EDInomics with Steve Keifer

e-Fueling Jets at $100+ per Barrel

Oil prices surged once again earlier this week.  On Monday oil futures experienced their biggest one time gain in history.  Experts say that heavy trading volumes were influenced by the US bailout plan for the financial sector.  Oil futures contracts are traded in US dollars.  A weaker US economy would lower the value of the dollar.  As a result, more dollars would be required to buy the same amount of oil, hence raising the price.  With the SEC and FSA bans on shorting brokerage stocks, I think investors who spent the last few weeks capitalizing on the subprime mortgage crisis decided to focus on oil futures speculation instead.  Regardless of the cause, the temporary decline in oil prices that we have enjoyed over the past few weeks seems to have passed.  As a result, gasoline prices will surely rise back to $4 per gallon in the US.  Other petroleum products such as jet fuel will, no doubt, be impacted as well.

AS3 Conspiracy Theories

In my last post titled AS3 Has Failed, I described the challenges the AS3 standard has faced in receiving widespread market adoption.  AS3's failure will not halt the process of businesses transferring files amongst each other.  There are numerous other FTP options available on the marketplace.  However, the cost of file transfers will remain unnecessarily high due to the proliferation of standardized and proprietary FTP variants.

AS3 Has Failed

AS3 has failed to achieve significant levels of adoption in B2B.  GXS released AS3 support on our Trading Grid over 24 months ago.  I am not aware of more than a handful of our 30,000+ customers who have even expressed an interest in AS3.   With the widespread use of FTP for external communications and the rapid adoption of AS2, many of us in the B2B sector were hopeful that AS3 would make a bigger impact on the marketplace. 

ANSI and Eddie Fact - B2B's Impact on the Global Economy

Fannie Mae and Freddie Mac 

In what will undoubtedly be recorded in history as one of the most important government interventions in history, the US Treasury seized control of Fannie Mae and Freddie Mac this past weekend.   The Treasury's move was, of course, designed to prevent further damage to the global economic climate which is still continuing to suffer from defaults on subprime mortgages.  US Treasury Secretary Henry Paulson stated that "Failure of either of them would cause great turmoil in our financial markets here at home and around the globe."  One of the key takeaways from the subprime mortgage crisis will surely be a heightened awareness of how the process of syndicating and packaging US mortgages impacts the global economy.   Prior to the bursting of the housing bubble I think few people realized how widespread distribution of mortgage backed securities to hedge funds and other investors had become.

Trouble Finding a Seat - Part 2

Yesterday members of the International Association of Machinists and Aerospace Workers walked off the job at Boeing plants near Seattle due to failures to reach an agreement on their labor contract with the large aerospace OEM.  The labor strike will further delay the 787 Dreamliner which is already two years behind schedule, but it may prove to help aerospace suppliers who have been struggling to keep pace with the demand for aircraft parts.  In my last post, I discussed how the aerospace industry has been suffering a critical shortage of parts such as galleys, seats and toilets.  With production activities temporarily halted, suppliers may be able to clear out the backlog of outstanding orders and build up an excess inventory buffer to prevent future shortages.

Trouble Finding a Seat

2008 has been yet another terrible year for the airlines.  The International Air Transport Association (IATA) predicts that the global airline industry will lose $6.1B in 2008.  The primary drag on profitability is the higher prices carriers must pay to fuel the planes.  Carriers have responded with a number of cost cutting measures including charging for items that were once complementary such as pillows, blankets, water and snacks.  Carriers are also proactively reducing capacity on less trafficked routes.  Experts predict there will be an overall 9% capacity cut in 2009.  Airline executives and government regulators say the capacity reductions are a necessary process to better balance supply with demand in the travel industry.  The biggest effects will be to customers traveling to or from tier 2-3 cities such as Roanoke, Virginia (US), which are viewed to be less profitable.  Many airlines are abandoning these regional airports or significantly reducing flights per day.  Airlines are also revising frequent flyer redemption policies by adding surcharges and eliminating the option to purchase the last seat on the plane with miles.