A Weekly Digest of The World's Financial Press

Business Week

Oil producers are sitting back and enjoying the increase in prices, while holding back on new wells

ALTHOUGH THERE is a temptation for producing nations to cheat, so far there is no evidence they have. The American Petroleum Institute recently announced that US oil inventories fell for the week ending 23 April after oil imports dipped by 17 per cent. There's no sign of new drilling. The number of oil rigs in operation in the U.S. dropped to 488 in the week ended 23 April, down 25 per cent from last December, to the lowest level since Baker Hughes Inc began keeping records in 1944. International rig counts are down. If the higher prices last, of course, drilling is sure to resume. For now, though, Big Oil is taking a long view. "When you drill a well, you realise benefits from it years later," notes Mobil spokesman Bill Cummings. The oil has been underground for millions of years. So what if it stays there a few more?

- Peter Coy

The Economist

Comment on the fall of the euro against the dollar, and the new currency's prospects for the future

THE CURRENT strength of the dollar - like the strength of America's economy - cannot last forever. Two factors still favour the euro in the medium term. The first is America's bulging current-account deficit. The second is that, over time, investors and central banks are likely to want to diversify some of their portfolios out of dollars into euros. America's current-account deficit could rise to almost 4 per cent of GDP next year, its biggest this century. The euro area, meanwhile, has a surplus of 1.5 per cent of GDP.

The euro will get its turn in the sun, even if the warmth has not come yet. The fall in the new currency may have given fresh heart to eurosceptics and wounded some European politicians' pride. But better that, surely, than an over-strong currency wounding the continent's fragile economies.

- Leader Comment


BP Amoco's chief executive, John Browne will soon be head of the world's second-largest oil company

JOHN BROWNE, chief executive of BP, now has big stakes in two important gasoline markets - California (Arco) and the US Midwest (Amoco). Browne would no doubt love to dethrone Exxon's Lee Raymond as the industry's most capable chief executive. Even in dismal 1998 Exxon managed to return an estimated 13 per cent on capital, leagues ahead of BP Amoco's 9 per cent. Raymond isn't yet grappling with Mobil. By the time he does, Browne will be well under way with his consolidation plan. One of the advantages of buying Arco is that Browne will be better able to keep ambitious executives challenged. "When John presented the pros and cons," says a BP Amoco board member, "one of the pros was, `We may have a surfeit of talent. Is there a risk that the talent will walk?' This solved the issue."

- Toni Mack


A historical perspective on the Goldman Sachs flotation comes from the 1929 Wall Street crash

WE HAVE reservations about the Goldman Sachs flotation. Perhaps our sense that Goldman Sachs' cashing out is a sell signal also springs from history. For one of the famous bits of Wall Street folklore concerns the fate of a trust launched by Goldman before the 1929 Crash. Bob Hoye sent us an excerpt from the 1932 Senate hearing on the Crash.

Senator Couzens: Did Goldman Sachs organise the Goldman Sachs Trading Corp?

Mr Sachs: Yes, Sir.

Senator Couzens: And sold its stock to the public?

Mr Sachs: Yes, Sir.

Senator Couzens: At what price? Mr Sachs: At 104. The stock was split two-for-one.

Senator Couzens: And what price is the stock now?

Mr Sachs: Approximately one and three quarters.

- Alan Abelson


On the growing demand for sex addiction treatment in the high-flying world of corporate America

"MOST OF my patients are CEOs or doctors or attorneys or priests," says Patrick J Carnes. "They are people with a great deal of power. We have corporate America's leadership marching through here, and they're paying cash because they don't want anybody to know."

Carnes works at a treatment center called the Meadows, an unassuming little oasis of forbearance tucked among the saguaro cactus and sage in Wickenburg, Arizona. His title is clinical director of sexual disorder services, and he is widely considered the nation's leading expert on what has come to be called, for lack of a better term, sex addiction. He says he treated 500 chief executives last year.

Not far from the Meadows is another addiction center called Sierra Tuscon. There is a waiting list, even at a cost of $850 a day for inpatients.

- Betsy Morris

Wall Street Journal

Looking at the IMF initiative to involve the private sector in global financial regulation

INTERNATIONAL REGULATORS, using their power over lending for leverage, have not been in the business of helping markets work, but of seeing to it that they don't work. That's because markets really do punish mismanagement.

Yet another idea floating around International Monetary Fund meetings is the thought of getting the private sector more involved in making the global financial system conform to an IMF-designed solar system. Maybe those pushing this approach should go back and review the US savings and loan fiasco, which cost US taxpayers almost as much as the $170bn the IMF has drummed up for its global bailouts these last two years. The private sector was very much involved. The best remedy is not regulation, but seeing to it that no one even thinks about getting a free lunch.

- George Melloan

Financial Times

Comment on the prospect of any new statutory regulation of the Financial Services Authority

TO JUSTIFY the cost of giving the Financial Services Authority (FSA) responsibility for mortgages, there would have to be substantial gains from regulation. This is far from clear. The mortgage market, while more complex than it used to be, is still comprehensible to most people. The Government should at least wait for the review of the industry's new voluntary code of conduct later this year before it decides whether statutory measures need to be imposed.

The joint committee has produced a report that addresses many of the concerns about the FSA Bill and has proved itself a useful mechanism for scrutinising legislation. But the report is not perfect and the Government should not feel obliged to comply with all its recommendations. The scope of the mighty FSA is quite large enough already without a whole new swathe of products.

- Leader Comment

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