Marketplace 8/2/2000

It's Wednesday, the 2nd of August.

The tall thermometer outside the Bun Boy Restaurant in Baker, California read 117 degrees this afternoon. The soundtrack to this, of course, is the roar of air conditioning compressors, units that are putting near-record demands on the West's electrical grid. Today, officials warned that rolling blackouts would be orchestrated if voluntary conservation steps prove insufficient. The heat is driving power prices up sharply across the West, and electricity bills could be going up elsewhere in the country. Bob Moon reports.

Moon: "If you find your power bill shocking, you're not alone. The irony is, deregulation may be a big part of the current short supply. While sustained economic growth has brought soaring electrical demand, there's been a virtual hold on new power plants."

Cavanaugh: "We stopped investing in the system, in large part because there was massive uncertainty about what the rules were going to be going forward. The whole industry's been turned on its head and restructured."

Moon: "Ralph Cavanaugh watches the power industry for the Natural Resources Defense Council. He says the good news is many new power plants are in the works. But Edison Electric Institute's Bill Brier says emergency reserve capacity, meantime, is the lowest in three decades."

Brier: "We used to have margins probably as high as 20 to 30 percent in some areas of the country, and now we have margins that may be as low as five to ten percent."

Moon: "Surging demand dictates high prices, but there are questions, though no firm answers, about possible price manipulation and whether some power's being held back to force prices up on the spot market. Those concerns have attracted some regulatory attention, but Arthur O'Donnell, who edits the California Energy Markets newsletter, suggests any clampdown could threaten the financing for those sorely-needed new plants."

O'Donnell: "They went into this agreeing to finance a lot of these plants thinking, 'Oh, these people will be able to recover their costs in the marketplace.' Well, if we have a political backlash and prices are arbitrarily limited, the bankers will put their money someplace else."

Moon: "Ralph Cavanaugh, the environmental advocate, says for consumers, the best revenge is conserving, and avoiding the need to pay for it. I'm Bob Moon for Marketplace."

Ten years ago today the world woke up to find that Iraq had invaded Kuwait and Americans had a very different kind of energy crisis on their minds. Marketplace's Stephen Henn reports.

Henn: "For most of the last decade the marketplace has ruled the oil business. But according to Daniel Yergen, author of The Prize: The Epic Quest for Oil, Money and Power, everything could have turned out quite differently."

Yergen: "We take the outcome of the Gulf crisis for granted but it was a not a sure thing by any means. If events had gone in a different direction, it would have given Sadam Hussein a decisive say over the world economy."

Henn: "When the West drove Iraq out of Kuwait the invading armies were also driving geo-politics out of the oil business, at least for a while. But rapid swings in supply and demand brought politics back. During the Asian economic crisis, demand dropped and plummeting prices re-awakened OPEC."

Yergen: "Again and again you see in the world oil business, particularly in the interaction of politics and oil, surprises happen. Things happen that people didn't expect."

Henn: "And according to Yergen, with Asian economies on the mend and world oil supplies now stretched tight, any surprises today could have a profound impact on the price of oil. In Washington, I'm Stephen Henn for Marketplace."

Today the price of crude oil rose 31 cents to $28.20 a barrel. This after an easing of prices in recent days persuaded the oil producer's cartel not to cut production.

Hints of a cooling economy that might head off another rise in interest rates boosted blue chips stocks today. The Dow Jones Industrial Average rose 80 points or 0.75 percent after the government reported that new home sales fell 3.7 percent in June to the slowest pace in two years. The index of leading economic indicators, also out today, held steady. The Nasdaq Composite fell 0.75 percent.

Rundown
Moneybags 2000
In the next installment of Marketplace's report on who's donating money to the political parties, Washington bureau chief John Dimsdale takes a look at how much money Philip Morris gives to the GOP.


Covering the Conventions
If you're interested in watching the show on the floor at the political conventions this season, you probably won't be turning on you local network affiliate. Host David Brancaccio talks to T.V. Guide senior editor Max Robins about some of the reasons behind the sharper turn in coverage.


Decimalizing the Numbers
In anticipation of a break from the traditional listing of stock prices in fractions, The Wall Street Journal has started to list stocks on the Nasdaq in decimals. Jessica Smith has this report.


Poolside Reading
Next on our list of summer reading suggestions, Phil Richards reviews Dava Sobel's historical book Longitude: The True Story of a Lone Genius Who Solved the Greatest Scientific Problem of His Time.


Family Vacation
We take a little trip with the youngest daughter of the Suzuki Family to a study abroad program in Australia. Jocelyn Ford has this report


Vacation Starvation
While workers in Europe enjoy three or four weeks off a year and sometimes more, here in the Land of the Free, Americans toil away. Commentator Diane Reynolds-Roome finds it quite appalling


Look-Ahead
Coming up on 8/3/00: The inventor of Liquid Paper established a foundation that hosts the Council on Ideas. More about that coming up along with the latest in world business news.