Top Business Stories of 2005

The surging price of oil was the big business story of 2004 — and we regret to report that it retained the top spot in 2005, despite commendable efforts from the likes of Martha Stewart, Bernie Ebbers, Dennis Kozlowski and a newcomer named The Housing Bubble.

Here is's selection of the year's biggest stories:

Gasoline Price Skyrockets

Energy remained foremost in the minds of American consumers, who watched in horror as crude oil and gasoline prices resumed their climb to unseen heights.

Interactive: 2005 Timeline.

The reasons? Continued strong demand in the United States and China, oil-producing countries' willingness to maintain prices at a high level, and massive damage to Gulf Coast refineries in the wake of Hurricane Katrina.

Crude oil reached a record $70.85 a barrel on Aug. 30, the day after Katrina devastated Louisiana and Mississippi. In the following days, gasoline prices reached a record high of $3.07 a gallon nationwide, and some gas stations had to turn customers away because their pumps couldn't be set at prices higher than $2.99. In some parts of the Southeast prices briefly spiked to as high as $6 a gallon before the government stepped in to punish price-gouging retailers.

Average retail price has dropped 92 cents since then, but that's still 31 percent more than a year ago. Forecasters like the Lundberg Survey estimate that average pump price could rise by another 57 cents by next summer.

CEOs Ousted

Controversial Hewlett-Packard CEO Carly Fiorina was ousted in February, three years after acquiring Compaq in a $19 billion move that failed to yield the synergy and savings it was supposed to bring. HP's stock dropped a painful 58 percent while Fiorina was in charge.

The price of a very public firing? $45 million worth in stock options and severance pay that Fiorina pocketed... and a deal for a memoir, to be published in the fall of 2006.

Boeing CEO Harry Stonecipher's downfall had nothing to do with stock prices. The married 68-year-old had barely spent a year at his job when he became involved with a female executive at the company. Boeing quickly moved to force him out.

The price of passion? $38 million, the amount Stonecipher had to forfeit as part of a stock award he received just before the scandal.

Martha Out of Jail

After dominating the headlines in 2004 with a high-profile trial, Martha Stewart remained a strong presence in 2005. Her release from Camp Cupcake, a minimum-security prison in West Virginia, after serving a five-month sentence for a stock sale, was followed with the fervor and urgency of a rock concert.

The media mogul made a triumphal comeback at her company headquarters and set out to win back the hearts of American consumers with a syndicated daytime talk show and a spin-off of Donald Trump's "The Apprentice." The prime time show ended its run with only one season, while the talk show was renewed for a second. Stewart is currently working on a home-improvement television show that may premiere next year.

Many Others Head to Jail

Most experts were expecting a guilty verdict for former WorldCom CEO Bernie Ebbers — but few could have predicted a whopping 25-year sentence, the equivalent of a life sentence for the 64-year old.

Found guilty in March of cooking up an $11 billion accounting fraud that produced the largest bankruptcy in U.S. history, Ebbers remains free on bail while he pursues an appeal for a sentence that surprised even his critics.

After a first trial that ended in a mistrial, Dennis Kozlowski of the $6,000 shower-curtain fame finally got a sentence handed to him: the former CEO of Tyco International (TYC) and his finance chief Mark Swartz were sentenced to 8 1/3 to 25 years in prison.

Kozlowski and Swartz were convicted of stealing more than $150 million from the company through secretly forgiven loans and undeserved bonuses. They were also accused of defrauding investors by selling $575 million in Tyco stock while misrepresenting the company's finances.

2005 also marked the downfall of the Rigas family of Adelphia fame. Patriarch John Rigas and son Timothy were sentenced respectively to 15 and 20 years in prison after they were convicted of using the cable company's funds like a personal piggy bank — to the tune of more than $2 billion.

Airlines Bellyflop

On the very same day in September, Delta Air Lines and Northwest Airlines, the nation's No. 3 and No. 4 carriers, filed for bankruptcy protection after years of high labor costs and rising fuel prices.

The filings put three (Delta, Northwest and United) of the nation's five largest airlines in bankruptcy court. The beleaguered sector's woes went from bad to worse this month as refinery outages caused by Hurricane Katrina caused jet fuel prices to spike.

Later that month, Delta announced it would cut 9,000 jobs, while Northwest said it would lay off 1,400 flight attendants. U.S. airlines posted close to $10 billion in losses this year.

General Motors Bleeding Continues

The world's No. 1 automaker sent deep shivers through America's factories when it announced in November that it would cut 30,000 jobs and close 12 manufacturing plants in a bid to save $7 billion per year. The company lost nearly $5 billion in its North American automotive business in the first nine months of 2005, raising speculation about a bankruptcy filing that seemed unthinkable only years ago.

The company's stock plunged more than 50 percent in 2005, and reached a 20-year-low in December after Japan's Toyota unveiled production plans for 2006 that came very close to GM's — increasing the possibility that it will topple GM as the world's largest automaker.

Vioxx Wins and Loses

The year ended on a disastrous note for Merck (MRK) as the first federal trial over the health risks of its painkiller Vioxx ended in a mistrial. Merck, which had lost a trial in a Texas state court and won another one in New Jersey, faces more than 7,000 lawsuits claiming it hid the risks of heart attack and stroke linked to Vioxx. The company's legal costs could total several billion dollars — with some analysts brandishing numbers as high as $10 billion or even $50 billion.

To make things worse, in early December the New England Journal of Medicine said Merck withheld information about the risky side effects of Vioxx when it delivered its data from a key trial it did on the drug's safety in 2000.

Ladies and Gentlemen, Meet the Housing Bubble

The year ended on signs that the U.S. housing market, the little engine that for five years carried the country's economic expansion, was beginning to sputter amid rising mortgage rates, softening demand and increasing inventory. The National Association of Home Builders' sentiment index fell in December to its lowest since April 2003 — the first time since 2000 that the index ended the year lower than where it stood at the beginning of the year.

Meanwhile, sales of new U.S. homes fell 11.3 percent in November, the biggest decline in nearly 12 years, as the number of houses for sale hit a record high, the Commerce Department said.

Anecdotal evidence of the cooldown has had a ripple effect on consumer sentiment and stock markets. But experts agree that, even if the housing market does go into a sustained decline next year, it is unlikely to cause a wholesale recession.

Reuters and the Associated Press contributed to this report.