Is prohibition returning to America? At the end of September, the US Senate ambushed online gambling companies, investors and the punters when it passed a bill designed to suppress such gambling across the US. Share prices collapsed and several of the biggest internet gambling quoted companies, such as PartyGaming and 888, are pulling out of the US. The move raises fundamental questions about free trade and to what extent internet commerce really is borderless. Online gambling is legal in Britain, which has ambitions to be the centre of the industry, and several companies, such as World Gaming, Sportingbet and PartyGaming, are quoted on the London Stock Exchange.
As the shock wears off, however, there is a growing suspicion among observers of this extraordinary industry that enough American gamblers will circumnavigate the restrictions to keep the roulette wheels spinning. There is no question that millions of ordinary Americans, as well as many more millions of people all over the world, want to gamble over the internet. About 200 companies offer poker—the most popular entertainment—and bingo, casino games, and mahjong in the far east are also very popular.
Before the bill passed, on any one evening 1,200 to 1,300 ring games were active in the US, involving hundreds of thousands of players. The players were typically male, aged between 18 and 40, and bet $40 to $200 a week. It was a largely recreational pursuit. No doubt some punters became addicted, but addiction has not caused US lawmakers to ban gambling completely. This is, after all, the land of Las Vegas, Atlantic City and Mississippi riverboats. The hypocrisy of the legislation is underlined by the explicit exemption of state lotteries and NFL Fantasy Football.
Nor was there a genuine grassroots movement in the US against online gambling. Attempts have been made for almost a decade to suppress it and the industry has lobbied hard to block legislation. The view in Washington was that the legislation would fail again this year. But the new law was unexpectedly pushed through by Bill Frist, the Republican leader in the Senate with presidential ambitions, who appended the online gambling provisions to a port security bill, without a vote. This abrupt change was said to be linked to the religious right, whose votes in the forthcoming midterm elections the Republicans desperately need to keep.
The irony here is that restricting the operations in the US of offshore online gambling companies can only benefit mainstream US gambling interests, which have long cast a jealous eye over the success of online gambling. The new law, however, does not prohibit internet gambling as such but tries to prevent payments associated with online gambling. This is notoriously difficult to do. The next few months will see whether America has suppressed online gambling or just driven it underground.
Much to gas about
You could hear the sighs of relief in Whitehall from Prospect HQ. At the beginning of October—and in the nick of time—natural gas started to flow to Britain through the new pipeline from the Langeled gas field in the Norwegian sector of the North sea. It now looks likely there will be no immediate repeat of last winter's scare, when the demand and supply of gas were so finely balanced that a fire at Britain's main natural gas storage facility nearly caused a physical shortage of gas. As it was, the tightness of the market led to painful increases in gas prices.
Since gas supplies about 40 per cent of Britain's primary demand for energy and about 70 per cent of domestic energy consumption, the relief is understandable. Politicians and civil servants know they narrowly averted serious embarrassment last winter. Gas from the British continental shelf has been as much as a boon for the British economy over the last 40 years as North sea oil, and nature's apparently limitless bounty caused complacency. The truth is that gas output has fallen precipitously in recent years and people who should have known better were caught by surprise.
Within a few years, Norway will have the capacity to supply about 20 per cent of Britain's gas. But the government—and the consumer—are not out of the woods yet. Production from the North sea is falling so fast that we will be importing about half our gas by 2010 and some 70 per cent by 2015. Other sources of supply and much greater storage capacity are needed. There is one consolation, however. Wholesale prices fell sharply when gas surged out of the new pipeline, suggesting that Britain's liberalised gas market is working. The gas price will come down—in a while.
A long flight ahead for Airbus
Only a couple of years ago Airbus was selling more planes than its arch-rival, Boeing of the US. EADS, the European company which controls Airbus, was hailed as a great European success. Now repeated problems with the Airbus 380 superjumbo, the world's biggest passenger plane, have plunged EADS into crisis. It is easy to see the travails of Airbus as proof that politically inspired enterprises are doomed to failure. Without doubt, the way EADS operates owes more to its political origins than is healthy. But this is a very long-term business and problems with new aircraft are common. EADS appears determined to streamline its business and cut costs. Dismissing EADS as another political fantasy seems premature.
