The price of oil hit a new high yesterday and President Bush lashed out at OPEC for deciding not to boost production.

The New York Times on page one says OPEC lashed back, blaming high prices in part on “mismanagement” of the U.S. economy and saying it would not boost oil production because the weak American currency is forcing higher prices.

“OPEC is angry that President Bush wants them to increase production while the dollar is sinking and the administration is doing nothing about that,” said Fadel Gheit, an oil analyst at Oppenheimer & Company in New York. “It’s really not surprising that they have ignored him.”

The Wall Street Journal on A3 says that energy prices have become untethered from market realities.

Yesterday’s rise underscored the market’s many contradictions. Despite the price increase and drop in overall U.S. commercial inventories, gasoline supplies hit a 15-year high amid increasing signs that fuel prices are cutting into American driving habits.

U.S. benchmark crude jumped $5, or 5%, to finish at $104.52 a barrel on the New York Mercantile Exchange.

“It’s pretty crazy, isn’t it?” said Exxon Mobil Corp. Chief Executive Rex Tillerson, speaking at an investor conference in New York.

Yes it is, Rex.

The WSJ quotes oil guru Daniel Yergin as saying oil prices these days are “as much about the supply and demand for dollars as the supply and demand for oil”, though Bloomberg puts emphasis for the hike yesterday on the troubles in South America, where Colombian rebels took out an oil pipeline and big oil exporter Venezuela is threatening to attack the country.

The Financial Times reports that Bush said high oil prices are making it harder for regular Americans to make ends meet. Well, yeah, but if George were honest he’d take some blame for the trillion-dollar wars, tax cuts, and resulting deficit spending that have sunk the dollar, boosted inflation, and are as much responsible for the high price of oil as any new pressure on supply or demand.

“America’s got to change its habits; we’ve got to get off oil,” Mr. Bush said at a conference on renewable fuels in Washington. “Until we change our habits, there’s going to be more dependency on oil.”

That bit of blather wins our Captain Obvious Quote of the Day.

Bond insurers stagger around


The business pages report that Ambac Financial, the troubled (is there any other kind?) monoline bond insurer, said it would raise $1.5 billion in new capital, or only half of what markets had been expecting and abandoned its plan to split into two companies— one “good” and one “bad.” Its shares lost nearly a fifth of their value.

Markets had been figuring on a bailout by the banks whose bond holdings Ambac insures. Bloomberg reports that instead, the company will raise capital by selling stock. That increases already rife skepticism that the company won’t be able to maintain its AAA debt rating, something that would in turn devalue more than a half a trillion dollars in bonds that the company insures—an event that could lead to $70 billion in new write-downs on Wall Street and raise the cost of borrowing for local governments.

The FT leads its front page with a report that the original bank-funded plan (which it pegs at $2 billion) foundered on its own legal complexity:

Eight banks led by Citigroup and UBS—between them bought the most guarantees from Ambac—had been prepared to inject up to $2bn into the insurer under a plan that would have split its operations into a triple-A rated municipal bond insurance business and a lower-rated structured finance business.

However, the complexity of the scheme led to its rejection by credit ratings agencies and Ambac, people involved in the negotiations said.

The WSJ reports on C1 that several of the banks involved in that plan have agreed to buy the shares if there isn’t enough market demand, while the NYT says on its C1 that investors worry new capital will have to be raised as losses increase. Bloomberg says banks would lose up to $70 billion if top-rated bond insurers lose their credit rating. Just what they need.


Hedges get trimmed

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu.