The Journal says on A1 that the “move may fuel inflation in consumer goods from plastic wrap to diapers to food.” Dow Chemical says its energy costs were up 42 percent in the first quarter, and the FT says analysts expect that number to be up even more this quarter.
But now there are signs that rising oil prices, as they make their way through the economy, will drive up inflation, at least in the short run. The consumer price index will be up 5.1% in August, J.P. Morgan economist Michael Feroli predicts. That would be the biggest year-over-year increase since 1991.
The firm’s CEO lashed out at the U.S. government for its failed energy policies.
Oil prices are changing our lives…finally
The soaring price of oil is beginning to change the way we live. The WSJ says that high oil prices are pushing some small towns and community colleges to four-day weeks. The move could be joined by local governments soon, it says on A3. The report comes after news that driving is down significantly from a year ago.
The paper says Hewlett-Packard is trying to slash 20,000 plane trips a year by increasing its videoconferencing.
The Journal on A8 says the biggest oil exporters aren’t able to pump out more oil—despite ever higher prices. Exports from them fell 2.5 percent last year even though prices soared 57 percent.
Mixed bag of economic tea leaves
In economic news, durable-goods order fell 0.5 percent in April—the fourth decline in six months—but another gauge indicated health. Orders for nondefense capital goods excluding aircraft were up 4.2 percent.
The FT says on page one that investors are betting that interest rates are more likely to rise by October than not. That is a signal of some economic confidence, but it’s also driven by oil costs. Higher interest rates will delay any recovery in housing.
But the WSJ in its C1 Ahead of the Tape column notices some warning signs among the Wall Street banks that it says may show the credit-crunch fun isn’t done. Their falling stocks and rising cost of credit protection aren’t good signs.
The story behind $2 a share for Bear
The Journal concludes its “Fall of Bear Stearns” mini-series by looking at the firm’s final days, when the paper says it nearly collapsed twice, hours after it thought it had gotten a month-long reprieve.
JPMorgan Chase yanked back its offer at one point on the morning the deal was signed after it got “cold feet” from looking at Bear’s books. It came back with an offer of $4 a share, but Treasury Secretary Paulson told CEO Jamie Dimon it was too high. That’s where the famous $2 a share offer came from, just hours before what would have been a devastating opening bell in Asia.
Bear Stearns investors took their lumps, if not as painful as Mr. Paulson had envisioned. The Fed got stability in the markets, but at a risk of tens of billions of dollars and by setting an uncomfortable precedent. And J.P. Morgan picked up prized clients, talented Bear Stearns employees and a sleek new building at a bargain price, but now faces at least $9 billion in liabilities and the chore of integrating two wildly different cultures.
But the Dow did not plunge 2,000 points, other trading houses did not fail and the global financial system, while wheezing, did not collapse.
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