Gunfire rings out in Libyan capital
By the CNN Wire Staff
March 6, 2011 -- Updated 0550 GMT (1350 HKT)
Tripoli, Libya (CNN) -- Heavy, sustained gunfire rang out in the Libyan capital of Tripoli early Sunday morning as unrest in the country entered a 20th day.
A government official said the shots were celebratory gunfire by supporters of Libyan leader Moammar Gadhafi. They were celebrating the military's victory in the city of Zawiya and because "the army is back in Ras Lanuf," the official said. Ras Lanuf is an oil town in eastern Libya.
Around the same time, Libyan state TV showed video of Gadhafi supporters in Green Square, with the caption "Green Square now."
However, opposition forces claimed major achievements in the two areas a day earlier.
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On Saturday, Libyan opposition leaders announced an alternative government as the United States and other countries helped evacuate refugees of the conflict.
Anti-government forces claimed two major successes Saturday: preventing pro-government forces from taking Zawiya, near the capital of Tripoli, and capturing Ras Lanuf.
The opposition and government forces have battled in recent days for full control of Zawiya, about 30 miles west of Tripoli.
Pro-Gadhafi forces withdrew from the city's Martyrs' Square and returned to their positions on the outskirts after intense clashes with rebels, according to a witness who is serving as a rebel spokesman.
He reported heavy gunfire and mortar shelling and saw the bodies of three slain opposition members carried in the square en route to burial.
The witness said pro-Gadhafi forces entered a residential area in the city and shot live ammunition and automatic weapons at residents in the streets. The sounds of automatic weapon fire and people yelling could be heard during a telephone interview with the witness.
After a lull in fighting, clashes erupted again Saturday evening.
The pro-Gadhafi security forces are using tanks, armed vehicles, and heavy weapons, and the anti-Gadhafi forces are well-armed, a second witness said. Many deaths and injuries have occurred in the latest round of fighting, and protesters managed to seize tanks and weapons from the security forces.
Emboldened opposition members prepared to advance west to Gadhafi's birthplace of Sirte.
Government forces, however, worked to thwart their push. CNN reporters following the movement of rebels in As Sidr, just west of Ras Lanuf, saw an air force helicopter pound opposition positions. There was no word on casualties.
Rebels near Ras Lanuf said they shot down a Libyan air force plane, a Soviet-made Sukhoi Su-24MK that crashed in the desert. CNN located the plane's debris, spread over a kilometer (about half a mile), with the headless bodies of two pilots at the site.
The plane was printed with the emblem of the Libyan Arab Air Force.
In the capital, a pro-democracy activist who spoke to CNN described a city filled with tension and mistrust. The woman, who asked not to be named because of fears for her safety, said she has seen people in the streets who, she believes, are monitoring residents' comings and goings and phone conversations.
"I see cars that have people inside them, and they are usually connected with a computer," the woman said, adding that special antennae are connected to the computers.
The same people are also interrupting cell phone signals and hacking mobiles, she said, and the internet has been unavailable since Thursday.
The family's business has been robbed, with millions of dollars' worth of materials stolen, she said. Squatters have also moved into one of the family's homes.
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"The police won't do anything about it," she told CNN. "Everyone is focusing on what is going on politically and losing focus on the crime."
The woman said she has been trying to smuggle medication and other supplies into Libya, and that's one reason she refuses to leave -- even though so far, she said her efforts have been unsuccessful.
The strife engulfing the besieged north African nation is reverberating across the country, the region and the world. Death toll estimates range from more than 1,000 to as many as 2,000, and the international community has been pondering strategies on how to end the violence and remove the Gadhafi regime.
The government has been reviled across the globe for violence against civilians, and the International Criminal Court this week launched an investigation of Gadhafi, some of his sons and other leaders for possible crimes against humanity.
Opposition-controlled radio announced Saturday that the country's sole legitimate representative was now the National Transitional Council, a group with 31 representatives for most of the regions in Libya.
The council held its first meeting Saturday in the eastern city of Benghazi. They called Benghazi their temporary location until the "liberation" of the capital, according to a decree the council issued late in the day.
Former Justice Minister Mustafa Abdeljeleel, whom the council said had tried to resign from Gadhafi's government several times, was announced as the council's new leader.
The council also named a representative for military affairs and established a military council to oversee the "liberation" of Libya and reconstruct the armed forces, according to the radio announcement.
The council said its main missions are to represent all of Libya internationally, liberate the country, draft a constitution and hold elections.
In Benghazi, witnesses said forces loyal to Gadhafi pounded a weapons depot, an airstrike that caused casualties and widespread damage.
One witness said the airstrike there was powerful enough "to destroy a whole city." News footage showed the remains of buildings and debris and ambulances arriving.
Such aerial attacks have prompted the West to step up discussions about imposing a no-fly zone over Libya. U.S. military and diplomatic officials have said such a zone would be complicated and risky, and international support for it is not strong.
"If it's ordered, we can do it," U.S. Defense Secretary Robert Gates said earlier this week, but imposing a no-fly zone "begins with an attack on Libya to destroy the air defenses."
The Arab League has rejected international intervention, saying Libya is facing "an internal affair that is decided by the people and their governments." However, the league cannot ignore the suffering of civilians and would consider the imposition of a no-fly zone in coordination with the African Union if fighting were to continue, said Hisham Yousef, chief of staff of the Arab League, on Wednesday.
The fierce fighting has sparked the flight of Libyans and foreigners out of Libya, with nations across the globe scrambling to help people leave.
Almost 200,000 people have fled Libya with nearly equal numbers going to Tunisia and Egypt, the United Nations refugee agency said.
The United States announced Saturday it is contributing $3 million to the International Organization for Migration to help return home thousands of non-Libyans who fled to Tunisia. Four U.S. military flights Saturday were taking a total of 312 Egyptians back to Cairo, the U.S. State Department announced.
Thursday and Friday, about 1,800 people crossed from Libya to Tunisia, and about 3,000 crossed on Saturday, said Firas Kayal, spokesman for the U.N. High Commissioner for Refugees.
He said the situation at the border is "very calm."
A few thousand Egyptians are in Tunisia awaiting travel home, and more than 10,000 Bangladeshis are there awaiting evacuation with hundreds more still arriving, Kayal said.
The agency confirmed that a Bangladeshi migrant worker died after a heart attack from the exhaustion of walking to the border. Many migrant workers told aid workers they had to walk to the border because soldiers took their money and they couldn't afford paying for a taxi.
CNN's Ben Brumfield, Arwa Damon, Ben Wedeman, Salma Abdelaziz, Jomana Karadsheh, Nic Robertson and Jill Dougherty contributed to this report
INVESTING March 2, 2011, 10:30PM EST text size: TT
As Libya Burns, Investors Watch Oil-Sensitive Stocks
Airline stocks face the brunt of higher oil prices, but analysts say retailers could also be pinched if energy stays higher
By David Bogoslaw
FINANCE
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Fear of oil supply disruption has pushed crude prices above $100 a barrel. But the bigger concern for economists—and for stock market investors—is how much and how quickly higher energy prices will trim growth prospects for a raft of oil-dependent industries.
On Mar. 2, as Muammar Qaddafi's forces attacked rebels on Libya's east coast, where the country's oil refining and shipping are centered, crude oil for April delivery climbed $2.60 per barrel, to $102.23, on the New York Mercantile Exchange. That was the highest settlement price since Sept. 26, 2008. The same day, Brent crude for April settlement rose 55¢, to $115.97, on London's ICE Futures Europe exchange. Brent's settlement price of $115.42 on Mar. 1 was the highest since Aug. 27, 2008. Gasoline for April delivery gained 4.61¢ cents to finish at $3.0295 per gallon in New York, its highest settlement since Aug. 27, 2008.
The price spikes have crunched airline stocks by more than 10 percent, but the market's view of other industries with high exposure to energy costs has been harder to read.
TEMPORARY, OR LASTING?
The market appears to be trying to assess the threat of higher oil prices, says Phil Sanders, chief investment officer at Waddell & Reed in Overland Park, Kan. "If it turns out this is a temporary spike, measured in weeks, there probably won't be much of a long-term lasting effect," he said. "If oil prices stay high for a long time, it becomes more concerning and the market starts to question the sustainability of the recovery."
Investors are taking some comfort, Sanders believes, from mounting evidence that the global economic recovery has gained traction. He cited the addition of 217,000 U.S. jobs by private employers in February, which could be confirmed by Labor Dept. data scheduled for release Mar. 4. The jump in oil prices hasn't lasted long enough to endanger the recovery, however fragile it remains, but there's concern that high fuel prices for an extended period will not only boost input costs but also erode consumer confidence, he adds.
Transportation industries, such as airlines and trucking companies, are the most vulnerable to rising energy costs. The price of Gulf Coast jet fuel has surged nearly 27 percent since the start of this year and is up more than 12 percent just since Feb. 18, reaching $3.13 per gallon on Mar. 1. If the price were to hold above $3 for an entire year, it would lower airlines' pretax income by $5.3 billion, assuming no change in revenue or other variables, Deutsche Bank Global Markets Research said in a Feb. 28 note.
THE HIT TO AIRLINES
The risk of another fuel-price shock contributed to a 7.9 percent selloff in the NYSE Arca Airline Index (XAL) so far this year, Citigroup (C) said in a Feb. 28 research note. The Airline Index was down 11 percent year-to-date on Mar. 2. Since fuel accounts for about one-third of airlines' operating costs, those stocks should become less attractive if fuel costs continue to rise, the note said. The International Air Transport Assn. (IATA) on Mar. 2 cut its 2011 net profit forecast for the airline industry to $8.6 billion from its December outlook of $9.1 billion, but left its outlook for North American carriers unchanged at $3.2 billion. The Geneva group, which represents 230 airlines worldwide, increased its average 2011 oil price assumption to $96, from $84, per barrel of Brent crude in December. It expects this will boost the industry's fuel bill by $10 billion, to a total of $166 billion.
If the price of jet fuel were to average the current $3.17 per gallon for all of 2011, airlines would need to increase their revenue by at least 10 percent to offset the added costs, says Helane Becker, director of equity research at Dahlman Rose. The airlines have raised prices six times since October 2010. Rather than continuing to boost fares, they're more likely to retire older, less fuel-efficient planes. She expects the industry as a whole to cut capacity 25 percent to 30 percent by grounding aircraft older than 15 years.
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Becker has a "buy" rating on 12 carriers, a "hold" on six, and no "sells," but says her earnings estimates are much lower than consensus. She hasn't heard that other airline analysts are planning to reduce their 2011 projections. But Becker and her peers will all probably use the industry's February traffic numbers, which start coming out this week, to adjust their outlooks, she adds.
A CAUSE OF RECESSIONS
Some economists have calculated that each $20-per-barrel hike in oil prices shaves one percentage point from the growth rate of the U.S. gross domestic product, according to Deutsche Bank's Feb. 28 note. Energy price spikes have precipitated most of the past half dozen or so U.S. recessions. For airlines to be able to continue to raise fares without losing too many customers, U.S. GDP must continue to grow at a minimum of 3.0 percent and the industry needs to keep capacity constrained, the note said.
U.S. trucking companies are dealing with a 11.7 percent rise in the average national price of retail diesel fuel year-to-date as of Feb. 28, but they're effectively hedged, thanks to automated fuel surcharges that "don't need to be renegotiated every time fuel prices spike," John Larkin, an analyst at Stifel Nicolaus, wrote in an e-mail exchange.
Larkin hasn't reduced any of his earnings projections except for FedEx (FDX), which on Feb. 14 lowered the outlook for its third fiscal quarter of 2011, ended Feb. 28. Citing the impact of severe winter storms and higher fuel costs, FedEx cut its forecast to 70¢ to 90¢ per share from the 95¢ to $1.15 it initially projected. Larkin says he generally waits until March to adjust his estimates, since the first quarter often includes challenging weather and fuel price hikes.
THREAT TO RETAILERS
The impact of elevated energy prices on consumer discretionary companies appears more muted. Higher fuel costs are more damaging to retailers that cater to lower-income consumers, who spend a higher proportion of their total household income on energy and therefore are more likely to curb spending. Initially, that puts such companies as Kohl's (KSS), J.C. Penney (JCP), and Target (TGT) at more risk than upscale retailers such as Nordstrom's (JWN). But if price spikes persist, even luxury retailers' profits would be impaired, says Robert Plaza, a consumer staples and discretionary analyst at Key Private Bank in Cleveland.
Stephen Wood, chief market strategist at Russell Investments, isn't very worried about a consumer pullback due to higher gasoline and food prices. The surge in energy prices in the first half of 2008 showed that consumers were willing to tolerate higher gasoline prices than expected before they stopped their discretionary spending, he says. The economic and psychological limit seems to be $4 per gallon, but with fewer SUVs and other gas guzzlers on U.S. roads than three years ago, Wood notes, it might take more than that for consumers to tighten their purse strings.
Bogoslaw is a reporter for Bloomberg Businessweek's Finance channel.
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