Why I’m a Deficit Owl
By Chris Barrero
Norway intervenes to avert oil industry closure
This was about to be seriously disruptive:
Norway intervenes to avert oil industry closure
By Mia Shanley and Dmitry Zhdannikov
July 9 (Reuters) — Norway’s government ordered on Monday a last-minute settlement in a dispute between striking oil workers and employers in a move to alleviate market fears over a full closure of its oil industry and a steep cut in Europe’s supplies.
The strike over pensions had kept crude prices on the boil with analysts expecting far quicker action by the government to stop the oil industry from locking out all offshore staff from their workplaces from midnight (2200 GMT) on Monday.
Oil markets breathed a sigh of relief on news of the intervention and crude prices dropped in early Asian trade.
Under Norwegian law, the government can force the striking workers back to duty and has done so in the past to protect the industry on which much of the country’s economy depends.
But it was slow to intervene in the latest dispute, which was in its third week, and did so on Monday only minutes before the start of the lockout, citing potential economic consequences.
“I had to make this decision to protect Norway’s vital interests. It wasn’t an easy choice, but I had to do it,” Labour Minister Hanne Bjurstroem told Reuters after meeting with the trade unions and the Norwegian oil industry association (OLF).
A full closure of output in Norway – the world’s No. 8 oil exporter – would have cut off more than 2 million barrels of oil, natural gas liquids (NGL) and condensate per day.
But the minister said her main concern was the potential cut in gas supplies. Norway is the world’s second-biggest gas exporter by pipeline, with the majority of supplies going to Britain, the Netherlands France and Germany.
“This could have had serious consequences for the trust in Norway as a credible supplier,” she added.
The oil and gas industry makes up about one-fifth of Norway’s $417 billion economy.
Leif Sande, leader of the largest labour union Industri Energi, representing more than half of 7,000 offshore workers, said workers would return to work immediately.
“It’s very sad. The strike is over,” he told journalists.
The dispute has raised eyebrows in Norway, where oil and gas workers are already the world’s best paid, raking in an average $180,000 a year. Offshore workers clock 16 weeks a year but cite tough conditions for their call for early retirement at 62.
The oil industry had refused to budge.
“I am very happy that the minister chose to end a conflict that has cost Norway and the oil companies large sums,” said Gro Braekken, leader of the OLF.
The OLF said the 16-day strike came at a cost of some 3.1 billion Norwegian crowns ($509 million).
The next step is compulsory arbitration to define a new wage agreement.
“With this decision we can see that whenever the oil industry says jump, the government listens,” Hilde Marit Rysst, leader of union SAFE, told Reuters. “We will never leave this issue – it is completely unthinkable to stop fighting for those who are worn out at 62.”
She said unions would push their issues at the next suitable opportunity.
Norway is keen to retain its image as a reliable supplier of energy, but analysts have said the Labour-led coalition government was slow to intervene as it faces general elections in a year, and labour unions are important partners.
On Monday, Labour Minister Bjurstroem said she believed the lockout was not necessary and the oil industry will have to take responsibility.
About 10 percent of the 7,000 offshore workers have been on strike since June 24.
Brent crude dropped more than $1 to below $99 per barrel in early Asian trade on Tuesday on news of the intervention, after surging to above $101 on supply fears in the previous session.
The strike had choked off some 13 percent of Norway’s oil production and 4 percent of its gas output.
State-controlled Statoil, which operates the affected fields, said it would resume production immediately and would be back at full capacity by the end of the week.
The last lockout in the offshore sector occurred in 1986, shutting down production on the Norwegian continental shelf completely, and lasted for three weeks before the government intervened. In 2004, the center-conservative government stepped in to avert a lockout. ($1 = 6.0881 Norwegian crowns)
Huffington Post article
The Certainty of Debt and Taxes – The Fiscal Cliff Burden of Proof
By Warren Mosler
The certainty of debt and taxes- comments on the Fiscal Cliff
It takes a fiat currency to sustain full employment.
And a fiat currency, like the $US and the euro, includes the certainty of debt and taxes.
Taxation is required to allow the government to spend its otherwise worthless currency.
And ‘debt’- some entity spending more than its income- is required to ‘offset’ an entity’s desire to spend less than its income.
These desires to not spend are known as demand leakages.
That means, at full employment, either a private sector entity or the government will be spending more than its income to offset the demand leakages.
Private sector spending is, operationally, revenue constrained. It is limited by income and credit worthiness.
Public sector spending in a currency it issues is not revenue constrained.
The private sector, the user of the currency, must first obtain funds before it can spend.
The public sector, the issuer of its currency, must, from inception, spend or lend first, before it can ‘collect’ taxes and/or borrow.
The private sector is necessarily pro cyclical. In a down turn, the private sector loses credit worthiness and therefore is limited in its ability to spend more than its income.
That leaves only the public sector to spend more than its income to fill any residual output gap and sustain full employment.
Those claiming ‘the problem is too much debt- private sector and public sector’ are entirely missing the point.
That includes everyone in Congress, President Obama, and Candidate Romney.
Those now pushing for Federal deficit reduction are entirely missing the point.
There is not Federal solvency problem, short term or long term, with any size deficit.
There could be a long term inflation problem.
However, I have seen no credible, professional long term forecasts of substantial inflation. That includes the Fed, the CBO, and the forecasts of the largest financial institutions, as well as the inflation rates implied by the long term inflation indexed US Treasury securities.
Last year the pre debt ceiling war cry from all sides was that immediate deficit reduction was imperative to keep us from becoming the next Greece.
That fell by the wayside after the downgrade, that was supposed to cause interest rates to spike and find the US, Greek like, on its knees before the IMF,
instead cause rates paid by the US Treasury to dramatically fall. The difference is the US govt is the issuer of the $US, while Greece is but a user of the euro.
So seems to me in this economy federal deficit reduction should be off the table, and the burden of proof of a sufficiently high long term inflation risk
be on those who want to put it back on the table. Anything less seems subversive, either by accident or by design.
(feel free to distribute)
Public employment by President
more hints euro zone gdp may be stabilizing
A couple of more hints deficits may be high enough for stability and even a bit of positive GDP growth:
German Industrial Production Increased More Than Forecast in May
By Jana Randow
July 6 (Bloomberg) — German industrial output rebounded more than economists forecast in May as construction buttressed Europe’s largest economy against the sovereign debt crisis.
Production rose 1.6 percent from April, when it dropped 2.1 percent, the Economy Ministry in Berlin said today. Economists forecast an increase of 0.2 percent, the median of 36 estimates in a Bloomberg News survey shows. Production was unchanged from a year earlier when adjusted for working days.
The European Central Bank cut interest rates to a record low yesterday as the worsening debt crisis threatens to tip the euro area, Germany’s largest export market, into recession.
While German business and investor confidence have slumped amid signs growth is slowing, record-low unemployment and demand from outside the region have helped insulate the economy. Factory orders unexpectedly rose 0.6 percent in May, the Economy Ministry said yesterday.
“German factories are still doing quite well, but we’ll see some skid marks as a result of the euro region’s debt crisis in the coming months,” said Andreas Scheuerle, an economist at Dekabank in Frankfurt. “In the euro area, everything points toward recession and the global economy has slowed to an extent that it can’t compensate for the weakness in Europe.”
Manufacturing output gained 1.8 percent in May, driven by a 3.8 percent jump in production of consumer goods, today’s report showed. Investment goods production rose 1.7 percent and construction activity was up 3.1 percent.
France’s Trade Deficit Narrowed in May to 5.3 Billion Euros
July 6 (Bloomberg) — France’s trade deficit narrowed 7.7 percent in May as exports rose.
The deficit in May was 5.325 billion euros ($6.6 billion) compared with 5.77 billion euros in April, the country’s customs office said in an e-mailed statement.
Exports rose 1.3 percent from the previous month to 37.44 billion euros while imports rose 0.1 percent to 42.77 billion euros.
For the first five months of the year, the deficit narrowed 10 percent from the same period a year ago to 29.4 billion euros
Airbus exported 22 planes for 1.58 billion euros during May, compared with 28 planes for 2.23 billion euros the previous month.
June Employment Data (U.S. and Canada)
Good for stocks and bonds,
Not so good for people, apart from the lower gasoline prices.
Karim writes:
June Employment Data (U.S. and Canada)
U.S.
- Headline payroll growth of 80k in line with other Q2 employment readings and a clear loss of momentum in job gains from Q1.
- The report was a positive from a personal income standpoint, however, as the components of the income equation, Hourly Earnings (+0.3%) and Aggregate Hours (0.4%) were both strong.
- The hours data in particular suggests demand was running at reasonable levels but forward uncertainty may have restrained hiring.
- Weather related sectors did bounce back: Net change in construction of +33k in particular. There may have been some seasonal issues in education as that sector had a net change of -55k.
- Other key metrics were generally stable: The unemployment rate was unchanged at 8.2%, the labor force participation rate was unchanged, the median duration of unemployment fell from 20.1 weeks to 19.8 weeks, and the Diffusion Index dropped from 59.8 to 57.9
- This is the last payroll number before the next Fed meeting. In what should be a close call, Twist 2 will likely be maintained.
Canada
- Very modest growth in employment in June (7.3k). Equivalent to about 75k in the U.S., population-adjusted.
- Y/Y growth in Canadian employment is exactly 1%. Combined with modest productivity growth, current GDP trends appear similar to the U.S., about 1.5-2.0%.
Japan economy may run out of cash by October
Monkey see, monkey do:
Japan economy may run out of cash by October
July 6 (VANCOUVER SUN) — Japan’s government could run out of money by the end of October, halting all state spending including salaries, pensions and unemployment benefits, because of a standoff in parliament that has blocked a bill to finance the deficit.
The deficit financing bill, which would allow the government to sell bonds needed to fund almost half of the budget, has languished in parliament as the ruling Democratic Party tussles with opposition parties that can use their control of the upper house to reject legislation.
Huffington post article
Norway Oil Industry Calls Lockout to End Strike
This could send crude up to whatever price it takes to immediately reduce world consumption by the amount of the cutbacks.
In addition to the additional anticipated Iranian cutbacks.
Releasing strategic reserves could contain prices until production resumed.
Norway Oil Industry Calls Lockout to End Strike
By Vegard Botterli and Nerijus Adomaitis
July 5 (Reuters) — Norway’s oil industry moved to lock out all offshore workers on the Norwegian continental shelf on Thursday, aiming to get the government involved and put an end to a near two-week strike that has hit crude exports and helped push up prices.
While a lockout would mean a complete shutdown of oil and gas production in Norway, the world’s eighth-biggest crude exporter, analysts expected the government to intervene, end the strike and prevent a full closure.
“The conflict is deadlocked, and the demands are unreasonable … Unfortunately, we see no other course than to notify a lockout,” the Norwegian oil industry association (OLF) said in a statement.
Some 6,515 workers covered by offshore pay agreements will be locked out from their workplaces with effect from July 10.
The strike, which began June 24, has already slowed crude exports, cut Norway’s oil production by around 13 percent and its gas output by around 4 percent. News of the lockout sent Brent crude futures up to as high as $102.34 a barrel. They were trading at $101.03 at 1458 GMT.
“The likelihood is that the strike will end sooner than expected,” Commerzbank analyst Carsten Fritsch said.
State-controlled Statoil said the lockout would cause a production shortfall for the company of around 1.2 million barrels of oil equivalent (boe) per day and 520 million Norwegian crowns ($86.6 million) in lost revenues per day.
The Norwegian government declined to say whether it would intervene but called the lockout legitimate.
“A lockout is still a part of the legal strike. We are continuing to follow the situation closely,” Gro Oerset, senior adviser at the labour ministry, told Reuters.
Several North Sea oil traders on Thursday were in agreement in expecting the strike to end soon.
“It seems like Statoil is trying to get the government to settle it,” said one.
INTERVENTION?
The government has the authority to force an end to strikes if it believes that safety is being compromised or vital national interests could be harmed and has done so in the past to protect Norway’s image as a reliable energy exporter.
Analysts expect the government to intervene. In 2004, it intervened one day after the oil industry called a lockout.
“A repeat is likely, and if not there will be some SPR (Strategic Petroleum Reserve) release, but the most likely outcome is now a Norway government intervention,” Switzerland-based Petromatrix energy consultancy said in a note.
The Labour-led coalition government has been reluctant to intervene as it faces general elections in a year, and labour unions are important partners.
“I can’t imagine they can accept that the entire production on the Norwegian shelf is shut down for even a minute,” SAFE trade union leader Hilde-Marit Rysst told Reuters.
No new talks are planned between the parties, the state mediator said.
The International Energy Agency said on Thursday it was monitoring the summer oil supply situation very closely.
“We really hope that the sides can reach an agreement by Monday night in order to avoid a prolonged and more widespread outage,” IEA executive Maria van der Hoeven said in a webcast.
EXPORTS SLOWED
The strike initially shut production at the Oseberg and Heidrun fields. Oseberg in particular is significant for oil prices, because it is part of the North Sea Brent benchmark used as the basis for many of the world’s trades.
Oil traders said on Thursday the loading of Oseberg cargoes would be delayed by at least a few days in July, although exact loading dates were unclear because Statoil has not issued a revised July export programme.
An Oseberg cargo scheduled to load on July 1-3 has yet to do so, a source familiar with the matter said. The delay, as reported by Reuters on Monday, was the first sign of an impact of the strike on exports.
An August export plan for Oseberg was expected to be released on Friday, but trade sources said this would not appear until production resumed.
In an apparent expectation of business as usual, however, Statoil on Thursday issued an August loading programme for oil from its Troll field, scheduling a normal export rate. A trading source provided a copy of the loading plan.
Wage talks broke down on June 24 after the OLF refused to negotiate an early retirement scheme for the sector’s 7,000 workers. A second attempt at reaching a deal ended unsuccessfully on Wednesday over pensions.
Hays Oil & Gas said in a recent report Norwegian oil and gas workers were the best paid in the world, followed by Australia, Brunei and the Netherlands. They earn more than twice the average salary of all countries surveyed and more than double workers in Britain.
Harsh working conditions mean that offshore workers, in particular, are among the best paid industrial workers in Norway. Their 12-hour shifts last for two weeks and are followed by four weeks of leave, making for a total of 16 weeks of work a year, excluding overtime.
But the main sticking point for unions is an early retirement age for offshore workers of 62, below the standard 67. Top executives at Statoil are currently eligible for retirement at 62.
The OLF has argued their demands are not in line with government pension reforms.
In May Norway produced 1.6 million barrels of oil per day, and 8.9 billion cubic metres of gas in total.