Saturday, March 12, 2011

A Snow Job over the Economy

This has been a horrible winter where I live. In fact, this year's record snowfall total surpassed last year's total, which was also a record. I have packed up that U-haul to move to a warmer climate. But where do I move?

It seems that most of the US had a bad winter. There was one satellite picture of North America taken after the onslaught of several storms across the US and it looked like all of North America was covered in snow. This snow not only has taken a toll on our bodies and psyche, it has taken a toll on our economy and the economy in other countries too.

For example, the UK got hit with extremely bad weather in December and its GDP dropped .5% due to the in climate weather. Germany's industrial production in December shrank 1.5% due to the snow. Part of the weak job growth in the US earlier this year was due to the bad weather. According to the Economist magazine, the Federation of Small Businesses (FSB), a British trade group, estimated that the UK economy lost £1.2 billion ($1.9 billion) for each day of the December freeze.

Of course, some people benefit from these snow days, and I am not including kids who are off from school. There are many people earning extra income in offering snow plowing services. Also, the ski resorts' profit margins increase due to the increase of skiers and the decrease in the need to make snow. In addition, tree removal services benefit from the downed trees caused by the bad weather. Moreover, car repair shops benefit from the fender benders caused by the treacherous driving.

Still, the majority of businesses are hurt by this weather. It reduces the production level of its employees because either they cannot make it into work or if they can make it to work, other persons or resources needed to do their work are unavailable, Of course, technology has mitigated that slightly because many people who work in the office can work from home. That is assuming, however, that they did not lose power from the fallen tree that knocked down the power line or they have to spend their time entertaining their kids who are off from school. In general, it causes disruption from closing of schools and offices along to flight delays or cancellations and delays in public transportation.

Interestingly, many economist have stated that the potential profits are not lost completely, but rather delayed. In 2010, when there was bad weather, the month proceeding the bad weather saw a larger increase in output and production. In the end, you see less of an even growth, but you see growth.

Nonetheless, I am hoping for the rest of 2011 that I do not have to write about or see snow. I, among many of us, have seen enough snow for the next several winters. Perhaps, a sure guarantee for that is to move to Caribbean. Then again, they get hurricanes.

Wednesday, March 9, 2011

Not Apologizing is Costly

Chevron got hit with a $9.47 billion fine from a court in Ecuador for polluting the water in the arc of the rainforest territory for polluting the region's water supply while pumping large amounts of oil in that region since the 1970s. If this judgement is upheld, the damage amount may be the highest-ever awarded in an environmental case. To add insult to injury, if Chevron does not make a public apology within 15 days of the issuing date of the judgement, the fine could go up to $17.2 billion.

At this point, the Company is not willing to apologize. Chevron is stating that the company it acquired Texaco cleaned up the polluted water before it ceased operations in the region and the current problems are due to another oil company, Petroecaudor, which is owned by the Ecuadorian government. Regardless of who is at fault, the inhabitants of that region complain of above-average cancer rates and the dumping of 15.8 billion gallons of toxic water into the streams of the rivers that supplies most of the areas drinking water.

At first blush, it would appear that Chevron has a pretty tough hill to climb because the entity it is blaming to have caused this problem is owned by the government. Chevron, however, has filed a suit in a New York court against the plaintiffs' lawyers alleging fraud and attempted extortion. Specifically, they claim that plaintiffs' lawyers have colluded with court officials to get this outrageously high amount of damages. In addition, Chevron has no assets in Ecuador. Therefore, collecting damages will be difficult. Ecuador will have to other authorities in countries where Chevron has assets to enforce this judgement. Most importantly, the Permanent Court of Arbitration at the Hague along with a court in New York issued an injunction temporally blocking this move by Ecuador.

In the end, Ecuador and the inhabitants of the plotted region may not receive an apology any type of damage payout. What seemed like a major victory now seems more like a Pyhric victory.