Beware of cheap oil.

Beware of cheap oil.

Beware of cheap oil.

A summary of what's in the major publications.
Aug. 5 2008 5:16 AM

Beware of Cheap Oil

Oil plummets and America rejoices! Right? Well, not quite. Certainly crude prices seem to be headed south, closing around $120 on Monday and raising the prospect of pump prices dropping below $4 a gallon. But as Fortune.commakes clear, "[F]alling oil prices also suggest that the recession the U.S. has so far avoided is well on its way."

There's plenty of Texas tea-leaf reading taking place to divine all the reasons for oil's current fall, be it a boost in Saudi production, relief that Tropical Storm Edouard is no hurricane, or, intriguingly, the Financial Times' suggestion that Beijing may have been stockpiling oil ahead of the Olympics. The New York Times points to less-fickle Chinese behavior—a very real economic slowdown (some say 2 percent) in the world's premier economic driver.

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A Chinese economic contraction has ramifications throughout the commodities world. Manufacturing in China, the world's biggest metals buyer, "contracted in July for the first time since at least 2005," writes Bloomberg, just one of the factors that has brought on a global commodities bear market.

But before you fire up the F-150 that's been sitting neglected in the driveway, remember that what goes down could always go back up. Even as some economists foresee a return to double-digit crude prices, one analyst cautions Fortune.com that, "[b]y the end of the third quarter, there's a good chance oil could be below $100 a barrel, and a good chance it could be above $150." Guess we'll have to see what the futures hold.

Fresh from creating ulcers for Yahoo CEO Jerry Yang, Carl Icahn has shifted his attentions to a company he already controls. As chairman of the ImClone board, he and his board moved to reject Bristol-Myers Squibb's unsolicited $4.5 billion offer for the high-flying biotech company, suggesting "the target company might be worth more to shareholders if it were split in two," writes the Wall Street Journal. Observers suggest this riposte was just part of the bargaining process as the two former collaborating companies came to a deal, but that didn't stop Icahn from expressing his "concern" that "Bristol-Myers may have had access to confidential information about ImClone before offering to acquire the 83% of shares it doesn't already own."

He might also have some concern over a WSJ report that shareholder opposition to Jerry Yang could have been greater than was recorded at last week's Yahoo shareholder meeting. Yang won 85.4 percent of the shares to stay on as a director, with 14.6 percent withheld. Now one major shareholder that opposed Yang, Capital Research Global Investors, has asked for a review of the vote, though the Journal notes that even if a mistake was made, "the impact on the total vote would have been relatively minor."

Did the CEO of Freddie Mac ignore warnings that "the firm was financing questionable loans that threatened its financial health"? That's the charge in the NYT this morning, backed up by "more than two dozen current and former high-ranking executives at Freddie Mac, analysts, shareholders and regulators." At issue is a 2004 memo sent to CEO Richard F. Syron by former chief risk officer David A. Andrukonis, in which he warned that buying bad loans "would likely pose an enormous financial and reputational risk to the company and the country." Syron admits some mistakes were made but replies with a candor that must make shareholders weep: "Frankly, if I had perfect foresight, I would never have taken this job in the first place," he says.

Cloud computing may be common parlance among the digerati, but it also has gained mainstream business resonance in recent days with the announcement of new remote computer networking and storage services by successive tech companies including Amazon, Google, and IBM. AT&T is the latest to join the cloud computing craze, and yesterday it described how the U.S. Olympic Committee, which runs teamusa.org and other Olympics Web sites, will rely on AT&T's server power to manage the spike in traffic it will receive during the Beijing Games. Yet even as the trend in cloud computing grows (even Microsoft is said to be planning its own post-software vision), Dell Inc. is looking to trademark the term, according to Computer World. Apparently, "Internet based development and use of computer technology" (thanks, Wikipedia) just doesn't have the same ring to it.

Finally, for all you morning java fixers, Starbucks has got a new way to lure you back in the afternoon. Starting nationwide today the caffeinated chain will offer morning customers "any iced grande beverage for $2 after 2 p.m," CNN Money reports. That's one way to give the economy a jolt.

Matthew Yeomans has covered everything from the dot-com bust to the global oil boom. Today, he is founder of Custom Communication, providing social media strategy and branded content for companies.