In the Nick of Oil!
By D. DiMartino
Our Houston Bureau guys (a/k/a Oilman #1 and Oilman #2) do an amazing job of keeping me posted on what's going on in the Gulf. Tonight, on the eve of our departure for the ranchstead, Houston 1 offers this:
(Let me sum up:) Hurricane Ivan destroyed 7 platforms and 100 piplines and 0 rigs.
Katrina & Rita destroyed (so far) 90 platforms and (who knows) pipelines and 100? rigs.
There are typically around 130 rigs working in the Gulf. Today, there are 23.
There will be virtually no new exploration in the Gulf for the next year or so, assuming everything stays the way it is right now. Plus, with the rigs left in operation, there are several countries bidding to have them work in their waters. Guess who wins? Highest bidder.
Gasoline was up $0.40 at my test location just since last night. Expectations are that it will rise over $1.00 by Sunday night. Two years ago, I could fill my SUV (26 gal tank) for $28. Today, it cost me $28 to fill my buzzie with a 10 gal tank.
Service companies are strained to the max. There is very little equipment available. Dive equipment, generators, winches and the whole lot were destroyed in the storms. Rentals are going out all over the world to get the equipment to do the job. Right now, everything is on an even keel, but one more surprise could put the whole remediation effort over the edge, as well.
Still working on the refinery data for you. Don't trust the happy talk. These are eyeball numbers. We are keeping a large wall map up-to-date in the war room. (Oilman1 is at an oil service company that does offshore work - G)
It's not only bad, it's very bad.
Ergo, we may not take too long getting there...we don't like lines any more than you do. (humming, "On the road again, just can't wait to get on the road again...")
Now let me add it up: A tenuous political situation in DC, New Orleans clusterfibbit, quakes pending west, and oil outages on the horizon. That means rationing and restrictions on travel. We'll take flight ahead of a crapstorm any day...
~ Get ready for the demise of pensions ~
The latest airline bankruptcies offer more evidence that our system of private pensions is crumbling.
It's inevitable that Delta Air Lines and Northwest Airlines will argue to their bankruptcy judge that they must jettison their pension obligations onto the Pension Benefit Guaranty Corp., the public's insurer.
Then, American Airlines and Continental – the only two carriers that offer pensions and aren't in bankruptcy – will say that they have no intention of doing the same, but that it sure is unfair for them to have this burden while their competitors don't.
And eventually, every airline will be like Southwest and won't offer a pension plan.
That's just the way it will be.
Meanwhile, to cover the shortfalls caused by this rush, pension providers soon may have to pay more into the insurance fund. That would be further disincentive for companies offering pensions to 40-odd million Americans.
Yet another disincentive looms.
The Financial Accounting Standards Board dictates the way corporate America keeps its books. In a long-overdue act, the FASB is expected to add pension reform to its agenda this fall.
The reason for the extended delay is self-preservation. The FASB likes being around.
Lobbyists for the corporations that treasure their legal right to obfuscate the health of their pensions could make life very difficult for the standards board. (Recall that the battle over stock options expensing nearly killed the FASB.)
The FASB could propose doing something radical – such as requiring companies to show the market value of pension assets and the future costs of pension obligations on their balance sheets.
It may come as a surprise to know that these hard promises have always been kept off the balance sheet.
The reason it happens gets to the heart of why Enron failed to reflect all its debts on its books – the truth would have revealed the company for what it really was, an unattractive investment.
The fact is, pension accounting reform is the right thing to do.
Plans down the drain?
But Credit Suisse First Boston accounting analyst David Zion predicts it will toss many a retiree into the cold.
"A big change in pension accounting could be the tipping point that sparks significant changes in behavior by companies that sponsor defined-benefit pension plans," he wrote recently.
These changes include a shift in assets – probably to bonds – plan restructurings, more plans being frozen or all-out dumping of plans.
The good news for workers is that these battles typically drag on for years.
That should give soon-to-be retirees a chance to take advantage of accelerated contributions to new retirement plans, such as Individual Retirement Accounts, before employers shutter their pension plans.
September 29, 2005
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