Just Explain It: What is the Strategic Petroleum Reserve?

Eliminating America's dependency on foreign oil has been a policy goal for at least the last two U.S. Presidents.  According to the International Energy Agency, by 2020,  the U.S. will overtake Saudi Arabia as the world's number one oil producer.
However, there's still some work to do.  The United States Energy Information Administration reported that 45% of the petroleum consumed by the U.S. in 2011 was from foreign countries.   Even though the country is well on its way to becoming self reliant, there's always a chance we could hit a major bump in the road.  The good thing is we have protection.  It's called the Strategic Petroleum Reserve or S.P.R.
So here's how the S.P.R. works:
The reserve was created after the 1973 energy crisis when an Arab oil embargo halted exports to the United States.  As a result, fuel shortages caused disruptions in the U.S. economy.
The reserves are located underground in four man-made salt domes in Texas and Louisiana.  All four locations combined hold a total of 727 million barrels of oil.  The inventory is currently at 695 million barrels.  That's around 80 days of import protection.  It's the largest emergency oil supply in the world -- it's worth about $63 billion.
Only the President has the ability to tap the reserves in case of severe energy supply interruption.  It's happened three times.  Twice within the last decade.  In 2005, President Bush ordered the emergency sale of 11 million barrels when Hurricane Katrina shutdown 25 percent of domestic production.  In 2011, President Obama ordered the release of 30 million barrels to help offset disruptions caused by political upheaval in the Middle East.
Following the release order, the reserve issues a notice of sale to solicit competitive offers.  In the most recent sale involving the Obama administration, the offers resulted in contracts with 15 companies for delivery of 30.6 million barrels of oil.  To put that in context, last year the U.S. consumed almost seven billion barrels of oil — that's 19 million per day -- or about 22% of the world's consumption.
Related Link: Using the Strategic Petroleum Reserve Like a Spigot
The release in 2011 had little effect on the price of gas at the pump.  Consumers paid about 2% less for a week before the prices began to climb again.
Related link: Just Explain It: Why Social Security is Running Out of Money
Did you learn something? Do you have a topic you'd like explained?  Give us your feedback in the comments below or on Twitter using #justexplainit.

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Apple to produce line of Macs in the US next year

NEW YORK (AP) -- Apple CEO Tim Cook says the company will move production of one of its existing lines of Mac computers from China to the United States next year.
Industry watchers said the announcement is both a cunning public-relations move and a harbinger of more manufacturing jobs moving back to the U.S. as wages rise in China.
Cook made the comments in part of an interview taped for NBC's "Rock Center," but aired Thursday morning on "Today" and posted on the network's website.
In a separate interview with Bloomberg Businessweek, he said that the company will spend $100 million in 2013 to move production of the line to the U.S. from China.
"This doesn't mean that Apple will do it ourselves, but we'll be working with people and we'll be investing our money," Cook told Bloomberg.
That suggests the company could be helping one of its Taiwanese manufacturing partners, which run factories in China, to set up production lines in the U.S. devoted to Apple products. Research firm IHS iSuppli noted that both Foxconn Technology Group, which assembles iPhones, and Quanta Computer Inc., which does the same for MacBooks, already have small operations in the U.S.
Apple representatives had no comment Thursday beyond Cook's remarks.
Like most consumer electronics companies, Apple forges agreements with contract manufacturers to assemble its products overseas. However, the assembly accounts for a fraction of the cost of making a PC or smartphone. Most of the cost lies in buying chips, and many of those are made in the U.S., Cook noted in his interview with NBC.
The company and Foxconn have faced significant criticism this year over working conditions at the Chinese facilities where Apple products are assembled. The attention prompted Foxconn to raise salaries.
Cook didn't say which line of computers would be produced in the U.S. or where in the country they would be made. But he told Bloomberg that the production would include more than just final assembly. That suggests that machining of cases and printing of circuit boards could take place in the U.S.
The simplest Macs to assemble are the Mac Pro and Mac Mini desktop computers. Since they lack the built-in screens of the MacBooks and iMacs, they would likely be easier to separate from the Asian display supply chain.
Analyst Jeffrey Wu at IHS iSuppli said it's not uncommon for PC makers to build their bulkier products close to their customers to cut down on delivery times and shipping costs.
Regardless, the U.S. manufacturing line is expected to represent just a tiny piece of Apple's overall production, with sales of iPhones and iPads now dwarfing those of its computers.
Apple is latching on to a trend that could see many jobs move back to the U.S., said Hal Sirkin, a partner with The Boston Consulting Group. He noted that Lenovo Group, the Chinese company that's neck-and-neck with Hewlett-Packard Co. for the title of world's largest PC maker, announced in October that it will start making PCs and tablets in the U.S.
Chinese wages are raising 15 to 20 percent per year, Sirkin said. U.S. wages are rising much more slowly, and the country is a cheap place to hire compared to other developed countries like Germany, France and Japan, he said.
"Across a lot of industries, companies are rethinking their strategy of where the manufacturing takes place," Sirkin said.
Carl Howe, an analyst with Yankee Group, likened Apple's move to Henry Ford's famous 1914 decision to double his workers' pay, helping to build a middle class that could afford to buy cars. But Cook's goal is probably more limited: to buy goodwill from U.S. consumers, Howe said.
"Say it's State of the Union 2014. President Obama wants to talk about manufacturing. Who is he going to point to in the audience? Tim Cook, the guy who brought manufacturing back from China. And that scene is going replay over and over," Howe said. "And yeah, it may be only (public relations), but it's a lot of high-value PR."
Cook said in his interview with NBC that companies like Apple chose to produce their products in places like China, not because of the lower costs associated with it, but because the manufacturing skills required just aren't present in the U.S. anymore.
He added that the consumer electronics world has never really had a big production presence in the U.S. As a result, it's really more about starting production in the U.S. than bringing it back, he said.
But for nearly three decades Apple made its computers in the U.S. It started outsourcing production in the mid-90s, first by selling some plants to contract manufacturers, then by hiring manufacturers overseas. It assembled iMacs in Elk Grove, Calif., until 2004.
Some Macs already say they're "Assembled in USA." That's because Apple has for years performed final assembly of some units in the U.S. Those machines are usually the product of special orders placed at its online store. The last step of production may consist of mounting hard drives, memory chips and graphics cards into computer cases that are manufactured elsewhere. With Cook's announcement Thursday, the company is set to go much further in the amount of work done in the U.S.
The news comes a day after Apple posted its worst stock drop in four years, erasing $35 billion in market capitalization. Apple's stock rose $8.45, or 1.6 percent, to close at $547.24 Thursday.

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US economy adds 146K jobs, rate falls to 7.7 pct.

WASHINGTON (AP) -- The pace of U.S. hiring remained steady in November despite disruptions from Superstorm Sandy and employers' concerns about impending tax increases from the year-end "fiscal cliff."
Companies added 146,000 jobs, and the unemployment rate fell to 7.7 percent — the lowest in nearly four years — from 7.9 percent in October. The rate declined mainly because more people stopped looking for work and weren't counted as unemployed.
The government said Superstorm Sandy had only a minimal effect on the figures.
The Labor Department's report Friday was a mixed one. But on balance, it suggested that the job market is gradually improving.
November's job gains were roughly the same as the average monthly increase this year of about 150,000. Most economists are encouraged by the job growth because it's occurred even as companies have reduced investment in heavy machinery and other equipment.
"The good news is not that the labor market is improving rapidly — it isn't — but that employment growth is holding up despite all the fears over the fiscal cliff," said Nigel Gault, an economist at IHS Global Insight.
Still, Friday's report included some discouraging signs. Employers added 49,000 fewer jobs in October and September combined than the government had initially estimated.
And economists noted that the unemployment rate would have risen if the number of people working or looking for work hadn't dropped by 350,000.
The government asks about 60,000 households each month whether the adults have jobs and whether those who don't are looking for one. Those without a job who are looking for one are counted as unemployed. Those who aren't looking aren't counted as unemployed.
A separate monthly survey seeks information from 140,000 companies and government agencies that together employ about one in three nonfarm workers in the United States.
Many analysts thought Sandy would hold back job growth significantly in November because the storm forced restaurants, retailers and other businesses to close in late October and early November.
It didn't. The government noted that as long as employees worked at least one day during a pay period — two weeks for most people — its survey would have counted them as employed.
Yet there were signs that the storm disrupted economic activity in November. Construction employment dropped 20,000. And weather prevented 369,000 people from getting to work — the most for any month in nearly two years. These workers were still counted as employed.
All told, 12 million people were unemployed in November, about 230,000 fewer than the previous month. That's still many more than the 7.6 million who were out of work when the recession officially began in December 2007.
Investors appeared pleased with the report, though the market gave up some early gains. The Dow Jones industrial average was up 53 points in mid-day trading.
The number of Americans who were working part time in November but wanted full-time work declined. And a measure of discouraged workers — those who wanted a job but hadn't searched for one in the past month — rose slightly.
Those two groups, plus the 12 million unemployed, make up a broader measure that the government calls "underemployment." The underemployment rate fell to 14.4 percent in November from 14.6 percent in October. It's the lowest such rate since January 2009.
Since July, the economy has added an average of 158,000 jobs a month. That's a modest pickup from an average of 146,000 in the first six months of the year.
In November, retailers added 53,000 positions. Temporary-help companies added 18,000. Education and health care also gained 18,000.
Auto manufacturers added nearly 10,000 jobs. Still, overall manufacturing jobs fell 7,000. That was pushed down by a loss of 12,000 jobs in food manufacturing that likely reflects the layoff of workers at Hostess.
Paul Ashworth, an economist at Capital Economics, noted that hiring by private companies was actually better in October than the government first thought. The overall job figures were revised down for October because governments themselves cut about 38,000 more jobs than was first estimated.
The U.S. economy grew at a solid 2.7 percent annual rate in the July-September quarter. But many economists say growth is slowing to a 1.5 percent rate in the October-December quarter, largely because of the storm and threat of the fiscal cliff.
The storm held back consumer spending and income, which drive economic growth. Consumer spending declined in October, the government said. And work interruptions caused by Sandy reduced wages and salaries that month by about $18 billion at an annual rate.
Still, many say economic growth could accelerate next year if the fiscal cliff is avoided. The economy is also expected to get a boost from efforts to rebuild in the Northeast after the storm.

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This subscriber loss may haunt RIM in coming months

RIM’s (RIMM) share price popped by 8% soon after it released its earnings, buoyed by positive sales and earnings surprises. The fact that RIM managed to beat expectations on both fronts is a real achievement. The company has been able to manage the 50% annualized decline in device volume a lot more gracefully than most investors expected. The adjusted EPS loss of $0.22 was much smaller than the $0.36 loss Wall Street expected. However, there is a fly in the ointment the size of a hamster — for the first time ever, the base of BlackBerry subscribers has started shrinking globally. Wall Street expected RIM to add 300,000 new subscribers. Instead, the company lost about a million, with the number of total subscribers dipping from 80 million to 79 million in three months.
[More from BGR: RIM’s first BlackBerry 10 smartphone to be called the ‘Z10′]
The key surprise in RIM’s summer quarter was the company’s ability to expand its subscriber base even as its sales in the United States and the United Kingdom markets tanked. That was one of the factors that underpinned the strong share price rebound during the autumn. And the key surprise in RIM’s November quarter is the new trend of subscriber base decline. What has been crucially important for RIM over the past dark year is the rock solid loyalty of its emerging market customers in South Africa, Nigeria, Indonesia, Malaysia, the Philippines and Brazil. Those markets have enabled RIM to beat subscriber base estimates for four quarters running, even as American and British consumers abandoned the brand.
[More from BGR: RIM beats estimates in Q3, but subscriber base shrinks]
That loyalty may now be wobbling. Nokia (NOK) launched a broad range of very cheap Asha QWERTY models in the beginning of 2012 and has been pushing these models aggressively into Africa and Asia over the past two quarters. Samsung (005930) has moved into bargain basement level with its own Android QWERTY devices dropping to the 5,000 rupee level and below in India. This pincer move may have started to take its toll on RIM.
RIM added 2 million subscribers during the August quarter and then lost 1 million in the November quarter. It’s hard to estimate precise rates, because RIM refuses to give out detailed information but this could represent a swing from 9% annualized growth to 4% annualized decline in just three months.
In a couple of months, RIM will launch a new range of Blackberry models with a spanking new OS and appealing revamp of the Blackberry Messenger software. But the first models coming out will be expensive and aimed at business users. The low-end erosion that the autumn subscriber loss indicates may bite deep during the February and May quarters. What RIM really needs badly is a range of appealing new QWERTY devices priced well below $200 in retail. It is not clear when these devices will arrive. Much hinges now on whether RIM has an aggressive low-end strategy in place or whether the company will chase the dream of reconquering its high-end prominence.
Messaging apps like 2go and WhatsApp are growing at breakneck speed in Africa and Asia — they knit together users of various platforms from iOS to Android to S40 to Blackberry. The subscriber contraction of the November quarter indicates that RIM needs to somehow revive the emerging market interest in BBM very soon. The short squeeze that started in October is still driving RIM’s share price higher. But over the coming weeks we may well see investors begin to ponder the year 2013 subscriber trajectory.

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RIM loses BlackBerry subscribers for first time

 Research In Motion's stock plunged in after-hours trading Thursday after the BlackBerry maker said it plans to change the way it charges fees.
RIM also announced that it lost subscribers for the first time in the latest quarter, as the global number of BlackBerry users dipped to 79 million.
In a rare positive sign, the Canadian company added to its cash position during the quarter as it prepared to launch new smartphones on Jan. 30. The new devices are deemed critical to the company's survival.
RIM's stock initially jumped more than 8 percent in after-hours trading on that news, but then fell $1.48, or 10.4 percent, to $12.65 after RIM said on a conference call that it won't generate as much revenue from telecommunications carriers once it releases the new BlackBerry 10 platform.
RIM is changing the way it charges service fees, putting an important source of revenue at risk. RIM CEO Thorsten Heins said only subscribers who want enhanced security will pay fees under the new system.
"Other subscribers who do not utilize such services are expected to generate less or no service revenue," Heins said. "The mix in level of service fees revenue will change going forward and will be under pressure over the next year during this transition."
RIM's stock had been on a three-month rally that has seen the stock more than double from its lowest level since 2003.
But Mike Walkley, an analyst with Canaccord Genuity, said BlackBerry 10 will change RIM's services revenue model dramatically. He said that instead of getting about $6 per device each month from carriers and users RIM could get as little as zero.
"That's what turned the stock from being up 10 percent to being down 10 percent," Walkley said. "That's been part of our worry. How do they come back with a new platform and get carriers to continue to share the higher revenue —which sounds like they are not going to— and then subsidize the phone to make it affordable for consumers and enterprises."
"People are seeing that the services revenue has a lot of risk to it now with the BlackBerry 10 migration."
Three months ago, RIM had 80 million subscribers. Analysts said the loss of 1 million subscribers was expected. Once coveted symbols of an always-connected lifestyle, BlackBerry phones have lost their luster to Apple's iPhone and phones that run on Google's Android software.
RIM is banking its future on its much-delayed BlackBerry 10 platform, which is meant to offer the multimedia, Internet browsing and apps experience that customers now demand.
"We believe the company has stabilized and will turn the corner in the next year," Heins said. He noted that the company's cash holdings grew by $600 million in the quarter to $2.9 billion, even after the funding of all its restructuring costs. RIM previously announced 5,000 layoffs this year.
Heins said subscribers in North America showed the largest decline, but said there is growth overseas.
Colin Gillis, an analyst with BGC Financial, said before the conference call that the company bought itself more time.
"It doesn't mean (BlackBerry) 10 will gain traction. A lot of people said 10 would be DOA, but I don't think that's going to be the case," he said.
Jefferies analyst Peter Misek also earlier called the results better than expected, noting that RIM added a significant amount of cash. RIM will need the money to advertise the new BlackBerrys and operating system.
Misek also called it a positive development that RIM said there would not be another delay to BlackBerry 10.
"The success or failure of this company will be on BlackBerry 10," Misek said.
RIM posted net income of $14 million, or 3 cents per share for its fiscal third quarter, which ended Dec. 1. That compares with a profit of $265 million, or 51 cents per share, in the same quarter a year ago.
The latest figure includes a favorable tax settlement. Excluding that adjustment, RIM lost 22 cents per share. Analysts polled by FactSet were expecting a wider loss of 27 cents.
RIM reported revenue of $2.7 billion, down 47 percent from a year ago.

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RIM shares slump as service revenue, subscriber concerns weigh

 Research In Motion shares tumbled more than 10 percent on Thursday after the company reported the first ever decline in its subscriber numbers and outlined plans to transform the way it charges for its BlackBerry services.
RIM, which hopes to revive its fortunes and reinvent itself via the launch of a brand new line of BlackBerry 10 devices next month, caught investors off-guard on its quarterly conference call, when it said it plans to alter its service revenue model - a move that will pressure the high-margin business that accounts for about a third of RIM's sales.
"RIM provided few details regarding the economics of these changes, thus adding a large cloud of uncertainty to the primary driver of its profitability, which we view as especially worrisome given risks already surrounding the firm's massive BlackBerry 10 transition," said Morningstar analyst Brian Colello.
Those subscribers who need enhanced services like advanced security will pay for these services, while those who do not use such services will generate much lower to no service revenue, RIM Chief Executive Thorsten Heins told analysts and investors on a conference call on Thursday.
"I want to be very clear on this. Service revenues are not going away, but our business model and service offerings are going to evolve ... The mix in level of service fees revenue will change going forward and will be under pressure over the next year," cautioned Heins.
The news startled investors, who had earlier in the evening pushed RIM's stock more than 7 percent higher in post-market trading, after the company reported a narrower-than-expected quarterly loss and said it boosted its cash cushion ahead of next month's crucial launch of the BlackBerry 10 smartphone.
RIM's shares have for weeks been on a tear as optimism around BB10 has grown. Following RIM's surprise announcement on service revenues, however, the stock ended 9 percent lower at $12.85 in trading after the closing bell.
Analysts also expressed concern about the decline in RIM's subscriber base.
"The early reaction was probably just 'Hey, numbers looked OK, better loss, the cash flow was good' but if you know the company, you're looking at the subscriber base falling off," said Mark McKechnie at Evercore Partners in San Francisco.
CASH BALANCE
One reason the shares rose earlier was RIM managed to build up its cash cushion to $2.9 billion from $2.3 billion in the previous quarter.
Analysts have been keeping a sharp eye on the size of RIM's cash pile, as RIM will need the funds to manufacture and effectively promote BlackBerry 10 in a crowded market.
RIM is counting on the new line to claw back market share lost in recent years to the likes of Apple Inc's iPhone and a slew of devices powered by Google Inc's Android operating system.
"They've done a great job at generating cash," said Raymond James analyst Tavis McCourt in Nashville. "They're certainly in a much better position than they were three or four quarters ago."
The Waterloo, Ontario-based company said it is now testing its BB10 devices with more than 150 carriers - up from about 50 carriers as of the end of October. RIM expects more carriers to come on board ahead of the formal launch of BB10 on January 30.
Positive feedback from developers and carriers around RIM's new BlackBerry 10 devices has buoyed the stock in the last three months. Despite the plunge in RIM's share price on Thursday, the stock has more than doubled in value the last three months.
SMALLER-THAN-EXPECTED LOSS
On an operating basis, RIM fared a little better than Wall Street had expected. It reported a loss of $114 million or 22 cents a share, excluding one-time items. Analysts, on average, had forecast a loss of 35 cents a share, according to Thomson Reuters I/B/E/S.
RIM also reported a surprise net profit of $9 million, or 2 cents a share, for its fiscal third quarter ended December 1, on the back of a one-time income tax related gain. That compared with a year-ago profit of $265 million, or 51 cents.
RIM said it shipped 6.9 million smartphones in the quarter, even as its subscriber base fell to about 79 million in the quarter from about 80 million in the period ended September 1.
In recent years, RIM's user base has grown, even as the BlackBerry lost ground in North America and Europe, boosted by gains in emerging markets. While eye opening, the shrinkage was not as bad as some observers expected during the last quarter before the BB10 launch.
"We're encouraged that the subscriber base only declined slightly during a very public transition, and BlackBerry sales were about what we expected," said Morningstar's Colello, who is based in Chicago.

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RIM posts smaller than expected loss; shares surge

 Research In Motion reported a smaller-than-expected quarterly loss on Thursday and boosted its cash cushion, sending its shares soaring more than 7 percent.
But the struggling BlackBerry maker also recorded the first-ever decline in its subscriber base, barely a month before the crucial launch of the new BB10 smartphone line.
RIM reported a loss of $114 million or 22 cents a share, excluding one-time items. Analysts, on average, had forecast a loss of 35 cents a share, according to Thomson Reuters I/B/E/S.
RIM shares, which closed 3.6 percent higher at $14.12 on Thursday, rose 7.6 percent after the closing bell in the United States to $15.20, as investors cheered the surge in RIM's cash pile ahead of next month's launch of the new BB10 devices.
RIM built its cash cushion up to $2.9 billion in the quarter, from $2.3 billion in the prior period. RIM will need the funds to manufacture and promote its new line of products ahead of the January 30 launch.
The Waterloo, Ontario-based company hopes to reinvent itself and revive its fortunes with the BlackBerry 10. It also reported a surprise net profit in its fiscal third-quarter, reflecting a one-time tax gain from restructuring of its international operations.
In the period ended December 1, RIM reported net income of $9 million, or 2 cents a share. That compared with a year-ago profit of $265 million, or 51 cents.
RIM said its subscriber base fell to about 79 million in the quarter from about 80 million in the period ended September 1.
The decline is a disconcerting marker in the history of RIM, which virtually invented the concept of on-the-go email. In recent years, RIM's user base has grown, even as the BlackBerry lost ground in North America and Europe, boosted by gains in emerging markets.
The company, whose aging line of BlackBerry devices has lost ground to the likes of Apple Inc's iPhone and a slew of devices powered by Google Inc's Android operating system, said it shipped 6.9 million smartphones in the quarter.

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