DealBook: Herbalife Increases Share Buyback Plan

Sudden Spike in Gas Prices, but Increases May Be Short-Lived

And according to the AAA daily gauge report, the average price of a gallon of regular gasoline is 17 cents more today than just a year ago, at a time when Americans appear to be driving substantially more than last summer.

In the last week, the price rose approximately 7 cents, reaching an average $3.55 on Friday for a gallon of regular grade, the report said. Prices range widely around the country. In South Carolina, for instance, a gallon of regular averages $3.21; in California drivers pay $3.99.

“We’re going to get a little sticker shock at the pump,” said Tom Kloza, chief oil analyst at GasBuddy.com, a Web site that monitors gasoline prices. “We’ve moved up on wholesale prices anywhere from 35 to 60 cents a gallon since June 28. This summer we are looking at average prices of somewhere between $3.45 and $3.75, and unfortunately I think we will approach the high end of that range pretty shortly.”

The recent price increases can be attributed mainly to higher global crude prices that have been creeping up because of the unrest in Egypt, brief export failures in Libya and Iraq and disruptions of Nigeria’s oil pipelines. Egypt is not a major oil producer, but instability there raises fears of a possible blockage of the Suez Canal, a major thoroughfare for oil exports and spreading unrest in the region.

West Texas Intermediate, the main American benchmark, has been rising for more than a week, partly because higher demand among summer vacationers has caused a sudden large drop in American inventories. Many experts say they believe that the American benchmark price, which has been depressed relative to global benchmarks in recent years, could remain somewhat higher for a while because new pipelines and railroad lines are gradually relieving bottlenecks for oil produced and stored in the Midwest.

In storage and delivery centers like Cushing, Okla., for example, excess inventories of landlocked oil that could not be easily transported made the oil cheap. But now that supplies are moving around the country more regularly, wholesale and retail prices are rising.

Stockpiles in Cushing fell by 2.7 million barrels last week alone, reaching the lowest levels of the year.

In recent years, a weaker economy and more fuel-efficient vehicles combined to lower American gas consumption, before this summer’s blip of vacation driving bucked the trend. And few oil experts expect a long-term increase in oil and gasoline prices. The rapid growth in United States oil production, coupled with sluggish demand in Europe and slowing growth in China and much of the developing world, is expected to restrain prices. Some experts predict a decline in oil prices over the next year.

“You will see oil prices hover somewhere in the $70 to $100 range,” Harbir S. Chhina, an executive vice president for Cenovus Energy, a major Canadian oil company, predicted for the United States oil benchmark in an interview last month.

The United States benchmark has broken out of that band for the first this time year in recent days to just over $105, representing about a $20 rise from last July. Crude prices, in the United States and abroad, rose approximately 1 percent on Friday.

Global oil production remains robust and some recent supply problems are easing. Two Libyan oil export terminals that were shut down in recent weeks by militias and disgruntled employees have resumed operations. The Kirkuk-Ceyhan pipeline, a major outlet of oil from Iraq’s northern oil fields, is returning to operations this week after being suspended since June 21 because of a leak and an interruption of repair work after an ambush on a crew of technicians.

Oil experts warn, however, that there is no telling when the next political crisis will come in the Middle East or North Africa.

“Oil price predictions used to be about oil consumption and markets, but now it’s about where the next riot will break out,” said Stale Tungesvik, a senior executive at Statoil, the Norwegian oil giant. “It’s so much more politically based, and that makes it a mystery to everyone.”

This article has been revised to reflect the following correction:

Correction: July 12, 2013

An earlier version of this article misspelled the surname of a senior executive at Statoil. He is Stale Tungesvik, not Tugesvik. It also misspelled the name of a Canadian oil company. It is Cenovus Energy, not Cenovis Energy.

Business Briefing | Legal/regulatory: S.E.C. Increases Scrutiny of Chesapeake Energy

The connections from preschool to reading proficiency to high school completion — a requirement in today’s economy — is clear.

The sequester isn’t as bad as it looks — and Republicans aren’t as dumb as they look, writes Joe Scarborough.

With Iran, agreeing to meet again keeps alive the slim chance of a diplomatic solution.

Consumer Debt Increases on Car and School Loans

WASHINGTON (AP) — American consumers borrowed more in November to buy cars and attend school, but they stayed cautious about using their credit cards.

The Federal Reserve said Tuesday that consumers increased their borrowing in November by $16 billion from October to a seasonally adjusted record of $2.77 trillion.

Borrowing that covers autos and student loans increased $15.2 billion. A category that measures credit card debt rose just $817 million.

The sharp difference in the borrowing gains illustrates a broader trend that began after the recession. Four years ago, Americans carried $1.03 trillion in credit card debt, a high. In November, that figure was 16.5 percent lower.

At the same time, student loan debt has increased significantly. The category that includes auto and student loans is 22.8 percent higher than in July 2008. Many Americans who have lost jobs have gone back to school to get training for new careers.

The November increase also reflected further gains in auto sales, which rose 13.4 percent in 2012 to top 14 million units for the first time in five years. The need to replace vehicles lost to Hurricane Sandy in the Northeast may have also contributed to the gain.

Consumer spending rebounded in November, helped by lower gas prices and solid job growth that carried over into December. Employers added 155,000 jobs in December and 161,000 in November.

Steady hiring may have encouraged consumers to keep borrowing and spending, despite concerns about the sharp tax increases and government spending cuts that were scheduled to occur at on Jan. 1.

Still, some analysts expect borrowing and spending may have slowed in December as budget negotiations in Washington intensified. Congress and the White House did not reach a deal to avert sharp tax increases until Jan. 1. And they delayed tougher decisions about spending cuts for two more months.

Consumer confidence fell in both November and December, which may slow spending in December. Consumer spending drives about 70 percent of economic activity.

Senate Passes Tax Increases on Wealthy Americans

The deal, worked out in furious negotiations between Vice President Joseph R. Biden Jr. and the Republican Senate leader, Mitch McConnell, passed 89 to 8, with just three Democrats and five Republicans voting no. Although it lost the support of some of the Senate’s most conservative members, the broad coalition that pushed the accord across the finish line could portend swift House passage as early as New Year’s Day.

Quick passage before the markets reopen on Wednesday would be likely to negate any economic damage from Tuesday’s breach of the “fiscal cliff” and largely spare the nation’s economy from the one-two punch of large tax increases and across-the-board military and domestic spending cuts in the New Year.

“This shouldn’t be the model for how to do things around here,” Mr. McConnell said just after 1:30 a.m. “But I think we can say we’ve done some good for the country.”

Mr. Biden, after a late New Year’s Eve meeting with leery Senate Democrats to sell the accord, said: “You surely shouldn’t predict how the House is going to vote. But I feel very, very good.”

The eight senators who voted no included Marco Rubio, Republican of Florida and a potential presidential candidate in 2016, two of the Senate’s most ardent small-government Republicans, Rand Paul of Kentucky and Mike Lee of Utah, and Senator Charles E. Grassley of Iowa, who as a former Finance Committee chairman helped secure passage of the Bush-era tax cuts, then opposed making almost all of them permanent on Tuesday. Two moderate Democrats, Thomas R. Carper of Delaware and Michael Bennet of Colorado, also voted no, as did the liberal Democrat Tom Harkin, who said the White House had given away too much in the compromise. Senator Richard C. Shelby, Republican of Alabama, also voted no.

The House Speaker, John A. Boehner, and the Republican House leadership said the House would “honor its commitment to consider the Senate agreement.” But, they added, “decisions about whether the House will seek to accept or promptly amend the measure will not be made until House members — and the American people — have been able to review the legislation.”

Even with that cautious assessment, Republican House aides said a vote Tuesday was possible.

Under the agreement, tax rates would jump to 39.6 percent from 35 percent for individual incomes over $400,000 and couples over $450,000, while tax deductions and credits would start phasing out on incomes as low as $250,000, a clear victory for President Obama, who ran for re-election vowing to impose taxes on the wealthy.

Just after the vote, Mr. Obama called for quick House passage of the legislation.

“While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country and the House should pass it without delay,” he said.

Democrats also secured a full year’s extension of unemployment insurance without strings attached and without offsetting spending cuts, a $30 billion cost. But the two-percentage point cut to the payroll tax that the president secured in late 2010 lapsed at midnight and will not be renewed.

In one final piece of the puzzle, negotiators agreed to put off $110 billion in across-the-board cuts to military and domestic programs for two months while broader deficit-reduction talks continue. Those cuts begin to go into force on Wednesday, and that deadline, too, might be missed before Congress approves the legislation.

To secure votes, Senator Harry Reid, the Senate Democratic leader, also told Democrats the legislation would cancel a pending Congressional pay raise — putting opponents in the politically difficult position of supporting a raise — and extend an expiring dairy policy that would have seen the price of milk double in some parts of the country.

The nature of the deal ensured that the running war between the White House and Congressional Republicans on spending and taxes would continue at least until the spring. Treasury Secretary Timothy F. Geithner formally notified Congress that the government reached its statutory borrowing limit on New Year’s Eve. Through some creative accounting tricks, the Treasury Department can put off action for perhaps two months, but Congress must act to keep the government from defaulting just when the “pause” on pending cuts is up. Then in late March, a law financing the government expires.

Jennifer Steinhauer and Robert Pear contributed reporting.

Commission Seeks Pay Increases for Conn. State Judges

Even as the state Legislature met in special session last week to deal with the state's budget crisis, lawmakers received a request for new expenditures.

A committee studying judicial compensation in Connecticut has proposed raises of 5.3 percent for state judges for each of the next four fiscal years. The plan would increase Superior Court judges' annual pay from current salaries of $146,800 to $180,483 over the four-year period -- an overall increase of about 23 percent. Pay for Appellate Court judges and Supreme Court justices would increase by a similar percentage, and judge trial referees, who handle many Superior Court cases, would see their per diem pay rise from $220 to $270.

The proposal from the Commission on Judicial Compensation now goes to the Legislature, whose regular session begins in January. Some lawmakers are already on record as saying that given the state's looming budget deficit -- in the hundreds of millions of dollars for this fiscal year alone -- it's the wrong time to boost the pay of some of the state's highest-salaried employees.

"The Commission is aware of the state's financial situation, which has changed for the worse since the Commission began its work" in October, according to a draft of the panel's report. "We understand that to some people, the budget situation is the beginning and end of the discussion and that there should be no consideration of raises."

The 12-member commission noted that Connecticut judges had not received raises since 2007, and stated that even before that their pay increases were not keeping up with inflation. "The judges began falling behind in 2002," the commission stated. "For every year since that time, their salaries were less than they would have been if they had received the same raises as other state employees. Nothing in this proposal will make them whole for a decade of disparities. Those dollars are gone forever. If the Commission were to cure the historical difference in raises between judges and other state employees, the proposed increases would have been higher."

Commission chair Tim Fisher, of McCarter & English, acknowledged there were differences of opinion among members over the size of the raises. "While some commission members thought our recommendations should be higher and there were those who said they should be lower, all of us were comfortable with the final numbers we are presenting in our report," Fisher said.

NO LEGISLATIVE INFLUENCE

The commission members divided up into sub-groups, which researched different factors that went into deciding on a proposed increase. Those factors included: the overall economic climate in the state; the state's ability to pay for the increases; the inflation rate; the history of raises for other state employees; comparisons with the judges in federal courts and judges in other states; compensation for other attorneys in the public and private sectors; and the state's interest in attracting highly qualified and experienced attorneys to serve as judges.

Members then met last week to hash out their differences and to unanimously approve the recommendations. Under the statute that created the commission, the Legislature was not involved in the process. "No one from the Legislature sought to influence or had any influence on our decisions," said Fisher, who declined to predict whether the proposal will be approved by lawmakers.

Under the commission's analysis, the pay raise proposal would cost the state an additional $2 million in the upcoming fiscal year, with that number increasing by an additional $2 million in each of the following three years. The commission stated that Connecticut ranks 46th in the nation in judicial pay, when cost of living is factored in. It noted that inflation has increased by more than 13 percent since judges last received raises.

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Firms Beef Up Tax Practices in Silicon Valley as IRS Increases Scrutiny of IP Assets

If there was any doubt about the value of patents to high-tech companies, Apple Inc.'s recent $1 billion victory over Samsung Electronics erased it.

Now the Internal Revenue Service wants a share of the action. The agency is beefing up staff, both nationally and in the San Francisco Bay Area, to look more closely than ever at how high-tech companies price intellectual property transactions involving their overseas subsidiaries.

And it's cracking down on tech companies in Silicon Valley that it suspects are dodging taxes on the profits their IP generates. Companies, however, aren't opening their wallets. They're fighting back, creating a lot more work for both tax planners and litigators. Tax lawyers say they're trying to help clients stay out of tax trouble, advising them to either work with the IRS before there's a dispute, or make sure they have their facts ready when the tax man arrives.

The IRS has made no secret of the fact that it's increasingly focused on what's called transfer pricing, or how a multinational company allocates income and expenses among itself and its foreign subsidiaries for tax purposes. Companies have long used transfer pricing to shift assets to countries with lower corporate tax rates, such as Ireland.

"There's been a substantial increase in controversy work, not just in Silicon Valley, but nationwide," said Kenneth Clark, who chairs Fenwick & West's tax litigation group and successfully defended Xilinx Inc. in one of the biggest transfer pricing cases in recent years. "We're not only seeing more cases, but also a greater degree of intensity in questioning by the IRS. From the taxpayers' perspective, that can mean a tremendous amount of additional work."

Now in addition to manufactured goods, the IRS is homing in on the transfer pricing of what it calls "intangible" intellectual property. Taxing an intangible asset like a patent, however, is no easy task, lawyers said.

There's much room for subjective interpretation about issues such as a patent's actual market value, and who generates more profit from the patent: the parent company in the U.S. where the idea was patented, or the factory in a foreign country that actually makes the products that the parent company sells?

"You end up having a battle over who is adding value," said John Ryan, a partner at Bingham McCutchen in Palo Alto who focuses on tax planning and audit defense. "And reasonable minds differ."

Several IP-heavy tech companies in Silicon Valley recently disclosed transfer pricing disputes with the IRS in their Securities and Exchange Commission filings, including Hewlett-Packard Co., Adobe Systems Inc., Cadence Design Systems Inc., Juniper Networks Inc. and Yahoo Inc., and the potential liabilities are substantial.

Last year, the IRS told Juniper Networks that it owes nearly $900 million in additional taxes based on cost-sharing arrangements related to the licensing of "intangibles," after auditing the company's 2004 to 2006 tax returns. The Sunnyvale, Calif.-based maker of network infrastructure equipment is fighting the tax bill and said in a recent SEC filing that the IRS' position is "inconsistent with applicable tax laws, judicial precedent and existing Treasury regulations."