruptcy, largely because of a mounting liquidity crunch caused by its faulty credit deriva- tives, and officials feared that AIG’s failure could send shock- waves through the financial sys- tem. The result was a 79.9 per- cent government stake in the company and a bailout package that eventually would grow to more than $180 billion. Even as AIG has made progress


in paying down its federal debt, some efforts have proven frus- trating. Earlier this year, for example, the company sold one of its major global insurance units to MetLife for $15.5 billion, a deal


$35 billion sale of AIG’s Amer- ican International Assurance subsidiary to Prudential fell through this year after Prudential demanded a lower price. AIG offi- cials have said the unsuccessful deal opened up other options, and Benmosche said Monday that the company continues to “work diligently on the initial public offering” for AIA. As the markets have stabilized and AIG has sold assets large and small, the company’s financial fortunes have improved. In May, AIG posted first-quarter earnings of $1.5 billion, its third quarter in the black out of the last four. The result was a far cry from the $61.7 billion loss the company posted in the fourth quarter of 2008, bringing total losses for that year to nearly $100 billion. The Government Accountabil-


ity Office found this year that AIG’s financial condition was “relatively stable” but pointed out that the company’s future success depends on its ability to restruc- ture effectively and on other fac- tors beyond its control, such as the performance of the insurance and credit derivatives markets. Monday’s debt payment stoked optimism within AIG. Ben- mosche cited the improvements in AIG’s insurance businesses and its stabilizing client reten- tion rates as an indication of brighter days ahead. “We are starting to see the light


at the end of the tunnel,” he said. dennisb@washpost.com


lions of 1 Day Acuvue contact lenses sold in Japan and other countries in Asia and in Europe, its ninth recall of a consumer health product in the past year. The New Brunswick, N.J., com-


pany said it had received some complaints from customers in Ja- pan that they experienced sting- ing or pain when inserting Acu- vue TruEye lenses. It said it has not received any reports of cus- tomers suffering damage to their vision. After the previous recalls,


Johnson & Johnson has been un- der scrutiny by Congress, Food and Drug Administration offi- cials, and federal prosecutors. — Associated Press


Political Economy JIA LYNN YANG Excerpt from voices.washingtonpost.com/political-economy


Cooper quits as lead writer of report on financial crisis The lead writer for a report ordered by Congress on the causes of the


2008 financial crisis has quit just four months before the investigation is due. Matt Cooper, a former reporter for Time magazine, has left his post working for the Federal Crisis Inquiry Commission to “pursue opportunities that would not wait until the end of the year,” according to FCIC spokesman Tucker Warren. Cooper’s last day was Aug. 13, said Warren. Cooper, who sat in the limelight during the Valerie Plame Wilson scandal, did not respond to calls or e-mails seeking comment. The sudden departure of the report’s lead writer could further hobble the 10-member commission, which has already been beset by delays and is supposed to submit its final report by Dec. 15. Warren said the commission is not worried about missing its deadline because it has a full-time staff of 58 employees, a group that includes writers other than Cooper. “Matt was never the sole person writing this report,” Warren said. He added: “We appreciate Matt’s time here and his contributions. The commission’s work continues.” Critics have accused the FCIC of being unfocused. In splashy hearings, commissioners have asked Goldman Sachs executives to discuss conflicts of interest and solicited the opinion of billionaire investor Warren E. Buffett on troubles at credit-rating agencies. (Buffett is a Washington Post Co. board member.) The commission requested more funding late last year after concluding that its $8 million budget would not support what it hoped to accomplish, and the House approved a $1.8 million increase earlier this summer. But Rep. Darrell Issa (R-Calif.) has raised questions about the request, sending a letter to the FCIC asking for an explanation of its spending. The FCIC is led by former California treasurer Phil Angelides and former congressman Bill Thomas (R-Calif.). It is modeled after the 9/11 Commission, which produced a final report that became a national bestseller. The FCIC report is also slated to produce a book, to be published by


Little, Brown and Co. The publisher is supposed to pay an advance to the government with some of the proceeds going to the U.S. Treasury.


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