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It looks like ice — but this ice could one day be used to heat your home.

It’s actually not ice at all, but crystallized natural gas, and if scientists can figure out how to harvest it cheaply enough, it could become a vast new source of energy available in just about every country in the world.

The big advantage to these crystals, known as methane hydrates, are their abundance. They are found beneath the sea floor off every continent, and under the arctic tundra.

Plus, they’re estimated to hold twice as much carbon as all the known reserves of oil, coal and natural gas combined.

"The potential is enough to power humanity from now until the asteroid hits," said Peter Tertzakian, chief energy economist at ARC Financial, a Calgary-based private equity firm.

But citing cost and the abundance of conventional natural gas, Tertzakian said this resource will likely "remain on the margins" for two or three decades.

Origins

The crystals are formed when methane gas, which results from the natural decomposition of animals and plants, comes into contact with water at just the right temperature and pressure.

Finding that sweet spot is actually much much more common than finding the conditions needed for the formation of conventional gas and oil, which require very specific geology. This is why oil is found in some places but not others.

Crystal gas forms almost any place there’s low temperature, high pressure and water, making the organism-rich continental slopes ideal spots.

The gas crystals are usually found between a few hundred feet to several thousand feet below the ocean floor and require deep drilling to bring them to the surface. They’re most prevalent in water over 1,000 feet deep, and up to about 200 miles offshore.

Although they’ve been known about since the early 1980s, only in the last 10 years has significant work gone into studying them and figuring out how to extract them.

The U.S. government currently runs a multi-agency research project with scientists from the Department of Energy, the U.S. Geological Survey and the Minerals Management Service, among others instant credit report. They’ve partnered with a few corporations, including BP (BP) at a site in Alaska’s North Slope and Chevron (CVX, Fortune 500) in the Gulf of Mexico.

Harvesting

Just because a huge amount of the gas exists doesn’t mean it all can be collected.

No one has figured out how much gas can be recovered using current technology, said Timothy Collett, a research geologist at the USGS.

But at the BP site in Alaska, Collett said using current technology to go after crystal gas would effectively double the known gas reserves there.

"We’re chipping away at the technical issue," he said. "We just have to get at the economics."

And it’s the economics that really hold this up.

There are several ways to bring crystal gas to the surface. But the most efficient seems to be to drill a well, like a conventional oil or natural gas well, then decrease the pressure inside. The decreased pressure will cause the crystals to revert to gas and flow out of the well.

But depressurizing a well requires creating a vacuum by continuously pumping the water out of it. That’s an expensive proposition.

Collett said in the Arctic, the cheapest place to extract this gas, costs vary. It can be just as expensive as it is now to produce conventional natural gas, to twice that amount. Going offshore gets even more expensive.

Furthermore, with all the gas currently coming online in the United States from the vast shale reserves, it’s doubtful crystal gas is going to see much investment in the near term.

"Why would anybody allocate money to gas hydrates, when there’s almost a gas glut emerging," said Tertzakian, the economist at ARC.

Yet once the shale gas begins to run out, or if there’s a significant increase in demand for cleaner burning natural gas plants, it may be nice to know this resource is available.  

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New home construction rose more than expected in January, while the number of building permits issued in the month dropped, according to a government report issued Wednesday.

Construction of new homes climbed to an annual rate of 591,000 during the month, up 2.8% from December’s revised rate of 575,000, the Commerce Department said. This is an increase of 21.1% from the 488,000 rate in January 2009.

Economists surveyed by Briefing.com expected January housing starts to rise to an annual rate of 580,000.

"We’re continuing to see signs of stabilization," said real estate analyst Mike Larson of Weiss Research. "We had this Olympic ski slope-looking plunge starting in 2005 and 2006, and it looks like we’re almost getting to the bottom of that."

Larson said that housing starts picked up in January as the new home supply dwindled.

"All the excess inventory that had built up has been exhausted, and when the supply gets so lean, builders start constructing homes again," he said.

The number of building permits issued during January fell to a seasonally adjusted annual rate of 621,000. That was 4.9% below the revised December rate of 653,000, but up 16.9% from the January 2009 rate of 531,000.

Economists had expected building permits would fall to 620,000.

The decline in permits and gain in housing starts were each led by activity in the multi-family sector: Multi-family building permits plummetted 26% while starts jumped 17.6%.

Meanwhile, single-family housing starts and building permits were both up last month. Single-family starts climbed 1.5% from December and permits edged up 0.4%.

Larson said that the increase in single-family activity was an encouraging sign of stabilization, but with such a large supply of existing homes, "nothing suggests a vigorous upturn."

"I think we’re going to be treading water in this range for some time," he said. "We’re going to be making small gains or losses throughout 2010, we’re not going to be making new lows or rebounding." 

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Companies will begin slowly adding to their payrolls in 2010, according to an annual White House review of the economy.

The White House Council of Economic Advisers, which on Thursday released a 462-page analysis of the president’s economic initiatives, said that the unemployment rate will be at 10% during 2010. It is now at 9.7%.

"With millions of Americans still unemployed, much work remains to restore the American economy to health," the report said. "It will take a prolonged and robust GDP expansion to eliminate the large jobs deficit that has opened up over the course of the recession."

On a call Wednesday with reporters, Council Chairwoman Christina Romer said she expects an average of 95,000 jobs a month to be created this year, and that the nation’s GDP will expand at a 2.5% rate.

The report, which is delivered to Congress, looks at the actions President Obama took to deal with the recession over the past year. It also discusses the economic challenges that lie ahead for the nation, but offers little insight that’s new.

Overall, the analysis enthusiastically supports the administration’s handling of the economic crisis and its proposals to strengthen the country’s fiscal standing in the future.

Romer called the report "a page-turner" and noted that it’s available for download to Kindle and other e-readers.

Placing blame

The report places blame on the Bush administration for running up debts and cutting taxes.

Romer blogged about the study on WhiteHouse.gov. "Largely because of two tax cuts, two wars, and a major new Medicare drug benefit that were not paid for, the budget surpluses of the 1990s had been replaced by substantial actual and projected future deficits long before the recession began at the end of 2007," she wrote.

She also took another whack at Obama’s favorite new target: Wall Street.

"Much of the economic growth that the United States experienced in the past decade was fueled by consumers and the government running up large debts, aided by a financial system better at making short-term profits than managing long-term risks," she wrote business cards.

Republicans were quick to react the report, calling it fluff and noting that the report says that unemployment won’t fall back to its 2008 level for another seven years.

"The Obama Administration’s report is full of blame for the policies of years past, praise for its own failed policies of the past year, and promises about their ideological agenda to grow government, said Rep. Eric Cantor, R-Va., the House GOP whip. "Instead of praising themselves and blaming others, a greater focus on small businesses and smart solutions to reduce uncertainty and create jobs would be welcomed and is long overdue."

Praising policies

The report has kind words for the $862 billion American Recovery and Reinvestment Act, the centerpiece of Obama’s economic policy in his first year. Calling the program the "great unsung hero of the past year," Romer reiterated that the program has funded up to 2 million jobs and helped turn the economy around.

Going forward, the report highlights several areas of financial concerns. These include health care, the deficit, living standards, business investment and trade, climate change and financial regulation. As consumers spend less, the government must foster an atmosphere which allows companies to ramp up their investments and exports.

The report lays out the administration’s proposals to address these issues.

Obama has made job creation his central focus in his second year in office. He has recently traveled the country promoting tax credits for small businesses, the source of many new hires. And on Tuesday, he brought together congressional leaders to push for a bipartisan agreement on legislation to boost hiring. 

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Fairfax-based SRA International has completed its acquisition of Perrin Quarrels Associates Inc. for an undisclosed sum.

Charlottesville, Va.-based PQA specializes is environmental programs like air quality and climate change. The Environmental Protection Agency is among its biggest customers.

The acquisition adds $6 million to the balance of SRA’s current fiscal year. The company will report fiscal second quarter results this month.

SRA International’s (NYSE: SRX) first quarter revenue was $417.5 million, up from $392.4 million in the same quarter a year earlier.

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Houston Public Radio and the Bauer College of Business at the University of Houston have joined together to launch a weekly business radio feature.

KUHF business reporter Ed Mayberry will host Bauer Business Focus each Friday morning at 8:35 a.m., starting Jan. 29.

"There's a lot of change taking placing in business today, and we're pleased to be able to provide a forum on public radio to discuss those changes and what's happening in the local business community," said Debra Fraser, station manager. "I think Bauer Business Focus will appeal even to people who wouldn't normally think of listening to a business program, because it's really about issues that impact all of us fast cash online."

Topics of the program will range from big-picture issues, job growth, economic diversification and entrepreneurship and innovation in emerging industries.

"We can't wait to explore trends and issues weighing on the minds of the business community," said Arthur Warga, dean of the Bauer College, and the first scheduled interview.

The program is available on 88.7 FM, HD Digital Channel 1 and streaming online at www.kuhf.org.

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The U.K.’s inflation rate probably jumped the most in at least 12 years in December as the economy shook off the recession and oil prices rose, economists say.

Consumer prices climbed 2.6 percent from a year earlier, compared with a 1.9 percent gain the previous month, according to the median forecast of 30 economists in a Bloomberg News survey. The 0.7 percentage-point jump would be the most since comparable records began in 1997. The Office for National Statistics will publish the data at 9.30 a.m. today in London.

The data would be the first since May showing inflation above the Bank of England’s 2 percent target, presenting a challenge to officials as they assess when to start raising interest rates from a record low. Gordon Brown’s spokesman said last week that the prime minister, who faces an election by June, is confident the economy has returned to growth.

“While the economy has been in recession the Bank of England hasn’t been focusing on inflation but it will become more of a concern,” Michael Saunders, chief economist for western Europe at Citigroup Inc, said in an interview. “I think they’ll hike rates in the second or third quarter.”

Saunders predicts the Bank of England will raise the benchmark interest rate to 1.5 percent by the end of the year. Officials makers have kept the rate at 0.5 percent since March. He says January data for inflation due next month will breach the government’s 3 percent upper limit, and it will reach 4 percent by the middle of the year.

Inflation, which troughed at 1.1 percent in September, has accelerated since then as energy costs increased and the economy recovered from the slump.

Producer Prices

Crude oil has doubled in the past 12 months, raising consumer gasoline costs. Producer prices jumped 0.5 percent in December, more than twice as much as the median forecast of economists in a survey by Bloomberg News.

The factory-gate data in part reflect the weakness of sterling. The pound has dropped by about a quarter in the past two years against a trade-weighted basket of currencies, raising the cost of imports for manufacturers.

Finance Minister Alistair Darling’s temporary 2.5 percentage-point reduction in sales tax in December 2008 to stimulate the economy will drop out of the annual comparison in the data for December 2009 and also raise the inflation rate, Saunders said.

For now, Bank of England officials say inflation will accelerate before dipping below the target later this year because of slack in the economy after the recession. Policy makers are showing few signs of unwinding emergency measures designed to fight deflation after they pledged to buy 200 billion pounds ($327 billion) of bonds. The bank will release new forecasts on Feb. 10.

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U.K. unemployment unexpectedly fell for the first time since February 2008, adding to signs the economy is emerging from its deepest recession in at least three decades.

Claims for jobless benefits declined by 6,300 in November to 1.63 million, the Office for National Statistics said in London today. The median forecast in a Bloomberg News survey of 26 economists was an increase of 12,500. The number of people seeking work in the three months through October rose 21,000 to 2.49 million, the smallest gain in 17 months.

The figures are a boost for Prime Minister Gordon Brown, who is counting on an economic revival to lift support for his Labour Party before a general election due by June. The economy has lost more than 600,000 jobs since the recession began, with the axe falling hardest on people under the age of 24.

“This a real shot in the arm,” Howard Archer, chief European economist at HIS Global Insight in London, said by telephone. “It’s very encouraging. However, I don’t think it’s an end for the rise in unemployment, which may continue until the end of next year. There’s a still a danger the economy may relapse next year, so I don’t think it’ll have a big impact on the Bank of England’s view of things things.”

Market Reaction

The pound rose after the report and was trading at $1.6334 as of 10:38 a.m. in London compared with $1.6240 yesterday. The 10-year gilt yield was little changed on the day at 3.892 percent.

The number of people in work rose by 53,000 to 28.9 million in the quarter through October, the biggest increase for 17 months, the statistics office said. In October, the number of claims rose by 5,900 instead of the 12,900 originally reported. The claimant rate in November was unchanged at 5 percent.

“It is encouraging that there are more people in jobs as we get near to Christmas, and also that so many more young people have been helped,” Work and Pensions Secretary Yvette Cooper said instant payday loan. “But it is still tough for a lot of people, and we still expect unemployment to increase again. So we are determined to do more.”

Unemployment has risen by less than officials initially predicted as companies froze pay and cut working hours to retain skilled labor needed once the economy returns to growth.

Jobless Rate

At 7.9 percent, the U.K. jobless rate is below the 10 percent in the U.S. and the 9.8 percent euro-region average. Many economists expect it to peak below 10 percent, compared with the postwar high of 11.9 percent record in 1984. Treasury forecasts published last week show the level of jobless claims is close to a peak.

The opposition Conservative lead in opinion polls has shrunk in recent weeks to less than 10 percentage points after Brown stepped up attacks on bankers and portrayed the Conservatives as the party of the rich. The margin is narrow enough to deny the opposition an outright majority at the election.

The labor market is likely nevertheless weigh on the wider economy, and companies may be slow to resume hiring as they initially increase the hours of existing workers, economists say.

Average earnings growth picked up to 1.5 percent in the quarter through October from 1.4 percent, with the rate excluding bonuses unchanged at 1.7 percent.

The fragility of the recovery was underlined earlier this month when Corus Group Ltd., the European unit of India’s Tata Steel, said it will cut 1,700 jobs at its Teeside plant in northeast England after demand for metal dropped. Diageo Plc, the world’s biggest liquor-maker, is also cutting jobs after closing facilities including a packaging plant and a distillery.

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Countries with a large government role in the economy don’t do significantly better in avoiding deep recessions than those with smaller public sectors, the Bank for International Settlements said.

While data from the latest recession suggest government spending helps stabilize economies, the effect seems to have weakened since the mid-1980s, according to the study published in the Basel, Switzerland-based BIS’s quarterly report. Openness to trade and monetary policy may be gaining in importance, the study said.

“Government size does not appear to reduce the depth of recessions,” authors Madhusudan Mohanty and Fabrizio Zampolli wrote.

The research was prompted by debate after the global financial crisis and recession about “the link between government size and output volatility,” according to the BIS. The study looked at data since 1970 from countries in the Organization for Economic Cooperation and Development.

While countries with “larger governments” such as Denmark and Norway had a smaller average loss of output over time, some with large governments, such as Sweden, have had more severe recessions, the study said.

Recessions have become “considerably longer” in the past 25 years and government spending to counter declining growth may deepen the boom-and-bust cycle, according to the BIS, which acts as a clearinghouse between central banks.

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General Electric — the last of the giant diversified conglomerates — has adopted a strategy that was once unthinkable: narrowing its focus. It’s a risky move for a company that had counted on its diversity as a hedging tool. But it’s also one that may pay off in spades.

By selling off media and entertainment division NBC Universal to Comcast (CMCSA, Fortune 500), GE is left with its core infrastructure business, which includes energy, transportation and health care units, as well as finance arm GE Capital and some consumer and industrial businesses. GE Chief Executive Jeffrey Immelt said on Thursday that the Comcast deal will allow GE to "play offense" by reinvesting in infrastructure, which performed very well during the recession.

That would mark a nice shift from GE’s defensive play, which was led by its flagging media division. NBC Universal’s profit has plunged 27% so far in 2009, compared to a 14% rise in earnings from its energy infrastructure businesses. Unlike NBC (and GE Capital for that matter), GE’s infrastructure unit helped the company weather the economic storm.

GE (GE, Fortune 500) bought NBC in 1985 for $6.3 billion to act as a hedge against its industrial businesses. With businesses in seemingly every sector, GE had counted on that part of its company to always do well no matter what the economic climate.

But analysts say holding onto NBC became too risky for GE, as the changing media landscape made it difficult to know how to invest. Internet media has soared, but it remains unclear how it will be monetized. Cash flow margins at NBC’s cable networks have been solid, but its broadcast channels have just a slim 5% margin.

"They’re getting out of a market at a good price where it is unclear whether they’re going to succeed," said Ed Zabitsky, analyst with ACI Research. "When you’re uncertain about a unit and you can sell it for a tremendous amount, you can take out a tremendous amount of risk."

Dialing back risk, dialing up growth. Many say GE has taken on enough risk by holding onto its finance unit, GE Capital. Once a driver of 40% of GE’s operating profit, GE Capital has gotten slammed by the subprime mortgage crisis and now contributes just more than 14% of GE’s earnings.

Analysts say that the main reason GE isn’t shopping GE Capital around is that GE won’t be able to get top dollar for the unit because of the lingering effects of the credit crisis.

Also, unlike NBC, GE Capital actually has some synergies with its core business. In addition to its mortgage and lending business, GE Capital finances the parent company’s infrastructure purchases, and it offers financing to GE’s vendors as well no fax payday loans.

Even in its heyday in the 1990s, when NBC was making upwards of $400 million a year for GE, the media company had no other synergies with GE’s other businesses. Now that NBC is slumping, GE decided it was the right time to unload it.

"As management reshapes GE, there’s clearly going to be a focus on the classic infrastructure businesses that have been its cash cows, namely energy, transportation, health care," said Nick Heymann, analyst at Sterne Agee & Leach. "Everything else that’s left will be a facilitator for one of those core businesses."

Heymann said the businesses that GE will decide to hold onto will all be focused on growth. GE believes that its infrastructure and related businesses have the best chance to succeed because of those units’ strong positions in the fast-growing emerging markets.

"This deal gives us tremendous flexibility at exactly the right moment and time," said Immelt on a conference call with investors. "There are lots of global opportunities in infrastructure as we think about the company going forward."

The death of the conglomerate. Experts say GE’s decision to unload risk and focus on what it does best puts a nail in the coffin of the conglomerate idea.

"The whole idea of conglomerate is really lousy," said Peter Cohan, a venture capitalist, management consultant and GE shareholder. "You can’t hedge cash flows of one business from another, because they can’t predict how they’ll interact."

Cohan said that over time, companies found the notion that they could offset risk from one industry by owning a business in another was overly simplistic, as there is no way to ensure that one business will succeed when another fails.

Instead, according to Zabitsky, GE and other companies are now opting to increase their capital reserves to offset risk instead of making non-core acquisitions.

But not everyone agrees that GE’s strategy is the best.

"GE had enough balance in its business that if something got disrupted, there would be something else there to save the day," said Rick Munarriz, senior analyst at The Motley Fool. "I don’t necessarily agree with its decision to trim down and focus on its core. This isn’t the time to shrink, this is the time to take advantage of everyone else shrinking." 

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Federal Reserve Chairman Ben Bernanke, just days ahead of his confirmation hearing, is warning Congress that actions limiting the central bank’s independence could prove detrimental to the causes of financial reform and economic recovery.

In an op-ed piece to be published in Sunday’s Washington Post, Bernanke criticizes two moves aimed at limiting the Fed — a proposal in the Senate to strip the central bank of its bank regulatory powers and a House Financial Services Committee vote to audit monetary policy deliberations and actions.

"These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States," Bernanke wrote.

Bernanke says the congressional moves are a byproduct of the public frustration over the financial crisis and the government’s response, especially the bailout of large banks. (Fed rage boils on Capitol Hill)

"The government’s actions to avoid financial collapse last fall — as distasteful and unfair as some undoubtedly were — were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society," he wrote.

But the Fed chairman says that, while reforms are needed, "we should be seeking to preserve, not degrade, the institution’s ability to foster financial stability and to promote economic recovery without inflation."

Among the ideas he supports is development of a special bankruptcy procedure for firms "whose disorderly failure would threaten the integrity of the financial system — to ensure that ad hoc interventions of the type we were forced to use last fall never happen again."

Bernanke’s column comes ahead of a Senate Banking Committee hearing, scheduled for Thursday, considering his nomination for a second term as Fed chairman. President Obama announced the nomination in August.

The last sentence of his commentary is likely to be the theme he and his supporters will stress during the hearing.

"Now more than ever, America needs a strong, nonpolitical and independent central bank with the tools to promote financial stability and to help steer our economy to recovery without inflation," Bernanke wrote. 

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