2. Marc Lifsher and Evan Halper at the Los Angeles Times have the story that yesterday Governor Schwarzenegger sent a letter to Treasury Secretary Paulson informing him that California would likely require a $7 billion loan from the federal government within weeks given the current credit situation. California is the state with the largest economy of the states in the US and with one of the largest state government budgets. The most recently data has it as the 10th largest economy in the world. The US Bureau of Labor Statistics released data showing that employment declined by 159,000 in September. Unemployment at 6.1%. Why, given the situation, hasn't the dollar tanked versus other world currencies? This is the explanation I've heard most recently, though I cannot vouch for it:
Since mortgage bonds held by European banks were issued in dollars, the European banks need to have capital reserved in US Dollars (for regulatory reasons). Usually the banks use LIBOR for this funding, but since LIBOR has gone through the roof, the European banks have turned to the euro/dollar swap market. This is why the dollar hasn't tanked. But if the bailout package passes, and unlocks the credit crunch, LIBOR should go back to normal, which would then precipitate a sell-off of the dollar.3. Patrick Hosking at The Times reports that Greece responded to widespread depositor withdrawals in that country by guaranteeing all deposits at all Greek banks whatever their size. Although it was previously reported that Germany had more or less doomed Sarkozy's pan European €300 ($414) billion financial stabilization fund, it is now being reported that Greece put the final nail in its coffin. Evidently the Irish decision last week to guarantee 6 banks operating there made them especially attractive to asset holders and money quickly started migrating there--putting further strain upon the banking systems of the other EU nations. The story has a pretty good recap of the events to date in Europe. Edward Cody and Kevin Sullivan at the Washington Post have a similar story on the difficulties European leaders are facing in terms of putting a unified response on the table. Nicolas Véron, a research fellow at Bruegel, has an op ed at the Wall Street Journal calling for centralized regulation of the markets in Europe. Another potential outcome to the current difficulties in the European financial sector. In this context, Andrew E. Kramer at the New York Times reports that Russian President Medvedev told a forum held at St. Petersburg State University that the era of US economic hegemony is over. “The times when one economy and one country dominated are gone for good.” He argued that the world does not want America as a "mega-regulator." German Chancellor Angel Merkel was at the forum, which was the 8th annual Petersburger Dialog, an effort to create stronger Russo-German ties, and responded that Germany, too, would “always support a multilateral approach” to market regulation. It does not seem to me that it is in Berlin's interests to realign away from Brussels and Washington towards Moscow, but plainly a message is being sent here.
4. Philip P. Pan at the Washington Post has the important story that one of the most important opposition parties in Russia, the Union of Right Forces, has decided to disband and establish a new party under Kremlin control. Anatoly Chubais, one of Russia's more prominent reformers, was one of the founders of the party and was involved in the talks that led to this move. How this would work in practice I have no idea.
5. Ellen Barry at the New York Times reports that a car bomb exploded at a Russian peacekeeping base in South Ossetia, killing 9 Russian soldiers. This comes 6 days before the agreed upon deadline for Russian troops to withdraw from Georgia proper altogether.
6. Karen DeYoung and Walter Pincus at the Washington Post report that the Defense Department will spend as much as $300 million over the next three years on private entities contracted to produce print and broadcast media in Iraq with the aim of winning hearts and minds. "The four companies that will share in the new contract are SOSi, the Washington-based Lincoln Group, Alexandria-based MPRI and Leonie Industries, a Los Angeles contractor."
7. Alex Lawler reports on the Reuters survey of oil firms, OPEC officials and analysts which has OPEC supply reducing by 310 kb/d in September (32.39 mb/d down from 32.70 mb/d). Most of the expected supply reduction comes from disruptions in Nigeria and Angola. Attacks in Nigeria took 60 kb/d off the market and the shut in of the Plutonio field (which has a capacity of 200 kb/d). Iran reportedly exported 50 kb/d less; Saudi Arabia 100 kb/d less (9.55 mb/d down from 9.65 mb/d.) (You'll note that taken altogether that equals 410 kb/d.)
8. Platts has the story that the Nigerian oil workers union Nupen has decided to put it plans to strike on hold as talks progress with Chevron. Chevron's current production in Nigeria is about 350 kb/d, down from capacity of about 450 kb/d due to unrest in the Delta State.
9. The Business Standard reports that Reliance Industry's new 580 kb/d capacity refinery in Jamnagar, India, is set to do test runs in the next couple of days and should be officially commissioned within a month. This refinery is sophisticated and meant to produce gasoline and diesel for the European and US markets. It will be able to process heavy crudes and thus should theoretically at least reduce demand for light crudes, ie the price you hear about in the papers. It will be one of the largest refineries in the world.
10. David Biello at Scientific American has the story that scientists at the Energy & Environmental Research Center (EERC) at the University of North Dakota have arrived at a process to refine canola (rapeseed), coconuts and soybeans into jetfuel indistinguishable from the crude oil derived process. This project is part of the U.S. Department of Defense's Defense Advanced Research Projects Agency (DARPA) and the jet fuel produced has a freezepoint of –47º C (–52.6º F) and a similar density and energy content as jet fuel refined from crude oil. Scientific American gave no details on the cost of the process, but the fact of it is very important as it presents a perfect substitution to kerosene. Department of Defense involvement also probably means that potentially high initial industrial production costs will not kill the project. (Air domination, of course, is central to American military strategy generally.) Furthermore, jet fuel is the only petroleum product which truly has a global market, as there are only two real commercial jet fuel specifications and in practical terms they are basically interchangeable.
11. Gerry Karey at The Barrel has a (kind of funny) report on Palin's strange understanding of the size of the Alaskan National Wildlife Refuge, as demonstrated in her ongoing interview with Katie Couric over the last week. I personally find it somewhat annoying that the candidate refers to energy as her "area of expertise."