ERMUSR MISC MEMO 03-11-2008 - Laserfiche WebLink

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Development of a mammoth new offshore oil find in Brazil means that by 2015 or so, Brazil's production will top those of Kuwait, Nigeria, Venezuela and the United Arab Emirates. But the jump won't ease tight global supplies, only help offset declines elsewhere. Most of the oil will head to the U.S. The long trek via the Suez or Panama canals will make shipping it to Asian buyers too costly. Meanwhile, don't fret about threats of a Venezuelan oil embargo. President Hugo Chavez is using a tiff with ExxonMobil to whip up support for his government but knows diverting oil from the U.S. wouldn't work. Too few buyers are interested in his country's heavy sulfur-laden crude. Clean coal`! Never mind. That's the message from the Energy-Dept., which recently pulled the plug on its $1.8-billion FutureGen program, aimed at developing coal-fueled, emissions-free electricity plants. DOE says the technology to gasify coal and sequester the carbon dioxide is too iffy. Other efforts on storing CO2 underground are a decade away. Utilities will have to rely more on natural gas and nuclear power. That'll bump electricity rates up by about SO% within a decade. An ethanol flood is nearing. By next year, a slew of new plants will lift annual output to about 13 billion gallons. That's more than can be used as E85 in flexfuel vehicles on the road and as E10, the 10% ethanol-gasoline blend approved by EPA for conventional engines. Prices will plunge further, and profits will disappear for makers. Expect the feds to face pressure to speed up market development... building infrastructure and helping get ethanol into more of the country and/or letting blends with over 10% ethanol in them be used in all cars. Adding to ethanol producers' woes: Stubbornly high corn prices. '~ Farmers are likely to plant fewer corn acres this year than last, lured by superhigh soybean prices to switch some acres to that crop. And if that's not enough to keep commodity markets on edge this summer... Worries about drought persist. La Nina, the weather phenomenon spawned in the Pacific Ocean and signaling hot, dry days across the South, isn't easing. Plus the Midwest is overdue for a severe drought... one typically hits every 19 years. It's been 20 years since the last one. '~' Teed off at the iuicy tax break your town offered a Home Depot? Take a lesson from Phoenix-area businesses. They felt shafted by local governments' efforts to lure new employers with sales tax breaks, property tax exemptions and other incentives existing firms didn't get. When the competition among the area's towns and counties got too hot and the inducements too sweet, established local businesses blew a fuse. The Arizona legislature finally stepped in, calling a cease-fire in the bidding wars in the Phoenix area. Now there's a move afoot to expand the ban on such business tax breaks statewide later this year. In other states, there's talk of taking a similar path. Lawmakers in Colo., Ark., Mo., Ga. and N.C. are mulling moratoriums on breaks. Oops. Bush officials' plan to help U.S. cruise ships backfires. The administration hoped to hamper competition from foreign-flagged ships by changing customs rules to make them stop for 48 hours at a foreign port when traveling between U.S. ports. That would help two U.S.-flagged ships that cruise around Hawaii but wreak havoc on other lines. Also losers: U.S. cities that are home ports for the 97% of ships under foreign flags. Remember, your subscription includes The Kiplinger Letter online