The Weekly Scan June 1, 2021

Welcome to the Weekly Scan. Here’s what we’re following for the week of June 1, 2021.

Amazon bags a lion. In a big shakeup for Hollywood, Amazon announced last week that it plans to acquire famed film and television studio Metro-Goldwyn Mayer (MGM) for $8.45 billion. Through the proposed deal, Amazon would acquire a library of 4,000 films, as well as a 50% ownership of the studio’s popular James Bond franchise. Barbara Broccoli and Michael G. Wilson, who are half siblings and the current owners of rights to the franchise, will retain the other half, as well as creative control over its future iterations. The sale, which needs approval from federal regulators, would be Amazon’s second-largest purchase after Whole Foods, which Amazon acquired for $13.4 billion in 2017. 

• The takeaway: The deal comes at a time of multiple mergers and acquisitions reshaping the media world. In late May, AT&T announced its plan to merge its WarnerMedia unit with Discovery Inc. in a cash and debt deal reportedly worth $43 billion. Amazon’s deal could expand Amazon’s Prime streaming service, which it launched ten years ago. By acquiring MGM, Amazon would bring in the studio’s experts in film production, an area where Amazon has reportedly struggled to be cost-efficient. Other potential buyers, including Apple and Comcast, weren’t willing to pay the 40% premium Amazon is reportedly willing to pay. Amazon’s market capitalization is $1.64 trillion, and the company reportedly has $71 billion in reserves.

New York Times

Biden’s big budget plan. President Biden proposed a $6 trillion budget last week for the 2022 fiscal year, which would increase spending on infrastructure, health, education, and social services. If passed by both houses of Congress, the money would go towards building green technology, expanding the nation’s electrical grid to increase broadband availability, providing two years of free universal pre-K and two years of free community college, and more. As part of his proposal, Biden will request an additional $300 billion for the 2022 budget, about 5% more than the 2021 budget.

• The takeaway: Biden’s budget would reportedly increase the federal net deficit to $1.4 trillion, and over the next few years, would increase the national debt, currently about $28 trillion, to a record level not seen since World War II. The administration plans to fund the budget by raising taxes on corporations and the wealthiest Americans. The budget also suggests that the administration does not predict the country’s annual rate of inflation to surpass 2.3% over the next ten years. Some experts have expressed concern over inflation in recent months, in part as a result of expanded government spending and low interest rates set by the Federal Reserve (the Fed). The Fed has said it will keep interest rates near 0% for the foreseeable future.

Wall Street Journal and CNBC

Topping off at a premium. Gas prices reportedly hit a seven-year high prior to Memorial Day, 2021, with the average gas price in the U.S. reaching $3.04 per gallon. That average is a 58% increase from a year ago, when many people were stuck at home because of the pandemic. Gas prices are up 7% from 2019, before the pandemic. The price surge arrives as more people start to travel as pandemic restrictions start to loosen. The national high for gas prices was recorded in California, where the average price is $4.17. Louisiana and Mississippi are home to the national low, $2.72.

• The takeaway: The increase in prices may in part be due to a scarcity of tanker truck drivers and continued gas hoarding. (Approximately 20% to 25% of tanker trucks are reportedly out of use because of the driver shortage.) Just weeks ago, some states saw gas shortages caused by a shutdown of the Colonial Pipeline, which provides 45% of gasoline, jet fuel, and diesel to the East Coast. Cybercriminals broke into pipeline’s network, stealing 100 gigabytes of information, locking the company out of its own system, and demanding $5 million in ransom payments.

CNN

Climate gains across the globe. Climate activists, pension fund executives, and shareholders fought and won climate battles against fossil fuel companies in the Netherlands, the U.S., and Australia last week. A court in the Netherlands ruled that Royal Dutch Shell, the largest private oil company in the world, would have to make big cuts in its greenhouse gas emissions over the next decade. Investors at Exxon, led by a small hedge fund, voted to diversify away from oil and gas, while shareholders at Chevron voted for the company and its customers to reduce greenhouse gas emissions. Meanwhile, an Australian judge sided with a group of eight children and a nun that a potential coal mine expansion in the country cannot be allowed to harm the health of Australia’s children. 

• The takeaway: The wave of actions against oil companies demonstrates the increasing pressure on some corporations to respond to the challenge of climate change. While climate activists scored wins, fossil fuel companies face big challenges in making changes. Last week, scientists said that the world’s average temperature will possibly spike 1.5℃, or 2.7℉, over the next five years. The Paris Agreement, a global accord of countries whose goal is to limit global warming caused by the buildup of carbon in the atmosphere, aims to avoid temperature increases of that kind. Shell has reportedly said it will appeal the court ruling.

New York Times

Find out what we covered in last week’s Scan.

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