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Cheaper Black Gold


That midsummer nightmare--oil prices near $80 a barrel--feels long ago and far away. Crude prices have tumbled nearly a third from their July peak. On Jan. 10 the price plunged $1.62, to $54.02, on the New York Merc after the Energy Dept. reported the biggest surge in three years in inventories of distillate fuel, the category that includes heating oil.

Is warm winter weather behind oil's slide? That's part of it, but only about 7% of oil is used for heating. Other factors include slower economic growth and cheating by OPEC members on their production-cutting deal (a Jakarta depot, photo). Plus, Belarus reported progress on Jan. 10 in a spat that halted shipments of Russian oil across its territory to Europe. In any case, for oil-consuming nations (and that's most of us), less pricey oil is as good as a tax cut.

See "The Oil Market's Weather Obsession"

Maybe it was because he broke his leg skiing over Christmas, but three days after he was sworn in to a second term as California's governor, Arnold Schwarzenegger proposed offering health-care coverage to the state's 6.5 million uninsured residents. The plan, costing an estimated $12 billion a year, would be funded by businesses, doctors, and hospitals. Conservative lawmakers are expected to challenge it as an open-ended tax. The move would make California one of four states to provide universal coverage and will shine a spotlight on the issue in the 2008 Presidential election season.

As is his wont, Steve Jobs set tongues wagging around the globe on Jan. 9 when he announced the forthcoming iPhone, a music, camera, Internet, video, and cell-phone combo. He also portentously dropped "Computer" from Apple's (AAPL) corporate name.

See "The Future of Apple "

Could the seemingly inexorable decline in America's competitive position be ending? The November trade deficit in goods and services, released on Jan. 10, was $58.2 billion, the lowest since July, 2005. Even more encouraging are glimmerings of a turnaround in the nonoil trade gap, which isn't influenced by the recent drop in crude prices. The nonoil deficit, averaged over the previous 12 months, actually shrank in November compared with the 12 months ending in October. That's a cheery sign, since it has expanded in 55 out of the past 57 months.

After years spent struggling to sell more jeans and tees, Gap (GPS) is trying to sell itself. On Jan. 8, CNBC reported the giant chain has hired Goldman Sachs (GS) to seek a buyer, driving Gap shares up 7.25%, to $20.26. Analysts say any potential bidder would be a private equity or other investment group rather than another specialty retailer, which would have trouble digesting Gap's thousands of Banana Republic, Old Navy, and Gap stores. Gap and Goldman declined to comment. On Jan. 10, the head of Gap's adult division and Old Navy's design chief announced their exits.

See "Gap on the Block"

A Supreme Court ruling has the patent world buzzing. In 1997 biotech MedImmune (MEDI) licensed technology from Genentech (DNA) to make a drug used to prevent respiratory illness in children, but did so under protest, claiming Genentech's patent was invalid. On Jan. 9 the justices said MedImmune didn't have to terminate the license--and risk huge damages for infringement--to go to court and try to void the patent. The case now goes back to a trial court for resolution, while attorneys light up the Internet with speculation whether it will make it easier for other patent licensees to bring challenges.

Decisions, decisions. Delta Air Lines (DALRQ) may have yet another way out of Chapter 11: hooking up with the other big boy in bankruptcy, Northwest (NWACQ). Delta had been insisting it wanted to emerge as an independent, spurning an $8.4 billion takeover bid from US Airways (LCC) last fall. But US Airways may have made that course impossible on Jan. 10 by boosting its offer to $10 billion. While Delta management was just saying no publicly, however, it has been in talks with Northwest about a merger, reported The Wall Street Journal on Jan. 10. Time is of the essence: Northwest plans to file its reorganization plan in court on Jan. 16. The maneuvers come as United and Continental explore a combo of their own.

See "Delta's Future Just Got Trickier"

It's hard to make money in plastics these days, so General Electric (GE) wants out. It has put its $7 billion plastics unit up for auction--with the caveat that private equity firms might not be able to team up for a bid. One reason, first reported in The Wall Street Journal on Jan. 9, is to abate growing antitrust concerns over private equity "clubs." But the company also wants as many bidders in the party as possible. ge is likely less concerned about the Justice Dept. than its own bottom line.

The king has a new throne, but his crown is less bejeweled. Nine months after abdicating as head of Burger King (BKC), saying he wanted to spend more time with his family, Gregory Brenneman on Jan. 8 was named CEO of sandwich chain Quiznos. Other notable managers moving on: Stephen Jonas, who revamped Fidelity Investment's mutual fund unit, will retire at the end of January; and Lawrence Jackson, head of global sourcing at Wal-Mart (WMT), quit on Jan. 8 after nine months in the job, the fourth top-rank exec to leave since December.

Shock jock and stripper aficionado Howard Stern should have no problem this year paying his tab. His employer, Sirius Satellite Radio (SIRI), said on Jan. 9 that Stern will be given stock valued at $83 million because the company beat subscriber targets for 2006. Before Stern was hired, Sirius expected to have 3.5 million subscribers by yearend 2006, but it ended up with 6 million. The bonus sweetens the $500 million, five-year contract Stern signed in 2004. Meanwhile, Sirius and its chief rival, XM Satellite Radio (XMSR), are bleeding red ink, while Sirius stock sank 40% over the past year. On Jan. 10, Sirius CEO Mel Karmazin said a merger with xm would make sense, and both stocks jumped.

Venezuelan President Hugo Ch?vez sure knows how to throw a scare into the financial markets. When the leftist leader said on Jan. 8 that he intends to nationalize a number of utilities, it raised the possibility that Mexican tycoon Carlos Slim would walk away from a deal to buy the nation's largest telecom provider, CANTV (VNT). Last April, Verizon (VZ) announced a plan to sell its 28.5% stake in cantv for $676.6 million to a company jointly owned by Tel?fonos de M?xico (TMX), Mexico's biggest telco, and Am?rica M?vil (AMX), a Latin American wireless outfit. Slim, the world's third-richest man, controls both of those companies. The Ch?vez announcement crushed cantv's value: By Jan. 10, its shares had fallen 29%, to $14. On paper, Verizon's stake is now worth a mere $441 million.

See "Venezuela's Chavez Rattles Markets "


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