Oil disaster

A sea bird was coated in oil at East Grand Terre Island along the Louisiana coast Thursday.
Charlie Riedel/Associated Press

It is not a spill; it is much more than a spill.

The White House is planning to send BP a bill for $69 million to cover the costs of cleaning up the spill, Press Secretary Robert Gibbs said Thursday.
J. Scott Applewhite/Associated Press

The White House is so far behind the eight ball on this issue it is pathetic.

Learn From the BP Disaster. Then Drill Again.

Nansen Saleri, president and CEO of Quantum Reservoir Impact in Houston, was formerly head of reservoir management for Saudi Aramco. He seems to think, no, he does think, and contend, that after learning our lesson, we should drill again. The Palin crowd might well agree, and surely will, but that hardly constitutes responsibility, wisdom, and prudence.

But Hardship Endures in Alaskan Zone Hit by Valdez Spill.Not as easy as wishing something were true.

Oil, Falklands, Malvinas

European Pressphoto Agency - Argentine President Cristina Kirchner, right, is trying to get Latin American leaders to sign a statement backing Argentina's claim to the islands

A British oil rig started drilling in disputed waters off the Falkland Islands on Monday, as Argentina tried to rally support from Latin American nations for a diplomatic statement backing Argentina's claim to the islands and criticizing the U.K. for violating Argentine sovereignty.

The move by British oil companies to initiate exploration off the Falklands has stirred passions over the remote South Atlantic islands to perhaps their highest point since 1982, when Argentina lost a brief war to Britain over control of the islands. No one predicts armed hostilities this time, but nationalist rhetoric has been flying on both sides of the Atlantic. If Britain finds large amounts of oil, relations could get stickier.

Can't see Gordon Brown doing a Thatcher.


Argentina's leftist President Cristina Kirchner was in Cancún, Mexico, on Monday working on a diplomatic response during a previously scheduled summit of Latin American leaders. Mrs. Kirchner was trying to get regional leaders to sign a statement condemning the U.K. and backing Argentina's claim to the islands, known in Spanish as the Malvinas.

Argentina was getting support from some quarters, such as Venezuela's leftist President Hugo Chávez. "In case of aggression against Argentina, rest assured that the Argentine nation will not be alone" as it was in the 1982 war, Mr. Chávez said Sunday.

On Univision's broadcast last night a clip was shown of Hugo telling the Queen of England that the era of empires has ended. Wonder if Elizabeth was watching.

Bill Rammell, the U.K.'s minister of state for the armed forces, said the Falklands had a "legitimate right" to develop an oil industry within its waters and that Britain had made Argentina aware of its determination to protect that right.

"We do, we have, and we will take whatever steps are necessary to protect the Falkland Islands—and our counterparts in Argentina are aware of that," he told the House of Commons.

The government has to stand strong; Brown can not afford to look weak. Surely the Tories are holding his feet to the fire.

Mrs. Kirchner had ratcheted up pressure over the islands last week, issuing a decree that ships traveling to the Falklands must first seek permission from Buenos Aires before entering Argentine waters.

This is manna from heaven for Presidenta Kirchner, an external crisis.

Argentina emphasized that it was intent on pursuing its objectives by peaceful means. No one in Argentina seemed eager for a repeat of the shooting war that started in April 1982, when Argentina's dictatorship, facing deepening discontent at home, seized the islands in a surprise attack. The U.K. government of Prime Minister Margaret Thatcher sent a naval task force across the Atlantic and retook the Falklands, at the cost of 649 Argentine and 255 British servicemen killed.

In the nearly three decades since the war, Argentina has gone from a military dictatorship to a democracy. Argentine political scientist Rosendo Fraga wrote on Monday that Argentina has cut military spending by a greater amount than any other South American country since Mrs. Kirchner's husband and predecessor, Nestor Kirchner, took office in 2003. Nevertheless, analysts say that putting forth a vigorous diplomatic defense of Argentina's historic claims to the Falklands could help Mrs. Kirchner politically at a time when she has sunk far in the polls because of the flagging economy.

Exactly.


For some Argentines, the oil dispute has reopened an old wound. On Sunday, computer hackers launched a cyber attack on the Web site of the Falklands newspaper Penguin News, posting an Argentine flag, a patriotic march and a manifesto affirming Argentina's claim to the islands. In the U.K., Argentina has been on the receiving end of potshots in the press. The Sunday Telegraph has dubbed Mrs. Kirchner the "Botox Evita."

What's in a name

A brief article in today's Wall Street Journal caught my eye. The picture appearing in the newspaper itself is not online, alas, but the article is still of interest.


Refinery Strike Prompts French Gas-Station Lines


Workers at oil giant Total SA's French refineries continued their strike Monday with no resolution in sight, prompting long lines at gas stations in France amid panic buying by car owners. Total suspended operations at its 137,000-barrel-a-day Flanders refinery on Sept. 15, after it said weak European product demand and depressed refining margins made it uneconomic to continue refining activities there. 

Workers at Total's French refineries first walked out last Tuesday to protest the company's move to postpone until the end of June a decision on whether to permanently shut down refining activities at the Flanders facility, near Dunkirk, in northern France.

Dunkirk.

French union Confederation Generale du Travail, or CGT, said that the industrial action at Total's refineries in France continued, with all of its six refineries still affected. Unions warned the strike could disrupt the country's refined-products supplies. On Monday, French Junior Minister for Industry Christian Estrosi insisted the government "will take measures so that France will not get stuck." He didn't elaborate.

Ghana signs oil development deal

Ghana, riding high from President Barack Obama's visit this month, quietly signed a long-awaited development plan for one of the biggest oil discoveries in West Africa in the past decade.

The agreement -- reached July 15 with a group of international oil companies after months of negotiations -- brings Ghana much closer to its stated goal of producing oil by the second half of 2010.

Celebrated for its democratic rule and stability on a continent more often associated with coups d'état and violence, Ghana is trying to figure out how to handle the oil discovery responsibly and avoid the problems that have beset other oil-rich African nations.

That Ghana has held five consecutive democratic elections -- the most recent one in December -- and is mostly peaceful has inspired confidence among many analysts that the country will better handle its oil and gas resources than Nigeria or Angola and Equatorial Guinea.

Nigeria has squandered hundreds of billions of dollars in oil revenue over the past four decades due largely to corrupt government officials. It also faces a violent militant campaign that has led to hundreds of foreigners and locals being kidnapped and pipeline attacks that regularly shut down the flow of oil.

Ghana has a more diverse revenue stream than Nigeria and Equatorial Guinea: It is the world's second-largest cocoa producer after neighboring Ivory Coast and Africa's second-largest gold producer after South Africa.

2nd? I'd no idea.

Chávez Allows West to Make Oil Bids as Prices Plunge

Social programs like food subsidies, which these women in Caracas picked up, are financed by Petróleos de Venezuela’s profits.

President Hugo Chávez is expected to put forth a referendum this year that would let him run for indefinite re-election.

Surprise! Well, he ain't stupid.

“If re-engaging with foreign oil companies is necessary to his political survival, then Chávez will do it,” said Roger Tissot, an authority on Venezuela’s oil industry at Gas Energy, a Brazilian consulting company focusing on Latin America. “He is a military man who understands losing a battle to win the war.”

Perhaps. Pragmatic, yes.

Venezuela also differs from top oil nations like Saudi Arabia and Mexico, where national oil companies have monopolies. Petróleos de Venezuela let private companies remain as minority partners after the nationalizations, despite Mr. Chávez’s often aggressive anticapitalist stance.

Watch what he does not what he says.

Moreover, foreign oil services companies like Halliburton, which has done business in Venezuela for 70 years, have even expanded their activities in the country as Petróleos de Venezuela grew more dependent on contractors to help extract oil from aging wells.

Even Halliburton is allowed into the socialist fatherland; how curious.

“In 10 years, not one major oil project has been built in Venezuela,” said the oilman, who asked not to be identified for fear of retribution. “Chávez has left his so-called strategic partners out to dry, like the Chinese, who have been given the same treatment as Exxon.”

Well, they are both capitalists, no?

“Chávez is celebrating the demise of capitalism as this international crisis unfolds,” said Pedro Mario Burelli, a former board member of Petróleos de Venezuela. “But the irony is that capitalism actually fed his system in times of plenty,” he said. “That is something Chávez will discover the hard way.”

Mexico’s Fiscal Prudence Fails to Avert a Slowdown

The state oil monopoly Pemex announced that production had fallen 9.3 percent for the year though November. Above, workers on the KU-S oil production platform.

“In the face of the most serious contraction in decades, it is hard to imagine that Mexico will avoid recession too,” said Gray Newman, Latin American economist for Morgan Stanley in New York.

When the US sneezes, Latin America catches a cold, is the old saying.

After a decade of sound economic management, Mexico’s government does have some room to maneuver. Next year the government will run its first budget deficit in five years as it increases spending to give the economy a push. It is also taking on new loans from the World Bank and the Inter-American Development Bank to support social and environmental projects. The central bank has almost $85 billion in reserves to defend the peso and room to bring down interest rates.

When Mexican crude was selling at $130 a barrel last summer, officials began selling Mexico’s future 2009 exports at $70 a barrel, a price that seemed wildly conservative in those heady days. In the fall, the congress estimated a $70 price for its 2009 budget projections. The government usually locks in the price of its future production by buying options to sell oil at a certain price. When the market price rises above the option price, the government loses money. When the price falls, as it has, the government makes a profit.

Buying the options cost the government $1.5 billion last summer, but at the current price, now below $30, Mexico would stand to earn more than $10 billion. That money would go to job creation plans in infrastructure, tourism and small business.

Well, that's good investing.

“There have been substantial gains by the main Latin American countries from the mid-1990s to 2006,” said Santiago Levy, a vice president at the Inter-American Development Bank in Washington, who started the Mexican program 11 years ago. “It would be very, very sad if this was lost.”

Economic news

Consumers gain purchasing power in November Real consumer spending rose 0.6% in November, marking the first gain since May, the Commerce Department reported Wednesday, as lower prices for gas and other goods have added to purchasing power. I just paid $1.84 a gallon of gas. In early July I paid $4.34 a gallon. That drop of $2.50 a gallon is significant: 4 gallons at 4.34 cost me over 17 dollars; five and a half gallons at 1.84 cost me 10.60: a gallon and a half more cost six dollars less; I'm getting more for my money, which is increased purchasing power. That is a very significant factor. Yet the fear of bad economics and more bad news is palpable, and offsets increased purchasing power.

US Durable Goods Orders Fell Less Than Forecast Orders for U.S. durable goods fell less than forecast in November, easing concern that business investment would plummet in coming months in response to the deepening credit freeze and slowing sales. Durable goods are items that last years. Demand for computers, machinery and defense equipment rebounded last month, partly offsetting a slump in aircraft bookings. Even so, companies will likely keep paring spending as consumer bookings slow and international demand weakens in the face of the global credit crisis.

Mortgage applications soar as rates fall Near record low mortgage rates sent mortgage applications shooting higher last week, especially for refinances, according to an industry report. Many of the applications are for refinancing, rather than purchases, yet the activity is substantial. That's good for lenders (more business), borrowers (money saved), and indicates a thawing in the credit markets.

Crude Oil Falls Below $37 on Forecasts of US Supply Increase Crude oil fell below $37 a barrel in New York before a government report that’s forecast to show U.S. inventories rose for the 12th time in 13 weeks. Down from$143, $147, a barrel of crude now sells for 37 bucks. That is a drop of $110 or so. About a 75% drop. Gasoline is only down about 57%, or so; there is room for lower gas prices soon.

All is all, those four news stories are good news. Lower oil prices, lower gas prices, credit market activity, an economic indicator showing some (relative) strength.

What's in a name

Shakespeare had Juliet say: "What's in a name? That which we call a rose
By any other name would smell as sweet."

In a story about Russia's oil woes, this item: The government is drawing up a list of the most significant enterprises that might need a bailout, Mr. Putin added. That would come on top of the more than $200 billion the Kremlin has already pledged to shore up the economy, and will cover a minimum of 1,500 firms. Deputy Economy Minister Andrei Klepach said on Thursday that the economy wouldn't grow again until the middle of next year.

What would Klepach be?

Oil, Daschle, and Hillary

Oil Price Falls Below $50 as Consumption Remains Weak - What a change. Oil prices dropped below $50 a barrel on Thursday for the first time in 22 months, shedding close to $100 in four months as an ailing global economy pares its consumption.

Obama’s Pick of Daschle May Test Conflict-of-Interest Pledge - Tough to be pure. At issue is Mr. Daschle’s work since leaving the Senate four years ago as a board member of the Mayo Clinic and a highly paid adviser to health care clients at the law and lobbying firm Alston & Bird

Clinton Decision Holding Up Other Obama Choices - There is much skepticism on talk shows and other media outlets about appointing Sentor Clinton as Secretary of State. Just under a week after news broke that President-elect Barack Obama met with Senator Hillary Rodham Clinton to discuss naming her the Secretary of State, Mr. Obama’s aides announced that the job of White House counsel was going to Gregory B. Craig, Mr. Obama’s longtime foreign policy adviser. Craig was one of Bill Clinton's lawyers during the Impeachemnt proceedings against the President.

The official word out of the Obama camp was that Mr. Craig was always viewed as a natural for White House counsel, a job that would take advantage of his years as a Washington powerhouse lawyer. But several Obama advisers acknowledged privately that Mr. Craig couldn’t take a foreign policy job if Mrs. Clinton ended up at State — too much animosity and bad history there.

Animosity? How things change. Nine years ago Craig helped Bubba stave off conviction, and there's animosity? Well, here is why.

Susan Rice, one of the earliest foreign policy advisers to sign on with Mr. Obama, also gets a new lease on life if Mrs. Clinton is out of the running for Secretary of State. Like Mr. Craig, Ms. Rice worked for the Clinton administration, handling Africa policy during the 1990s. But the two of them formed a tag team to debunk Mrs. Clinton’s claim to foreign policy experience during the campaign.

Aha.

Angola, Now Calmer and Flush With Oil Cash, Faces a Vote

Over time, things change.

In a galaxy far away, a time long ago ...

On my drive down from Chichester, I meandered in Dutchess County, avoiding the Taconic Parkway for some miles. Wondering led me to Milan Hollow Road, and I followed that in a generally southern direction. After a while, I came into Clinton Hollow (for a moment, that seemed a politically ironic comment, before I dismissed it as inaccurate, though wishful thinking). Somewhere between and amogst CLinton Hollo, Clinton Corners and Salt Point, I happened upon a gasoline station that had clearly been closed for quite some time. A look at the numbers makes that quite very obvious.

Oil and Gas

The L.A. Times has a story with this picture: gas below $4 returns to SoCal. I haven't seen a leading 3 in quite some time; I paid $3.999 (which is actually 4 bucks) on 20 May (and 3.92, 3.96 a few days before that).

Sad part is that 3.979 seems a relief.

How to run an Airline

Amidst all the difficulties airlines face in the face of $125-$140 oil, this company continues to make a profit.

It was the airline’s 69th-consecutive profitable quarter, helped by its extensive fuel-hedging program, and it stood in sharp contrast to the losses reported by the six traditional airlines, some of them steep.

What a concept: hedge the cost of one of your company's biggest independent cost variables; I seem to remember learning that in business school.

Collectively, the other major airlines lost $6 billion in the quarter, hit hard by record prices for jet fuel. Southwest did not escape the impact of higher fuel prices, seeing those costs rise 35 percent in the quarter.

Southwest’s hedges, which cover 80 percent of the fuel that it buys, again proved its best protection against the problems faced by rivals.

2008 Economics

A look at today's headlines in the NYTimes.com business section:

Fannie and Freddie Shares Fall by as Much as 50 Percent - By STEPHEN LABATON and STEVEN R. WEISMAN 27 minutes ago Fannie Mae and Freddie Mac shares dropped nearly 50 percent in early trading on worries that the companies will suffer larger losses and default on debt.

• Fannie and Freddie Weigh on Markets 10:29 AM ET
• Loan-Agency Woes Swell From a Trickle to a Torrent
• For Short Sellers, It Doesn’t Get Much Better
• Shares of Lehman Brothers Take a Beating

It has become customary for the nicknames of these two organizations to be used as a matter of course. Fannie is Fannie Mae, or FNMA: the Federal National Mortgage Association. Freddie is Freddie Mac is FHLMC, the Federal Home Loan Mortgage Corporation. Both are government-sponsored enterprises (GSE), semi-public, or quasi-private companies which promote private home ownership in the US by buying mortgages, so keeping the mortgage market liquid. That is, these two GSEs buys mortgages from banks and other mortgage originators that lend money to people to buy their own homes. By buying the mortgages Fannie and Freddie allow lenders to get their money back, and so make other loans.

Recently, especially in the last six months or so, the mortgage market has collapsed. Banks and other mortgage originators, after overdoing their lending, have stopped lending. As a result of several factors, including fear and the perception of more and more things going wrong, the values of homes have plunged. Following, some people owe more on their mortgages than their houses are currently worth. In many such cases, borrowers have walked away from their mortgage obligations, further complicating things.

Fannie and Freddie have a lot of bad stuff in their books. Investors are fearful that the two GSEs will have to raise more capital in order to remain in business; investors are also fearful that the GSEs will not be able to raise more capital. Fear rules these days. In consequence, the shares of the two GSEs have plunged in value, falling precipitously, adding to the panic in the markets. And it is panic.

InBev and Anheuser Enter Friendly Talks - By ANDREW ROSS SORKIN and MICHAEL J. de la MERCED
The Belgian brewer InBev has raised its offer to $70 a share from $65, a person close to the talks said.

• Times Topics: InBev | Anheuser-Busch

InBev is a Belgian-Brazilian company formed in the last couple or so years by combining Interbrew and Bev...something Brazilian. Now it wants Anheuser. The latter is fighting, and has gotten a couple of Senators to urge it remain American. But it will be bought out. The offer has exposed just how poorly the company has been run. To fight, Anheuser has announced a scorched-earth plan which includes mass firings of workers, taking on debt, and raising prices. All of those things will probably happen when it is taken over, but not just for the sake of fending off a takeover.

Oil Climbs Above $147 a Barrel - By THE ASSOCIATED PRESS Oil prices spiked Friday amid continued tensions in the Middle East and concerns of renewed violence in Nigeria.

• OPEC Leader Issues Warning About Iran and Oil Supply

147 dollars a barrel. After a pause earlier this week, oil has gushed up again. It is an unchecked run: the dollar is weaker than a bad cup of coffee; the US seems to be adrift; the financial markets are in panic. Bush leaving office can't come too soon, but won't happen soon enough. Paulson leaving will also be welcome: he seems almost a buffoon at times, toeing the party line, double-speaking, and getting absolutely nothing done. What we need in both the US and the world market is some forceful leadership. Bush doesn't know what that means, Pauslon clearly can't do it, and Bernanke seems to have indigestion.

Meantime, Bush and Cheney rattle their sabers (or is it their cages?), reiterating that the option of a military move against Iran can't be "taken off the table," and allowing Israel to bluff a military move. Once these two buffoons are gone, President Obama needs to get Omert by the ear and tell him to back off.

Profit Falls 6% at General Electric - General Electric said that its profit fell 6 percent in the second quarter, and that it has agreed to sell its Japanese consumer finance business for $5.4 billion.

Another case of mismanagement. GE has gone down the tank along with the general economy, unable not only to get good financial results, but also unable to get Wall Street's respect. In response, it is pulling ideas out of the air.

Citi Sells German Business for $7.7 Billion - Citi will sell its German retail business to France’s Credit Mutuel for $7.7 billion, it said on Friday.

Speaking of mismanagement, there is Citigroup. What a disaster. What needs be done with this behemoth is to dismantle it, focus it on a series of business markets, and kick it in the ass to get it going. The new CEO, Vikram Pandit, might do it. He has got some challenge.

UAL Sees Second-Quarter Charges Near $2.7 Billion - The charges at the parent of United Airlines relate largely to the impairment of goodwill, the company said in a filing with the Securities and Exchange Commission.

Airlines are bigger disasters than Citi, and that is saying something big. Perhaps the best solution would be to create one gargantuan airline by merging three or four current lines, firing all the executives, and making that company a subsidiary of Southwest or JetBlue, two of the only viable, and well-run, airlines in the US today.

Ashland to Acquire Hercules for $2.6 Billion - The acquisition would give Ashland, which makes that services the pulp and paper industry. chemicals and Valvoline motor oil, a major presence in the water treatment arena

There are good buys to be had, clearly, and not all economic activity has come to a standstill. That mangled subheadline is from NYT.com earlier on Friday; currently the story reads: Ashland Inc, which makes chemicals and Valvoline motor oil, said Friday it would acquire peer Hercules Inc in a $2.6 billion cash-and-stock deal that would significantly boost its product offerings. The acquisition would give Ashland a major presence in the water treatment arena that primarily services the pulp and paper industry. It would increase the company's portfolio of specialty additives and ingredients.

Whether spanning markets, which used to be called building a conglomerate, is a good idea, remains to be seen. Citigroup, though significantly much larger, proves that the idea can prove to be disastrous. Yesterday, another takeover was announced: Dow Chemical Buying a Rival for $15.3 Billion

Toyota Scales Back Production of Big Vehicles - Toyota acknowledged that, like its rival automakers in Detroit, it misjudged the drastic swing in the American market away from larger vehicles.

Even Toyota is hurting; $147 a barrel of oil will do lots of damage to lots of people and lots of companies.

Government Rule Makers Looking at Pensions - Accounting rule makers started an ambitious project to force state and local governments to reveal the true cost of their pension promises.

Not a bunch of good news.

Not good economic news

Not good news.

Smithfield Foods Inc. reported a 94% plunge in fiscal-fourth-quarter profit and warned consumers to brace themselves for higher meat costs this summer.

Unemployment Rate Jumps to 5.5% As Economy Continues to Shed Jobs
The U.S. unemployment rate posted its sharpest one-month increase in 22 years last month, suggesting U.S. consumers already facing a housing slump and soaring gasoline prices now confront growing pressure from a weakening jobs market. The data, which included a fifth-straight drop in nonfarm employment, should take financial-market expectations of Federal Reserve rate increases as soon as this fall off the table.

Also damping sentiment was a return to surging oil prices, with crude futures soaring $6.23 to $134.02 a barrel, just off record levels in New York. The gains continued a rebound that began on Thursday, as futures surged $5.49 – the biggest single-day price increase in the history of the New York Mercantile Exchange crude contract – to settle at $127.79 a barrel. Bullish predictions by analysts helped to keep the rally going on Friday. Ole Slorer, a shipping analyst at Morgan Stanley called for a "short-term spike in oil prices" to $150 a barrel by July 4 this year.

Meanwhile, geopolitical concerns were prodded by reports from Israel Friday that the country could launch an attack on Iran's nuclear facilities. "If Iran continues its nuclear weapons program, we will attack it," Shaoul Mofaz, an Israeli deputy prime minister and also the country's transportation minister, told the Yediot Aharonot daily. But Mofaz, who hopes to replace troubled Ehud Olmert as prime minister, stressed such an operation could only be conducted with U.S. support.

Chavez Price Controls Mean Record Oil Fails to Prevent Shortage

Good intentions, bad results.

President Hugo Chavez ... the avowed socialist is trying to redistribute the country's wealth, blunt U.S. influence and rid capitalism of what he calls its “anti-values.” Socialism is Christ; capitalism is Judas, Chavez says.

Chavez ... has defined socialism as “attending to all of the needs of everyone.” On this day, the Super Mercal isn't delivering on that promise. In a country blessed with enough crude to make it OPEC's sixth-largest producer, the store has no milk, no chicken, no cooking oil and no flour.

It doesn't work; that has been proven time and again.

Surging prices have more than doubled the value of oil in the past year. That hasn't put food on the table. Price-controlled staples are often in short supply. Beef production declined last year even as consumer demand surged. Venezuelans are buying new cars as investments. A currency black market is thriving. Inflation hit an annualized 29 percent in April.

Buying cars as investments; warped.

Smoked salmon and French wines show up on store shelves, yet Chavez found it necessary to order Petroleos de Venezuela SA, the state-owned oil company, to form a unit to distribute beans and rice.

Who suffers most?

“It's a dangerous thing when a mother can't get milk for her children,” he says. [Edwin Gutierrez, who manages about $5.5 billion in emerging-market debt at Aberdeen Asset Management Plc in London.]

It's cynical, really. Witness: Sterilized milk started reappearing on shelves more regularly after Chavez eliminated price controls and gave importers priority for the dollars they need. Such moves contribute to inflation, though. In Caracas, the capital, food prices soared 42 percent in April from a year earlier. Chavez removed controls on eggs and raised the regulated price on chicken in April to ease shortages.

He's micromanaging the national economy; absurd. Still, some accomplishments are undeniable.

Behind the swaggering rhetoric, Chavez has achieved some of his goals. In foreign affairs, he has forged an anti-U.S. coalition composed of Bolivia, Cuba, Ecuador, Nicaragua and, to some extent, Argentina. At home, the government is spending oil wealth by the billions, focusing on health care and education. Thousands of Cuban doctors have been flown in. In April, Chavez raised the minimum wage 30 percent to the equivalent of $372 a month, the highest in Latin America. That followed a 20 percent rise in 2007.

“There's no incentive to invest in new production now in Venezuela,” says Jose Guerra, the central bank's former director of economic policy. “There's been a massive increase in demand, but on the other side, there's a problem, because Venezuela is a country that produces almost nothing.”

Key words are no incentive.

“There are some products you just can't find,” insurance broker Diego Ramirez, 30, says. “Rice, cooking oil, beef – everything that's a basic necessity.”

Key words are basic necessity.

Chavez's fix consists of more social spending and a series of pricing changes on regulated goods. He's poured cash into the economy from PDVSA revenue, which has boosted overall economic growth. The oil company's so-called social contribution to the nation was just $34 million in 2001. By 2007, the floodgates were open. The $13.9 billion contribution last year represents a more than 400-fold increase from six years earlier.

One result: Venezuela's $182 billion economy has expanded an average of more than 12 percent in the past four years – the highest growth rate among Latin America's biggest economies.

$34 million seems absurdly low.

This I agree with: Chavez often criticizes the diversion of cropland to ethanol production, saying the shift is partly to blame for global food-supply imbalances – and rising prices at home.

Corn for fuel? And subsidized with price supports in the US.

Imbalances of Power

This is quite discouraging. One writer's opinion, but he is a smart one.

There has been much debate in this campaign about which of our enemies the next U.S. president should deign to talk to. The real story, the next president may discover, though, is how few countries are waiting around for us to call. It is hard to remember a time when more shifts in the global balance of power are happening at once — with so few in America’s favor.

Keen insight; I agree. Bush and his cohorts acted as if what the US decides is simply going to be accepted. Those days are over.

Let’s start with the most profound one: More and more, I am convinced that the big foreign policy failure that will be pinned on this administration is not the failure to make Iraq work, as devastating as that has been. It will be one with much broader balance-of-power implications — the failure after 9/11 to put in place an effective energy policy.

Bush is not the only president to fail to put in place an effective energy policy, of course.

It baffles me that President Bush would rather go to Saudi Arabia twice in four months and beg the Saudi king for an oil price break than ask the American people to drive 55 miles an hour, buy more fuel-efficient cars or accept a carbon tax or gasoline tax that might actually help free us from what he called our “addiction to oil.”

Speak of perceptions: the US president goes to see the Saudis twice (bad enough), and they rebuff him twice.

Friedman writes of two books: Superclass: the global power elite and the world they are making, by David Rothkopf; and The post-American world, by Fareed Zakaria.

Mr. Zakaria’s central thesis is that while the U.S. still has many unique assets, “the rise of the rest” — the Chinas, the Indias, the Brazils and even smaller nonstate actors — is creating a world where many other countries are slowly moving up to America’s level of economic clout and self-assertion, in every realm. “Today, India has 18 all-news channels of its own,” notes Zakaria. “And the perspectives they provide are very different from those you will get in the Western media. The rest now has the confidence to present its own narrative, where it is at the center.”

Mr. Rothkopf’s book argues that on many of the most critical issues of our time, the influence of all nation-states is waning, the system for addressing global issues among nation-states is more ineffective than ever, and therefore a power void is being created. This void is often being filled by a small group of players — “the superclass” — a new global elite, who are much better suited to operating on the global stage and influencing global outcomes than the vast majority of national political leaders.

“Call it the triple deficit,” said Mr. Rothkopf. “A fiscal deficit that will soon have us choosing between rationed health care, sufficient education, adequate infrastructure and traditional levels of defense spending, a trade deficit that has us borrowing from our rivals to the point of real vulnerability, and a geopolitical deficit that is a legacy of Iraq, which may result in hesitancy to take strong stands where we must.”

A very bleak picture, indeed.

Blame Wall Street for $135 Oil on Wrong-Way Betting

I am utterly baffled about the rise of oil: so quick, so steep. This might be one explanation, but only a partial one.

Oil's rally to a record above $135 a barrel came as traders bought crude to cover wrong-way bets that prices would decline, according to data from the New York Mercantile Exchange.

The bet that crude prices would fall didn't pan out.

"It is not a growing market, it is a shrinking market in terms of open interest," said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. "It is also facilitating the move upward."

Is it pessimism, or rank speculation?

Crude for delivery in December 2016 ended yesterday at $142.09 a barrel, signaling investors anticipate prices will gain for years. Some traders speculate oil will reach $200 this year. The price of a December 2008 option contract that allows the holder to buy 1,000 barrels of crude at $200 each jumped 67 percent in three days to $1.72 a barrel yesterday on the Nymex.

December 2016: 8 years from now.

An Oracle of Oil Predicts $200-a-Barrel Crude

Wow. $200 a barrel. When I worked at Hess, Qatar crude as $13; after the Iranian revolution, spot market crude went to $40.

Arjun N. Murti remembers the pain of the oil shocks of the 1970s. But he is bracing for something far worse now: He foresees a “super spike” — a price surge that will soon drive crude oil to $200 a barrel. Mr. Murti, who has a bit of a green streak, is not bothered much by the prospect of even higher oil prices, figuring it might finally prompt America to become more energy efficient.

Maybe I should get a more fuel-efficient car; $4 a gallon gasoline might go to six bucks a pop.

An analyst at Goldman Sachs, Mr. Murti has become the talk of the oil market by issuing one sensational forecast after another. A few years ago, rivals scoffed when he predicted oil would breach $100 a barrel. Few are laughing now. Oil shattered yet another record on Tuesday, touching $129.60 on the New York Mercantile Exchange. Gas at $4 a gallon is arriving just in time for those long summer drives.
As of 1.30pm crude went through $132. Ole Boone Pickens weighed in yesterday with a $150 a barrel forecast.

T. Boone Pickens' $150-a-barrel oil forecast looks more prescient by the minute, while the Bank of England cites fundamentals as the key.

Three months ago the sages said the fundamentals did not justify 80, 90, or 100 dollars a barrel.

That dude on the line has his gasoline-powered lawnmower!

Mr. Murti, 39, argues that the world’s seemingly unquenchable thirst for oil means prices will keep rising from here and stay above $100 into 2011. Others disagree, arguing that prices could abruptly tumble if speculators in the market rush for the exits. But the grim calculus of Mr. Murti’s prediction, issued in March and reconfirmed two weeks ago, is enough to give anyone pause: in an America of $200 oil, gasoline could cost more than $6 a gallon.

6 bucks a gallon; to fill my 14 gallon tank would cost me 84 bucks.

That would be fine with Mr. Murti, who owns not one but two hybrid cars. “I’m actually fairly anti-oil,” says Mr. Murti, who grew up in New Jersey. “One of the biggest challenges our country faces is our addiction to oil.”

Experts disagree over the supply of oil, the demand for it and whether recent speculation in the commodities markets has artificially raised prices. As an energy analyst at Citigroup, Tim Evans, reportedly put it, trading commodities these days is like “sticking your hand in a blender.”

Ouch.