The highlight of this week was a new president being sworn-in in America as the 44th American President Barack Obama, takes centre stage.

There is nothing like a change in power to make people feel better which is a bit like having a shot in the arm. Barack Obama has plenty to do in his new role having followed the office of probably one of the worst presidencies in history. They say that major depressions come every 75 years or so and this one has come at about the right time according to history, helped along with bad management of the largest economy in the world!.

UK is officially in recession

Back over in the UK where we are still stuck with our government we are now officially in recession due to having two consecutive negative growth quarters ending December 2008. Sterling came under more pressure too this week with most currencies falling away again. The Sterling to US dollar rate closed at just over $1.37, which represents a fall of over 7% this week and has fallen by just under 35% since the rate hit $2.11 back in August of 2007. The US Dollar is back to the rates we were seeing back in December of 2001.

The other currency that has fallen sharply is the Sterling Euro rate closing the week at just under €1.06, having recovered a small amount last week.

Oil price recovers

Despite gloomy news around the globe the oil price has recovered this week with Opec cutting production and as much as 1.55 million barrels per day in January. The priced closed up at $46.47, which is a rise of 27% in one week. So it will be interesting to see where the price of oil moves this week with cold weather on its way on the one hand and on the other hand “peace” is restored in the Middles East for the time being.

Rising job losses

This has also been another week of job losses and warnings of job cut-backs, with Microsoft announcing 5,000 cuts in its work force which is the first ever in its history of trading! Over in Germany chip-maker Qimonda has filed fro bankruptcy with the loss of 12,000 jobs around the world. Corus, the Anglo-Dutch steel maker owned by Tata is to cut around 3,500 jobs with up to 2,500 of hose in the UK alone! But it is Spain that seems to be worst hit with their unemployment rate hitting 13.9% or 3.2 million jobless in the last quarter of 2008.

More trouble on the tech front!

Another first in this economic gloom as Samsung the South Korean chip-maker records its first ever quarterly loss. Samsung Electronics is the world’s biggest chip-maker and made a loss of 22.2 billion Won (£11.6 million), which is as a result of falling global demand as well as prices in memory chips and liquid crystal displays (LCDs). Japan’s electronics company Sony has also given out a profits warning along with other tech firms including Microsoft and Nokia.

If you want to read some good news for business in all this gloom the BBC have a great article on Why recession can be good time to start business

End of the week saw:
Stock exchanges:
FTSE 100: 4,052
DOW: 8,078
S&P: 831.95
Nikkei: 7,745

Currencies
UK Sterling £ to US Dollar $ 1.37210
UK Sterling £ to Euro € 1.05837
UK Sterling £ to Japanese Yen 121.637
UK Sterling £ to Aus $ 2.09337
US Dollar $ to Euro € 0.771464
US Dollar $ to Japanese Yen 88.6288

Commodities
Nymex Crude oil – $46.47
Gold – $895.80

The price of oil fell to below $40 this week and closed the day at $40.32 representing another low of this year and down to levels seen back in 2004.

Opec have been cutting production to help maintain the barrel price and has again agreed to cut this again by a record 2.2 million barrels per day. However, despite these cuts and to-date this is 4.2 million barrels per pay, the price of oil has continued its fall, as inventories of oil build up in America and other major oil consumers around the globe.

Merrill Lynch predicted that, should China go into recession, the price could fall to around $25 per barrel, which I must admit seems so low, but then I though that price had bottomed out at around $55 per barrel and then at just over $40. So it is any ones guess where the bottom might be to this fall in oil prices at a time where consumer confidence in world economies is at an all time low.

Inflation has been reported to have fallen to 4.1% in November, continuing its fall after peaking at 5.2% and falling to 4.5% in October.

The main causes for the rise in inflation being the rise in commodity and food prices, with oil prices rising to record levels back in July 2008. However, most will have noticed the falls in pump prices of both petrol and diesel with petrol prices in the UK below 80 pence per litre and diesel now falling below £1 per litre.

The governor of the Bank of England has written to the Chancellor saying that the inflation rate could fall below 2% in 2009.

World oil prices have continued to fall, undermining oil cartel Opec’s efforts to steady prices by cutting output by 1.5 million barrels a day.

The decision to cut about 5% of the cartel’s total daily output came after an emergency Opec meeting in Vienna.

The move did not halt the sliding oil price with US sweet, light crude down $3.69 at $64.15 after wild swings saw greater falls in earlier trade.

Recession fears have pulled oil down from a high of $147 a barrel in July.

The sell-off also hit London Brent, down $4.40 at $61.52.

Dramatic collapse

In a statement after the meeting, Opec said it had cut output because supply outpaced demand, and prices had collapsed dramatically in recent weeks.

“There’s not going to be any impact on inflation, there’s not going to be any impact on growth” OPEC President Chakib Khelil

UK supermarkets in petrol price war

The cut will take effect from 1 November.

The 13-nation producers group, responsible for producing about 40% of the world’s total supply, said it would continue to provide the market with the crude oil volumes required by consumers.

Analysts had expected Opec to cut output by at least one million barrels a day and some producers – such as Venezuela and Iran – wanted greater cuts.

More cuts?

OPEC President Chakib Khelil said because Opec members produce about 300,000 barrels a day more than the official quota of close to 29 million barrels, the total reduction by the end of the year would be about 1.8 million barrels a day.

Mr Khelil rejected the suggestion that the decision would hurt the global economy.

“There’s not going to be any impact on inflation, there’s not going to be any impact on growth.”

Opec oil ministers said that they would review their decision at their next meeting in December, leaving open the possibility of further cuts beforehand if necessary.

Revenue worries

Observers said that the failure of oil prices to climb suggested that Opec was losing its power.

“The power to influence oil prices is moving farther and farther away from Opec,” said oil analyst Stephen Schork.

“Everyone thought China and India would go on buying oil forever, but that’s not the case. The demand is no longer there. People fooled themselves when they said emerging markets could weather a US downturn.”

Ahead of the meeting, some of the cartel’s members called for a reduction in output to stop the fall in prices: Venezuela wanted production to be cut by a million barrels a day, while Iran had called for a cut twice that size.

The two countries are thought to be most in need of a relatively high oil price – around $100 a barrel – to finance government spending, says the BBC’s economics correspondent, Andrew Walker.

Iran relies almost entirely on its oil exports for government revenue: for every dollar off the price of a barrel of oil, the country loses roughly $1bn a year in revenue.

But British Prime Minister Gordon Brown warned that any reduction made in a bid to push up oil prices would be “scandalous” at a time when major economies were close to tipping into recession.

Motorists benefit

Oil prices hit an all-time high of $147 a barrel in July, but have since fallen back steadily.

Prices now stand at levels not seen since last spring, amid fears a global economic recession will cut demand.

The price that motorists have been paying for petrol at forecourts has been falling recently.

A price war has broken out among leading UK supermarkets with Asda, Sainsbury’s, Tesco and Morrisons all announcing cheaper petrol on Friday.

But some observers believe moves to reduce production could reverse that trend.

News reported by The BBC

We have seen a dramatic fall in oil prices since July 2008 where the Dollar price per barrel was $147 and today the figure is just under $78!

However, as Virgin Atlantic announces that it is to reduce its fuel surcharges on flights for most passengers in response to a fall in the price of oil, we can see that these reductions are in no way as bigger a percentage as the fall in the price per barrel.

Virgin’s surcharges for its economy passengers shorter-hall routes will be cut by £10 to £68 from £78 (12.8% cut) and on their long-haul routes economy charges will drop from £109 to £96, which represents a fall of 11.9%.

This is by no means the fault of Virgin, as they are more than likely being charged by the oil companies for their fuel at a still comparatively high rate, despite the fall of nearly 47% on the price of crude. This is also the case at the pumps across the UK, which have seen a fall in recent weeks, but not to the same extent as crude oil prices – even Gordon Brown has called for a cut in petol prices.

Oil prices rocketed above $120 on Thursday as Tropical Storm Gustav approached the Gulf of Mexico – before falling back in a see-saw session.

Having battered Haiti there are fears Gustav may disrupt oil production.

But analysts said a belief that the US government would tap the Strategic Petroleum Reserve if this happened, caused prices to fall back.

US light sweet crude ended $2.56 lower at $115.59 a barrel. London Brent crude lost $2.05 to settle at $114.17.

The US has only twice tapped its emergency reserve to respond to disruptions or supply shortage concerns. The most recent saw about 700 million barrels released after Hurricane Katrina.

And the International Energy Agency said it was prepared to tap its emergency stocks if needed.

This prospect was “taking some of the steam out of this (price)rally,” said Jim Ritterbusch, of energy consultancy Ritterbusch and Associates.

The storm is on course to hit the US coast by Monday, and there are fears it may be strengthening into a hurricane.

Inflicting damage

With 85% of US offshore oil and gas production at risk of being affected, analysts predict that oil prices will rise further until Gustav has run its course.

“Oil markets are waiting for Gustav” PetroMatrix analyst Olivier Jakob

UK oil giant Shell has already removed about 400 staff from its offshore facilities in the Gulf of Mexico with another 270 expected to be withdrawn.

“It looks as though the hurricane is on track to inflicting damage,” said Ken Hasegawa, an analyst at broker Newedge in Tokyo.

Fellow oil analyst, Peter McGuire of Commodities Warrants Australia, predicted that the impact of Gustav could lead to oil prices returning above $130 a barrel, a price last seen in July.

“Oil markets are waiting for Gustav,” said PetroMatrix analyst Olivier Jakob.

“It is still potentially going towards the oil assets of the US Gulf but current forecasts are not showing it to be the mother of all hurricanes.”

News reported by The BBC

UK wholesale gas prices have risen 15% in the past two days after a leak in a Norwegian gas pipeline sparked fears of supply problems over the winter.

Norway’s StatoilHydro said on Wednesday that it had discovered the leak from a pipeline feeding from the Kvitebjørn platform to the Kollsnes onshore plant.

The firm said it had shut the pipeline pending repairs to begin in the spring.

The news came as UK consumers face higher gas and electricity bills, with another two suppliers raising prices.

Since the start of the year, many energy firms have hit their customers with higher bills, blaming the spike in wholesale gas costs for their actions.

E.On and Scottish and Southern were the latest firms to announce price rises on Thursday.

Surprise rise

Following news of the leak, wholesale gas prices for delivery over the winter leaped to about 105 pence per therm from 90p on Wednesday.

Analysts expressed surprise at the market’s dramatic reaction as the Kvitebjørn oil field is not a significant producer of gas for the UK market and had been offline for summer maintenance anyway.

“It’s an unwelcome development that distributors and consumers, all having a hard time, could have done without” Damien Cox, John Hall Associates.

Platts energy agency said the Kvitebjørn field and Visund platform from which the pipeline runs together produce 25 million cubic metres of gas a day.

During the summer months, the UK typically consumes about 200 million cubic metres.

Platts said the rebound in world oil prices, with US crude up $6 on Thursday, had supported the price jump.

Vulnerable position

Some analysts said the nervous reaction in the market reflected Britain’s vulnerable position in relying on more of its supplies from abroad as North Sea reserves are depleted.

In addition, the UK lacks the storage infrastructure to cope with the transition from being a net energy exporter to becoming energy dependent, observed Damien Cox, an analyst at energy consultancy John Hall Associates.

“It’s an unwelcome development that distributors and consumers, all having a hard time, could have done without,” he said.

As for whether it will mean more price hikes for UK consumers, analysts said that depended largely on the future direction of oil prices as long-term oil contracts in Europe are linked to gas prices.

News reported by The BBC

World oil prices have fallen after waning US demand for crude outweighed concerns of dwindling supplies.

US sweet, light crude tumbled $3 a barrel to $112.86, erasing most of the gains in a rally on Wednesday that extended in Asian trade on Thursday.

London Brent fell $1.18 a barrel to $112.29.

Oil prices were boosted on Wednesday by US government figures showing a surprise drop in oil and petrol stocks and the geopolitical risks in Georgia.

But the rally was short-lived as investors remained bearish on the US economy and US demand for refined oil products, including petrol, which has soared recently.

“It’s just a market that has all the feeling of continuing to work lower until we get some definitive evidence that demand is going to improve because of lower pump prices, and that seems a long ways off,” said Jim Ritterbusch, president of US energy consultancy Ritterbusch and Associates in Galena.

Prices are now well off the peak of $147 a barrel hit in July.

Government data

As the US economy slows, demand for oil has fallen and there are predictions that this trend will continue.

On Wednesday the US Energy Department’s (EIA) Energy Information Administration data showed that crude oil imports had been hit by tropical storm Edouard.

Petrol stocks fell 6.4 million barrels to 202.8 million barrels in the week ending August 8 – marking a fall three time greater than expected, the EIA data showed.

But data from the EIA also showed that demand for oil in the first half of 2008 saw its sharpest drop in 26 years, compared to a year before.

Iran’s Opec governor Muhammad Ali Khatibi said this week that the cartel of oil producing nations should trim its oil output if demand falls in industrialised nations.

Tensions in Georgia

Clashes between Georgia and Russia earlier this week helped to underpin oil price rises on Wednesday amid worries that key pipelines that run through the country could be at risk.

Georgia is a strategic energy transit route with three major oil and gas pipelines passing through the country from its Caspian Sea fields.

BP shut two of the three pipelines for security reasons on Tuesday.

It has now restarted pumping gas through the South Caucasus gas pipeline but its oil pipeline which runs from Baku on the Caspian Sea in Azerbaijan to the Georgian Black Sea port of Supsa remains shut.

Another BP pipeline that runs through Georgia, the Baku-Tbilisi-Ceyhan oil pipeline, was closed last week after an explosion in Turkey.

News reported by The BBC

Petrol prices are falling but not fast enough in response to dropping oil prices, according to the AA.

Oil prices fell to a three-month low on Tuesday, with US crude down to $118 a barrel at one point.

The AA said prices at the pumps had come down in recent weeks and petrol was at an average of 115p a litre but could be cut further.

Retailers said that the volatility in the market meant that oil price changes were not immediately reflected.

Latest prices

Analysts said that rising supply and slowing demand were reducing the price of oil, having peaked at $147 a barrel on 11 July.

“Any pump price above £1 per litre causes hardship and misery for many millions of car dependent motorists” Edmund King, AA president

The AA says that a $2 fall in the price of a barrel should be reflected in a 1p fall at the pumps. This would be the equivalent of prices dropping by 14p from the peak to the latest low.

But the motoring organisation said that a lack of transparency in pricing meant that it was very difficult to tell whether motorists were getting a fair deal.

An AA spokesman said retailers were cutting prices “selectively and not quickly enough”.

On Monday, the average price of petrol was 115p a litre, and diesel cost 128p a litre, according to figures from the AA and Experian Catalist.

“Any pump price above £1 per litre causes hardship and misery for many millions of car dependent motorists,” said AA president Edmund King.

“Already 55% of AA members have cut back on journeys due to prices at the pumps and others are sticking to speed limits and eco driving to make their expensive fuel go further.”

Volatile market

Experian Catalist said that the price of petrol on Monday had dropped by 2p and diesel by nearly 3p a litre compared with a week earlier. Petrol was down by 4.5p compared with a peak on 17 July and diesel by nearly 5p over the same period.

A tussle over prices by the supermarkets was in evidence during the latest cuts in price.

“We continue to review prices daily and we reduced petrol by up to 3p and diesel by up to 4p at the end of last week to ensure we provide customers with the best possible value for their fuel on a local basis,” said a spokesman for Sainsbury.

An Asda spokesman said its stores across the country had also cut prices in the last two weeks and had a “watching brief” regarding the latest oil price dips.

Representatives of rival Tesco also said prices had fallen but a spokesman stressed that oil prices needed to show a sustained fall in what was a volatile market.

An AA spokesman accepted that there were a number of factors that affected the cost of petrol and that a cushion was needed against the volatility of the cost of oil.

News reported by The BBC

A serious oil supply crisis is looming, which could push prices above $200 a barrel, a think tank has warned.

A “supply crunch” will affect the world market within the next five to 10 years, the Chatham House report said.

While there is plenty of oil in the ground, companies and governments were failing to invest enough to ensure production, it added.

Only a collapse in demand can stave off the looming crisis, report author Professor Paul Stevens said.

“In reality, the only possibility of avoiding such a crunch appears to be if a major recession reduces demand – and even then such an outcome may only postpone the problem,” he said in The Coming Oil Supply Crunch.

Lack of funding

Prof Stevens warned that investment in new oil supplies has been inadequate as oil firms prefer to return profits to shareholders rather than reinvest it.

Furthermore, oil producing cartel Opec has failed to meet plans to expand its capacity since 2005.

He also argued that a “resurgence of resource nationalism” means that governments are “starving” their national oil companies of investment by excluding international oil firms from helping to develop capacity.

“While the forecast is controversial and extremely bullish, even allowing for some increase in capacity over the next few years, a supply crunch appears likely around 2013,” he added.

“The implication is that it will quickly translate into a price spike although there is a question over how strategic stocks might be used to alleviate this.”

Unpopular measures

However, Prof Stevens does conclude that only “extreme policy measures could achieve a speedy response” in boosting supplies and lowering oil prices – a move that is likely to be “politically unpopular”.

Other, longer-term moves suggested by the report include offering support to help oil-exporters to manage “resource curse” – where an abundance of natural resources can damage a country’s economy – and allowing Opec to join the International Energy Authority’s emergency sharing scheme.

The report comes just days after oil prices slipped from peaks near $150 a barrel.

News reported by The BBC