GM Drops the V8
This is pretty significant in my opinion:
Jan. 3 (Bloomberg) — General Motors Corp., the world’s largest automaker, canceled a $300 million program to build an advanced V-8 engine for luxury vehicles, citing rising oil prices and tighter U.S. fuel economy restrictions.
“We have seen a declining demand for V-8 engines as fuel prices have risen,” GM spokeswoman Sharon Basel said today. New requirements for carmakers to boost average mileage 40 percent by 2020 also figured in the decision, she said.
GM is trying to shed its reputation for gas-guzzling vehicles as it loses sales to Toyota Motor Corp. and its fuel- sipping Prius, a gasoline-electric hybrid. Eight-cylinder engines, used mainly for high-performance sedans, large pickup trucks and sport-utility vehicles, get lower mileage than conventional four- and six-cylinder engines.
“That’s maybe the first volley in what’s starting to look like this brave new world,” said Jack Nerad, executive industry analyst for Irvine, California-based Kelley Blue Book, in an interview today. “Perhaps they looked at the implications of the new energy bill that just passed and saw the writing on the wall.”
So, something positive has already come out of the new CAFE regulations. Definitely a step in the right direction.
WSJ on $100 Oil
One of the things that is often unmentioned when we discuss current oil prices is the giant transfer of wealth from the U.S. to a lot of countries that dislike the U.S. The Wall Street Journal reported on this today:
The surging price of oil, from just over $10 a barrel a decade ago to $100 yesterday, is altering the wealth and influence of nations and industries around the world.
The long oil-price boom is posing wrenching challenges for the world’s poorest nations, while enriching and emboldening producers in the Middle East, Russia and Venezuela. Their increasing muscle has a flip side: a decline of U.S. clout in many parts of the world.
The article is pretty long, but one section is devoted to this transfer of wealth:
Oil’s run-up is bringing the most startling changes of all to the Middle East. Big producers like Saudi Arabia and the United Arab Emirates are using their billions in profits to build their economies with roads, schools, airports and entire new cities. The value of hydrocarbon exports from the Middle East and Central Asia is expected to approach $750 billion this year, almost four times the level in 2001, according to the International Monetary Fund.
Underscoring the region’s new global financial heft, Abu Dhabi recently swooped to the rescue of Citigroup Inc. with a $7.5 billion cash infusion as it struggled with write-downs from this year’s credit crisis.
Even before that deal, Bahrain, Kuwait, Oman, Saudi Arabia, Qatar and the United Arab Emirates, which includes Abu Dhabi, spent about $124.3 billion in the past three years buying up foreign companies, real estate and other assets, according to London-based Dealogic. One transaction underscores the region’s financial-markets ambitions. Dubai, also part of the UAE, agreed to a complex deal with Nasdaq Stock Market Inc. that essentially gives Dubai major stakes in Nasdaq, the London Stock Exchange and Nordic exchange OMX AB.
This wave of oil wealth is blunting America’s influence. Oil money has galvanized the might of Russia under President Vladimir Putin. He has overseen a dramatic consolidation of power and rollback of democracy in Moscow, while sticking a thumb in the West’s eye on issues ranging from independence for Kosovo to the U.S. bid to build an anti-Iran missile-defense system in Europe.
Surging oil prices have also weakened the Bush administration’s efforts to use financial pressure to get Iran to back off its nuclear program. China, eager to secure all possible access to energy, increasingly is turning to Iran as a trading partner, with oil going east and Chinese technology heading the other way. High oil revenue, meanwhile, has kept the otherwise rickety Iranian economy humming and Iran’s current government firmly in power.
In closing, the size of ExxonMobil is put into perspective:
More than from their bank accounts, national oil companies’ strength stems from their control of resources. Exxon Mobil, with a market capitalization of around $500 billion, is one of the largest and most successful publicly traded companies ever. But there are 12 state-controlled oil companies, such as Saudi Aramco and PetroChina Co., that control more oil reserves.
The article is a good read. I have quoted less than 20% of it. Our political leaders need to sit up and take notice.