Cuban Oil -- an oxymoron

Cuba has many resources within its grasp. But it has no expertise. For all the reasons cited below, its oil-drilling venture will end in an operating failure. Moreover, even if Cuba extracts some oil from the Gulf waters, it's got no way to refine the oil into useful products. Oh well. It's business as usual for the half-baked socialist dreamers of Castro's failed revolution.

Drill, Bebé, Drill

Cuba is about to drill for offshore oil with “second-tier parts” because of the trade embargo. That’s not good news for U.S. beaches.

July 29, 2011

Sometime over the next three months, if all goes according to plan, Cuban workers on a Chinese-built, Spanish-owned rig will start drilling for oil in the mile-deep waters just off the north coast of Cuba, 70 miles from the Florida Keys.

If the drill hits a major oil deposit—and all geologic signs indicate it will—the discovery will unleash a cascade of developments with profound political, environmental, and economic consequences.

The Cuban government has long wanted to extract the rich reserves of oil and natural gas believed to lie off its shores. Estimates for oil range from 5 billion to 20 billion barrels, while the estimate for natural gas is 8.6 billion cubic feet. Unlocking that oil could jump-start a nascent Cuban offshore-oil industry—and free the island nation from its energy and political dependence on Venezuela, from which it imports 60 percent of its oil today.

A newfound independence from its socialist neighbor and its mercurial president, Hugo Chavez—coming at a time when the Cuban leadership is facing change with the eventual demise of Fidel Castro—is an appealing prospect to the United States.

But the potential of a closer relationship with Cuba comes with a terrifying specter: An oil blowout in Cuban waters could reprise the nightmare that was last year’s Gulf of Mexico oil spill, and send crude spewing to the beaches of Florida, Georgia, and South Carolina.

And the likelihood for such a disaster is very real, say oil industry experts, thanks in part to Washington’s 49-year-old embargo on Cuba.

Because of the embargo, U.S. companies cannot drill in Cuba, supply equipment to Cuba, have any say over safety regulations in Cuba, or even take part in helping control a blowout and spill in Cuba. As the island prepares to begin offshore drilling, it has signed contracts with oil companies from Brazil, India, Italy, Russia, and Spain—and is in talks to lease major portions of its coastal water to Chinese companies (continuing China’s pattern of pursuing oil exploration in countries where U.S. drillers aren’t welcome).

Under the embargo’s terms, the oil drilling and safety equipment used by those companies must be less than 10 percent U.S.-made. But all of the most technologically advanced equipment for drilling and preventing or stopping oil spills is made in the United States or by U.S. companies.

“There are not international suppliers of this level of equipment. They will have to buy copycat or second-tier parts,” Lee Hunter, president of the Houston-based International Association of Drilling Contractors, told National Journal.

Hunter and other experts say that, to date, it appears that the Cuban government, fearful of the devastation an oil spill could wreak on its economy, wants to use the lessons learned from the BP oil disaster to develop a rigorous safety and oversight program. But it will be nearly impossible for drillers in Cuba’s waters to legally use the safest equipment.

“The Cubans want to use good technology; they want to drill safely,” Hunter said. “But … their ability to drill safely is extremely compromised.”

Also deeply compromised is their ability to respond to a disaster should it occur. Even if oil from a Cuban spill laps at Florida’s shores, the U.S. agencies and oil companies that have all-too-hard-won expertise in wrestling a spill—the Coast Guard, the Federal Emergency Management Agency, and the Interior Department—would be banned from crossing into Cuban waters to help.

And experts say that the Cuban oil industry and government don’t yet have a fraction of the resources and expertise they would need to deal with such an event on their own.

State Department officials are well aware of the problem, and they are working with Hunter’s group, along with others, to find a way for U.S. companies to get into Cuban waters—if not to drill, at least to help out in case of a spill. One way this could happen is if the Treasury Department issues special advance licenses granting U.S. companies the ability to travel to Cuban waters to give aid in a disaster. Cuban officials are also cautiously indicating interest in cooperating with the U.S. on the plan, despite the embargo.

“This is something that could get Cuba and the U.S. sitting down and talking, finding points of agreement and cooperation,” said Jorge Piñón, a former president of Amoco Oil Latin America and a current visiting research fellow with Florida International University’s Cuban Research Institute.

It is also something that is likely to further ignite the fight over opening up more U.S. waters for drilling, pointed out Piñón and many others. Currently, most of the eastern portion of the U.S. Gulf of Mexico—which borders the water where the Chinese, Indians, and Russians would be operating off Cuba—is closed to drilling.

But defenders of the U.S. drilling ban will be hard-pressed to keep it in place, no matter the risks, if two things happen: if oil-producing rigs pop up in Cuban waters, and, in the coming years, in the surrounding waters of Mexico and even the Bahamas, which is now looking into starting offshore drilling.

NASA -- Out of Orbit

For some reason that defies the truth, a lot of Americans believe the Space Program has delivered an abundance of scientific advances that have been converted into loads of cash by those positioned to exploit the knowledge gained from space flight.

Well, that's not exactly what happened, even though millions believe the myth. sure, advances were made and benefits were gotten. But everything that has come from the Space Program was coming along anyway, so the best you can say is the Space Program pushed things along a little faster.

Ex-Astronaut Story Musgrave Blasts NASA, Washington, Over Space Shuttle Program Failures

7/9/11

Houston, we have a problem ... with NASA.

As the space shuttle Atlantis orbits Earth in the final mission of NASA's 30-year reusable spacecraft legacy, at least one former astronaut -- and six-time shuttle voyager -- is lashing out at the space agency for what he deems as failures in the overall vision of the shuttle program.

"The shuttle did not turn out like we planned," Dr. Story Musgrave told The Huffington Post. "It was going to [fly] 66 times a year and it ended up with about five times a year. It was going to cost $10 million a flight, and two months ago, an independent study showed that it cost $1.2 billion a flight. It was massively fragile, difficult to operate and exceedingly dangerous."

Musgrave is a surgeon, mathematician, chemist, biophysicist, physiologist, computer scientist, artist and author of important scientific papers in the areas of aerospace medicine, physiology and clinical surgery.

His achievements include designing the spacesuit that was used by shuttle astronauts for space walks. Musgrave performed the first space shuttle space walk in 1983 on Challenger's maiden flight. Ten years later, he was the lead space walker during the first mission to repair the Hubble Space Telescope.

But with NASA closing shop on the shuttle program because of the huge ongoing expense, Musgrave is critical of how the powers-that-be made decisions.

"The downside is the [international] space station needs us, needs a shuttle to service it in a way that nothing else can," he said.

"I think what the real problem is: Why are we so poor in our vision and so poor in our project management that we come to a point where it's reasonable to phase out the current program and we have no idea what the next one is? Washington has to stop doing that."

"Washington is in total failure that this has happened," he added. "It is Washington's fault and they have to look in the mirror and have to see their failure. It's NASA, Washington, Congress and the administration -- they are in failure."

As an example of what he perceives as NASA's failure "to have any vision leadership or project management," Musgrave talked about NASA's Assured Crew Return Vehicle -- or escape module -- proposal for the International Space Station.

"That's the lifeboat. In 1974, when we saw that a space station was going to happen, we had a requirement to have a lifeboat to be able to get off the station in case of a fire or some other catastrophe. That was 1974. Where is our lifeboat? We don't have one because there's no leadership in Washington, there is no vision and they're unable to manage a project like that.

"It can be a totally manually flown thing without a computer -- it's so simply done, and we toyed with it for years. If you want to have the biggest example of failure in Washington to be able to do anything, where is the assured crew return vehicle?"

And despite his criticism of the space program leadership, Musgrave feels the public wants to keep going into space.

"The public does care. They're always there for you. They love space, but you've got to give them something. If you ask the average person: What's the space station doing for you? They simply don't know."

Musgrave is now a concept engineer for a company called Applied Minds in California, a professor of design at Art Center College of Design in Pasadena and a landscape architect in Orlando. Space agency and Washington leadership criticisms aside, he always feels honored for his accomplishments at NASA.

"I'm massively privileged to be part of the space program, and I never forget to say that."

Words From the Wise

Two ‘geezers’ who are bullish

Commentary: Eisenstadt and Fosback both forecast higher market


By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C. (MarketWatch) — “The years teach much which the days never knew.”

I was reminded this week of Ralph Waldo Emerson’s classic comment about the wisdom of old age, having received the latest forecasts of two stock market veterans with more decades of investment experience than most of the rest of us have even been alive.

You might not agree with them, but their years of experience suggest we should at least pay close attention to their forecasts.

Interestingly, furthermore, both of them currently are bullish.

The first of these veteran advisers is Sam Eisenstadt, the former research director at Value Line who, prior to his retirement in December 2009, had spent 63 years at that firm — including playing a pivotal role in creating Value Line’s famed stock ranking system. At the time of his retirement, Value Line’s flagship publication, the Value Line Investment Survey, was in first place for risk-adjusted performance over the three decades the Hulbert Financial Digest had been tracking advisory performance.

Eisenstadt in retirement continues to closely follow the stock market, periodically updating his econometric model that spits out a six-month forecast for the S&P 500 index /quotes/zigman/3870025 SPX -0.70% . His latest forecast is for the S&P to be trading at the 1,430 level at the end of this year.

That is equivalent to a 5.7% return from current levels, or 11.7% on an annualized basis.

Eisenstadt bases his econometric model on monthly readings of numerous economic and financial variables over the last six decades — back to 1952, in fact.

While Eisenstadt stresses that no model is perfect, he reports that the model’s forecasts over the last six decades have been statistically significant.

Last December, you may recall, Eisenstadt was forecasting an 11.9% increase over the first half of this year. As fate would have it, the S&P rose just 5% for the year through June 30, though — given that some last December were forecasting a resumption of the bear market — coming this close has to be judged at least a partial success (if not more).

The other veteran whose latest forecast I received over the past week is Norman Fosback. Compared to Eisenstadt, of course, Fosback is a spring chicken, having been actively following the market for “just” 40 years — first as president of the Institute for Econometric Research, and in recent years, as editor of Fosback’s Fund Forecaster.

Though Fosback’s econometric model doesn’t issue six-month forecasts, it does make 12-month forecasts — and its bullishness is in the same order of magnitude as Eisenstadt’s model: Fosback is predicting a gain over the next 12 months of 17%, and a 61% return over the next five years.

The factors on which Fosback base this forecast include sentiment, valuations, and technical indicators . But the most bullish single factor, in Fosback’s opinion, is Fed policy: “The monetary evidence couldn’t be more powerfully bullish,” he writes.

This bullishness on the part of these two market veterans reminds me, in an ironic way, of the contrast between so-called “kids markets” and what fellow columnist Peter Brimelow has referred to as the “geezers markets.”

The concept of “kids markets” traces back to Adam Smith, the pseudonymous author in the late 1960s of the famous book “The Money Game.” A “kids market” is one in which the investors making the most money are those too young to remember the distant past — and whose investment approach is not affected by those memories.

“Geezers markets,” in contrast, are periods in which long-term experience translates into outperforming the kids.

If indeed the bull market still has a long way to go, for example, the “kids” could very well lose out because they have a very lively memory of the trauma of the 2007-2009 Great Recession and no recollection of prior decades.

And though it is too early to know whether we are indeed in a geezers market, it is striking that these two veterans are markedly more bullish than many of their younger brethren.

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.

Obama and his fellow dim bulbs

Are they really so brazen that they'll force Americans to buy a product millions don't want? Yes. It seems the Obama administration is as brazen as that.

New Flare-Up in Light-Bulb Wars

Critics of Greater Federal Regulation Push a Fresh Challenge to 2007 Law

Associated Press

The light-bulb wars are back on.

Energy Secretary Steven Chu came out swinging Friday against a House bill that would repeal a 2007 federal law effectively outlawing older forms of incandescent bulbs—an effort at energy conservation that has inflamed a wide swath of Americans who don't care for the more expensive alternatives.

In a conference call with reporters, Mr. Chu said the more-efficient bulbs required would save consumers money over the life of the product, even if the up-front price is higher.

"We are taking away a choice that continues to let people waste their own money," he said.

The light-bulb issue has become a flash point in a broader debate about the expansion of federal regulation into areas of personal choice, such as what to eat, how to save for retirement and how much gasoline to use.

The controversy also spotlights a shift in the Republican party's stance.

A House vote on repealing the light-bulb efficiency standard, expected Monday, would reverse part of an energy bill President George W. Bush signed four years ago and that received widespread support in both houses of Congress.

Rep. Fred Upton (R., Mich.), who said in 2007 that the light-bulb mandate was a "common-sense, bipartisan approach ... to save energy as well as help foster the creation of new domestic manufacturing jobs," now wants to repeal the law. "It was never my goal for Washington to decide what type of light bulbs Americans should use," he said in a statement Friday.

It isn't clear that the latest flare-up will change anything for consumers, as the measure's prospects are dim in the Senate.

The 2007 law means cheap incandescent bulbs will become harder to find, and fluorescent, halogen and LED bulbs—as well as more-efficient incandescent bulbs—will take their place in stores. The new bulbs need less energy to produce a brighter light and last longer than conventional incandescent bulbs.

Supporters of the new standards say the more-efficient incandescent bulbs only cost about $1 more than older ones.

The bulb issue has become fodder for conservative critics of the federal government.

"The American people want less government intrusion into their lives, not more, and that includes staying out of their personal light-bulb choices," Minnesota congresswoman Michele Bachmann, now a presidential candidate, said in March.

Representatives of the lighting industry joined environmental groups in a letter to Congress Friday opposing the GOP bill. Kyle Pitsor, vice president of the National Electrical Manufacturers Association, said companies had made investments in anticipation of the new standards taking effect on schedule.

Jim Presswood, federal energy policy director at the Natural Resources Defense Council, said Friday there were several more-efficient bulbs on the market and such technology "wouldn't have been out there but for these standards."

But critics say the government shouldn't compel consumers to buy more expensive bulbs.

"I will concede over the life of the bulb...that you probably do save some money, but it takes a long time to save it," said Rep. Joe Barton (R., Texas), a sponsor of the bulb bill, in an interview.

Pipeline Dreams -- Obama Nightmares

How dangerous to the economic health of America is the Obama administration? Very. Is there anyone in the administration who realizes the only result of its policies is the choking effect they've had on the economy? Apparently not.

Jobs in the Pipeline

The EPA tries to scuttle oil transport from Canada's tar sands

With 9.1% unemployment and gasoline prices in the stratosphere, President Obama must sometimes wish that some big corporation would suddenly show up and offer a shovel-ready, multibillion-dollar project to create 100,000 jobs and reduce U.S. reliance on oil from dictatorships.

Oh, wait. His Secretary of State has had that offer sitting on her desk since she was sworn in. The trouble is that the Administration can't approve it without upsetting its anti-fossil fuel constituency. And so the proposal sits.

In September 2008 TransCanada applied to build a new pipeline—the Keystone XL—to bring diluted bitumen from the oil-rich tar sands of Alberta to thirsty American refineries on the Gulf Coast. It is hardly a radical proposal. Canadian crude has been flowing to the U.S. for decades. Another Canadian company—Enbridge—operates the Clipper pipeline across the Canadian border to Chicago. In July 2010 TransCanada began operating its Keystone pipeline from Alberta to Cushing, Oklahoma, which is a major storage and pricing depot.

The Keystone XL would cut a slightly different path, through the American heartland to Port Arthur, Texas. Judging from its past experience and that of Enbridge, TransCanada expected that permitting would take roughly 23 months. Thirty-three months, two State Department studies and 208,000 public comments later, TransCanada is still waiting. On current trend, the company will be lucky to get its permit by January, or after 40 months. But even that is far from certain.

If Mr. Obama were drawing up a plan from scratch to boost union employment and deflate Iranian-ally Hugo Chávez of Venezuela, it might look like the Keystone XL. TransCanada estimates that building the pipeline will mean more than $20 billion—$13 billion from TransCanada itself—in investment and 13,000 new American jobs in construction and related manufacturing. The company also expects more than 118,000 "spin-off" jobs during the two years of construction.

TransCanada says it has signed building contracts with four major U.S. unions. It projects that construction will generate $600 million in new state and local tax revenue and that over its life the pipeline will generate another $5.2 billion in property taxes. The Energy Policy Research Foundation in Washington estimates that by linking to the XL, oil producers in North Dakota's Bakken region will enjoy efficiency gains of between $36.5 million and $146 million annually. Lower transport costs will mean savings for Gulf Coast refiners of $473 million annually if the pipeline meets conservative expectations of shipping 400,000 barrels per day.

Today those refineries are highly dependent on imports from Mexico and Venezuela, which have decreased output in recent years. TransCanada would help to provide Gulf Coast refiners with a more reliable source of supply from a U.S. ally.

None of this is lost on the State Department, which must approve the project because it crosses the U.S. border. Its first environmental impact statement, in April 2010, found that the XL would meet industry standards and not significantly affect the environment. Without the pipeline, State said, the U.S. would not be able to benefit from cost-efficient Western Canadian oil and "would remain dependent upon unstable foreign oil supplies."

Hillary Clinton indicated early on that she was inclined to allow it and so it seemed the company would get its permit after a 90-day comment period. But the Environmental Protection Agency raised a stink and State acquiesced to a "supplemental" statement, which took months to prepare. On June 6, at the end of another 90-day comment period, the EPA stamped the report "inadequate" and sent State a nine-page letter with objections, which, no surprise, would require years of further study.

You could be forgiven for thinking that this must have something to do with pipeline safety. But pipelines remain the statistically safest way to transport oil, pipeline accident rates have fallen sharply, and technology has improved reaction time to leaks and the ability to contain them.

Friday's Exxon pipeline leak of up to 1,000 barrels along the Yellowstone River in Montana is a case in point. Any spill is unfortunate, but Exxon says it has put 150 workers on clean-up duty, has asked local residents to identify further damage, and has flown in 90,000 feet of absorbent boom, 3,000 absorbent pads and 2,200 feet of containment boom. TransCanada points out that for river crossings the XL will be 25-feet underground versus Exxon's eight feet (laid 20 years ago) and will feature other state-of-the-art safety enhancements.

So why the EPA push back? Ask the Natural Resources Defense Council. "This is really a campaign against tar sands expansion rather than a single pipeline," Susan Casey-Lefkowitz, director of the council's international program, told the New York Times last month. The EPA's June 6 letter echoes that point. It complains at length about the "[green house gas]-intensive" tar sands and frets about what Canadians are doing to migratory birds.

U.S. greens loathe oil, and the tar sands has become the next Alaska in green mythology. We get that. But what about jobs and growth? The U.S. economy needs a stable and affordable energy supply and, according to Cambridge Energy Research Associates (CERA), Canada's tar sands oil from "wells to wheels" isn't any "dirtier" than Nigerian light or California or Middle East heavy crude.

The Keystone XL pipeline is another case in which the Obama Administration's ideology clashes with its professed goal of job creation. Why do jobs always lose?

Cuba -- A Nation of Closet Capitalists

They Communists always end up going with capitalism. It's human nature.

Cuba tries to drag shadow economy into the light

Cuban economic reform aims to bring a world of secret businesses into the light

July 3, 2011

HAVANA (AP) -- Want some paprika-infused chorizo sausage? How about a bit of buffalo mozzarella? Or maybe you just need more cooking oil this month, or a homemade soft drink you can afford on paltry wages. Perhaps you are looking for something more precious, such as an imported air conditioner or some hand-rolled cigars at a fraction of the official price.

In a Marxist country where virtually all economic activity is regulated, and where supermarkets and ration shops run out of such basics as sugar, eggs and toilet paper, you can get nearly anything on Cuba's thriving black market -- if you have a "friend," or the right telephone number.

A raft of economic changes introduced over the past year by President Raul Castro, including the right to work for oneself in 178 approved jobs, has been billed as a wide new opening for entrepreneurship, on an island of 11 million people where the state employs more than four in five workers and controls virtually all means of production.

In reality, many of the new jobs, everything from food vendor to wedding photographer, manicurist to construction worker, have existed for years in the informal economy, and many of those seeking work licenses were already offering the same services under the table.

And while the black market in developed countries might be dominated by drugs, bootleg DVDs and prostitution, in Cuba it literally can cover anything. One man drives his car into Havana each day with links of handmade sausage stuffed under the passenger seat. A woman sells skintight spandex miniskirts and gaudy, patterned blouses from behind a flowery curtain in her ramshackle apartment.

Economists, and Cubans themselves, say nearly everyone on the island is in on it.

"Everyone with a job robs something," said Marki, a chain-smoking 44-year-old transportation specialist. "The guy who works in the sugar industry steals sugar so he can resell it. The women who work with textiles steal thread so they can make their own clothes."

Marki makes his living as a "mule," ferrying clothes from Europe to Havana for sale at three underground stores, and has spent time in jail for his activities. Like several of the people interviewed for this article, he agreed to speak on condition he not be further identified for fear he could get into trouble.

Merchandise flows into the informal market from overseas, but also from the river of goods that disappear in pockets, backpacks, even trucks from state-owned warehouses, factories, supermarkets and offices.

There are no official government statistics on how much is stolen each year, though petty thievery is routinely denounced in the official news media. On June 21, Communist party newspaper Granma reported that efforts to stop theft at state-run enterprises in the capital had "taken a step back" in recent months. It blamed managers for lax oversight after an initial surge of compliance with Castro's exhortations to stop the pilfering.

"Criminal and corrupt acts have gone up because of a lack of internal control," the paper said.

An extensive study by Canadian economist Archibald Ritter in 2005 examined the myriad ways Cubans augment salaries of just $20 a month through illegal trade -- everything from a woman selling stolen spaghetti door-to-door, to a bartender at a tourist hot spot replacing high-quality rum with his own moonshine, to a bicycle repairman selling spare parts out the back door. He and several others who study the Cuban economy said it was impossible to estimate the dollar value of the black market.

"You could probably say that 95 percent or more of the population participates in the underground economy in one way or another. It's tremendously widespread," Ritter, a professor at Carlton University in Ottawa, told AP. "Stealing from the state, for Cubans, is like taking firewood from the forest, or picking blueberries in the wild. It's considered public property that wouldn't otherwise be used productively, so one helps oneself."

Cubans even have a term for obtaining the things they need, legally or illegally: "resolver," which loosely translates as solving a problem. Over the decades it has lost its negative connotations and is now taken as a necessity of survival.

"Turning to the black market and informal sector for nearly everything is so common that it has become the norm, with little or no thought of legality or morality," said Ted Henken, a professor at New York's Baruch College who has spent years studying Cuba's economy. "When legal options are limited or nonexistent, then everyone breaks the law, and when everyone breaks the law, the law loses its legitimacy and essentially ceases to exist."

There is evidence, however, that Castro is persuading at least some black market operators to play by the rules and pay taxes.

In the past seven months, more than 220,000 Cubans have received licenses to work for themselves, joining about 100,000 who have legally worked independently since the 1990s. Of those, 68 percent were officially "unemployed" when they took out their license, 16 percent had a state job and another 16 percent were listed as "retired," according to statistics on the government website Cubadebate.

Many of these jobless and nominally retired people were likely making ends meet by working in the informal market, and even the former government workers were probably connected in one way or another.

"You have to find a way to survive," said Manuel Rodriguez, the former head of a Cienfuegos medical center for children with disabilities. Rodriguez said his monthly government ration card plus his and his wife's meager salaries only covered two weeks' worth of food. "I sat in the park one day and thought, 'What can I do?'"

He began bicycling around town on Sundays, renting out bootleg DVDs of the latest Hollywood films, which others had downloaded from the Internet. Rodriguez, who moved to Miami in 2009, defended his decision to turn to the black market to put food on the table.

"I wasn't hurting anyone," he said. "It's not pornography. It's not drugs."

In fact, the sale and rental of pirated DVDs now is one of the 178 jobs that can now be done legally in Cuba, which ignores U.S. intellectual property rights in response to Washington's 49-year economic embargo.

New license holders complain the taxes and social security payments can be well over 50 percent of sales, raw materials are hard to come by because there is no wholesale market, and government promises to provide bank credits and retail space have been slow to develop.

But many say they jumped at the chance to go legit anyway, tired of always looking over their shoulder.

"We started off illegally, years ago, but when they started to give out licenses we got one because it means peace of mind," said Odalis Losano, a 46-year-old single mother who obtained a license in December to sell lunches she prepares on her home stove. "Now we don't have to be afraid of the police or the inspectors."

Paradoxically, the expansion of a legal free market may be increasing the size of the black market, particularly for the goods and services the new entrepreneurs need to survive. Newly legalized pizzerias must have a steady supply of cheese, flour and tomato paste, self-employed construction workers must have building materials, manicurists must find nail polish.

One man profiting off the legitimate economic opening, albeit illegally, is Roberto, who uses stolen canisters of CO2 to make carbonated drinks for sale to the scores of downmarket private cafes opening up all over Havana. He charges just 7 pesos (28 cents) for a 1.5-liter bottle, a sixth of what a bottle of state-made cola costs in the supermarket.

"This business is not totally legal," he said. "I can't get a license for it because the state will not sell me the CO2. I need to get it on the black market."

And then there are the many activities that by their nature must remain hidden under Cuba's controlled system.

The Internet is strictly regulated in Cuba, so those who sell time on accounts that belong to doctors, professors and computer technicians do so on the sly. The government maintains a monopoly on that most quintessential of Cuban products, the cigar, so the hundreds of underground stogie-rolling factories will stay underground.

Likewise, the sale of gold is regulated, so those who melt it down for false teeth won't get licenses anytime soon.

"Even if they legalize this, it wouldn't be worth getting a license," said one practitioner, who spoke on condition of anonymity for fear of earning the ire of the state. He charges up to $40 per tooth, using gold melted down from jewelry and trinkets he buys from secret suppliers. "They would regulate it so much it would be impossible to get the gold and other materials I need. The authorities would bother me so much it would be worse than doing it in hiding."

Marki, the mule, said he would happily open an imported clothing boutique if the island's leaders ever scrapped Cuba's Marxist economy for capitalism. Until then, he said, he and many of his countrymen will carry on living and working on the margins of the law -- and no amount of fines, seizures or jail time will dissuade them.

"Half of Cuba lives off the black market," he said with a gruff smile. "And the other half depends on it. To me, it is unstoppable."

Melting Polar Ice Caps

Warming Ocean Could Melt Ice Faster Than Thought

RANDOLPH E. SCHMID 07/03/11

WASHINGTON — Warming air from climate change isn't the only thing that will speed ice melting near the poles – so will the warming water beneath the ice, a new study points out.

Increased melting of ice in Greenland and parts of Antarctica has been reported as a consequence of global warming, potentially raising sea levels. But little attention has been paid to the impact of warmer water beneath the ice.

Now, Jianjun Yin of the University of Arizona and colleagues report the warming water could mean polar ice melting faster than had been expected. Their report was published Sunday in the journal Nature Geoscience.

While melting floating ice won't raise sea level, ice flowing into the sea from glaciers often reaches the bottom, and grounded ice melted by warm water around it can produce added water to the sea.

"Ocean warming is very important compared to atmospheric warming because water has a much larger heat capacity than air," Yin explained. "If you put an ice cube in a warm room, it will melt in several hours. But if you put an ice cube in a cup of warm water, it will disappear in just minutes."

In addition, Yin explained, if floating ice along the coastal areas melts it will allow the flow of glaciers to accelerate, bringing more ice into the seas.

"This mean that both Greenland and Antarctica are probably going to melt faster than the scientific community previously thought," co-author Jonathan T. Overpeck said in a statement.

Overpeck, co-director of the University of Arizona's Institute of the Environment, said: "This paper adds to the evidence that we could have sea level rise by the end of this century of around 1 meter and a good deal more in succeeding centuries."

The subsurface ocean along the Greenland coast could warm as much as 3.6 degrees Fahrenheit (2 Celsius) by 2100, the researchers reported. The warming along the coast of Antarctica would be somewhat less, they calculated, at 0.9 degree F (0.5 C).

Knee-deep in Polar Ice Water

The best brains in the Global Warming industry now believe that a touch of warming over the next 90 years might cause glaciers in Greenland to melt faster than previously predicted. They say if that happens, the sea might rise one meter.

What would we do if the the level of the world's oceans and open seas rose a whole meter, a little more than a yard? I suppose after a lot of thinking and calculating, and worried head scratching, someone might say, "well, we could put all the buildings by the shore up on stilts. Yeah, we could do that."

Someone else might say, "well, we could just move back from the sea shore."

Another person might remind the others, "Well, New Orleans is below sea level, and so is Holland. Most of the time they manage."

Warming Ocean Could Melt Ice Faster Than Thought

RANDOLPH E. SCHMID 07/03/11

WASHINGTON — Warming air from climate change isn't the only thing that will speed ice melting near the poles – so will the warming water beneath the ice, a new study points out.

Increased melting of ice in Greenland and parts of Antarctica has been reported as a consequence of global warming, potentially raising sea levels. But little attention has been paid to the impact of warmer water beneath the ice.

Now, Jianjun Yin of the University of Arizona and colleagues report the warming water could mean polar ice melting faster than had been expected. Their report was published Sunday in the journal Nature Geoscience.

While melting floating ice won't raise sea level, ice flowing into the sea from glaciers often reaches the bottom, and grounded ice melted by warm water around it can produce added water to the sea.

"Ocean warming is very important compared to atmospheric warming because water has a much larger heat capacity than air," Yin explained. "If you put an ice cube in a warm room, it will melt in several hours. But if you put an ice cube in a cup of warm water, it will disappear in just minutes."

In addition, Yin explained, if floating ice along the coastal areas melts it will allow the flow of glaciers to accelerate, bringing more ice into the seas.

"This mean that both Greenland and Antarctica are probably going to melt faster than the scientific community previously thought," co-author Jonathan T. Overpeck said in a statement.

Overpeck, co-director of the University of Arizona's Institute of the Environment, said: "This paper adds to the evidence that we could have sea level rise by the end of this century of around 1 meter and a good deal more in succeeding centuries."

The subsurface ocean along the Greenland coast could warm as much as 3.6 degrees Fahrenheit (2 Celsius) by 2100, the researchers reported. The warming along the coast of Antarctica would be somewhat less, they calculated, at 0.9 degree F (0.5 C).

Oil on Fire

Barron's says oil is headed for the sky. Hmmm. Well, maybe, briefly, but those spikes don't last long, and perhaps, possibly, maybe, if oil prices soar, maybe the president will wake up and unleash the domestic oil industry.

Maybe he'll allow drillers to drill all the easy places where reserves are abundant. The Arctic National Wildlife Refuge. Off the coast of California, throughout the Gulf of Mexico. And maybe he'll wake up to the benefits of making greater use of natural gas. Maybe he'll learn that subsidizing domestic ethanol production at the expense of everyone who buys food is a bad idea. Perhaps he will eliminate the subsidy and simultaneously eliminate the tariff on ethanol imported from Brazil.

Barron's Cover | SATURDAY, JULY 2, 2011

Get Ready for $150 Oil

By GENE EPSTEIN

After a decline this summer, crude's price is likely to rise sharply by next spring. It will hurt the economy, but it won't be a disaster.

The U.S. economy is never completely ready for higher oil prices, which is one reason they take a nasty economic toll when they arrive. But readiness can be enhanced by awareness of the likely outlook for petroleum prices–and the outlook today is relatively grim, although probably not disastrous.

Despite the recent 20% decline from April highs, new highs on crude, heating oil, diesel fuel, jet fuel and gasoline seem likely over the next 12 months. Following some further easing over the summer, the second leg of the long-term bull market in petroleum–the first occurred in 2007-08–probably will begin this fall.

As oil producers' spare capacity gradually declines to worrisome levels, the average monthly price could reach a record $150 per barrel by next spring, with spikes to $165 or $170. With this, $4.50-a-gallon gasoline will become the norm. That will put a huge dent in consumer wallets, while ramping up the desirability of fuel-efficient cars.

The continued short-term easing of oil prices should benefit the economy over the summer, only to exact a much larger payback later. The projected oil shock of spring 2012 will hurt the economic expansion, but not kill it, pruning about 1.5 percentage points from quarterly growth in real gross domestic product.

While painful, this forecast isn't quite as extreme as it might appear. Short-lived price spikes and troughs make for frenzied headlines in newspapers and on the Internet as well as for hysterical talking heads on radio and TV, but what matters for the economy are average prices over at least a few months. Barron's estimates that the effective price of crude was about $110 in this year's second quarter, which just ended. So a projected increase to $150 by the second quarter of next year assumes a rise of $40. Oil is likely to stay at $150 for several months, before the promise of greater supply brings a gradual easing.

The $110 price estimate comes from taking the midpoint between the market price on West Texas Intermediate oil traded on the New York Mercantile Exchange in New York and on Brent crude traded on the Intercontinental Exchange in London. While the recent unusual 10%-15% premium of Brent over WTI, which actually is of higher quality, has puzzled many analysts, those Barron's polled agree that the lower price on WTI is potentially misleading.

According to Credit-Suisse energy analyst Joachim Azria, the U.S. is mainly paying the West Texas Intermediate price, but the cost of gasoline and diesel and jet fuel reflects the higher Brent price. James Hamilton, an economics professor at the University of San Diego, has studied the effect of oil shocks on the economy. He suggests using a midpoint between Brent and WTI to capture the effective price. That's what we've done.

Still, even a $40 rise, to $150, by next spring differs by several country miles from the oil market's own implied price outlook. Last week, futures contracts for June 2012 delivery of WTI crude were trading around $99, while Brent crude for June 2012 delivery was commanding just $112.

Steve Briese, publisher of the Bullish Review of Commodity Insiders newsletter and Website, says that commercial hedgers–who deal in the underlying commodity and thus have lots of professional experience in these matters -- are "overwhelmingly bearish" and are putting their money where their convictions are. They currently have a record net short position on the Nymex futures and options market. Because history shows that the hedgers often have been right, Briese concludes that the "short profit potential is enormous."

While Barron'ssees some short-selling potential this summer, it's not "enormous." And with all due respect to the expertise of the commercial hedgers, even pros can be wrong. We think this is a great buying opportunity for bulls on petroleum.

Cornerstone Analytics oil analyst Michael Rothman, with more than 25 years' experience calling the market, foresees an extended price plateau of $170. In support of his view, Rothman cites a comment made by Nobuo Tanaka, executive director of the International Energy Agency, the Paris-based organization that represents oil-consuming nations. Tanaka spoke on June 23, when the IEA helped cause a selloff in the petroleum market by announcing that 60 million barrels were being released from strategic reserves held by the U.S. and 27 other countries. (For more on the effects of this move, see Commodities Corner column.)

The markets seemed quite impressed by this infusion, even though it amounted to just a little over two-thirds of the nearly 90 million barrels the world consumes each day. At that rate of daily off-take, the total emergency stocks held world-wide, 1.6 billion barrels, come to only about 18 days of supply. Far more important is the ability of producing nations to meet needs, month after month.

The ostensible reason for releasing the 60 million barrels was to help replace the loss of production from war-torn Libya. But Tanaka, who not surprisingly said that he had been in "close consultation" with "major producing countries," also linked the decision to concern about spare capacity within the Organization of Petroleum Exporting Countries, and especially from its largest producer, Saudi Arabia. While welcoming increased production from this source, he cautioned that it "will take time" to come on line.

Comments Rothman: "Read between the lines. This raises the specter that the Saudis might have a problem raising their output."

The Barron's projection assumes that the Saudis will ramp up output this month, and that prices will continue to ease as a result. Another oil bull, Morgan Stanley's commodity research head Hussein Allidina, sees this only furthering the decline of OPEC's spare capacity to "untenable levels," and especially in the land that Allidina dubs the "kingdom of spare capacity" -- Saudi Arabia.

While Allidina is more cautious than Rothman -- his most bullish scenario projects a Brent average price of about $140 through next year -- their broad concerns are similar. Author of a September 2009 report called "Crude-Oil Balances to Tighten Again by 2012," Allidina foresaw the process by which unused capacity would eventually be reduced to puny levels, sparking higher prices.

THERE ARE FOUR MAIN PLAYERS in the global oil drama.

On the demand side are the nations of the Organization for Economic Cooperation and Development, which includes the U.S., Canada, Japan, Australia, New Zealand and most of Europe. And there are the non-OECD nations, which include India and China, currently in a phase of rapid economic growth.

On the supply side is OPEC, which includes Libya, Iraq and Saudi Arabia, and non-OPEC nations, including Norway, Mexico and the former Soviet Union.

The dynamics of both the first (2007-08) leg of the bull market and the second leg, likely to begin this year, are essentially the same. The thirst for oil by non-OECD nations puts pressure on supply, and the increase in output from non-OPEC producers is inadequate to quench this demand.

Since 2000 -- despite the post-9/11 economic downturn, the global stock-market swoon of the early 2000s, the 2008 financial crisis and the 2008-2009 Great Recession -- global oil consumption has advanced by a yearly average of 1.1 million barrels per day, while non-OPEC output has risen by a yearly average of less than 0.6 million per day. In 2000, non-OECD demand amounted to 37.7%, or a little over a third, of the world's consumption; now, it amounts to 48.5%, or nearly half.

The upswing in demand is adding urgency to concern about the availability, or lack thereof, of spare capacity, technically defined as crude that can be produced on a sustained basis within 30 to 45 days. Perhaps the most important thing to know about spare capacity is that only the OPEC producers have any. The non-OPEC gang is probably already pumping out all it can.

The 2007-08 bull market in oil peaked with an average monthly price of a record $133.40, reached in July 2008, with a short-lived spike, to $147, on July 11. While that oil shock certainly worsened the Great Recession, which struck early in 2008, the economic contraction would have happened anyway, since its main cause was the bursting of the housing bubble.

The causality also went the other way, however. The recessions in the OECD countries, including the U.S., Germany and Japan, meant weakened demand for oil that placed some drag on the uptrend and eventually helped sink the price of petroleum.

The coming second leg of the bull market, in contrast, will be sustained by steady, if modest, economic growth in the OECD world. The consensus estimate from the economists surveyed for the Blue Chip Economic Indicators is for real gross domestic product growth of 3% in the U.S. over the next four quarters, moderate growth in Germany and the U.K. and a resumption of growth in earthquake-ravaged Japan by next year.

Even if Chinese economic expansion slows–a focus of some disagreement among prognosticators -- non-OECD demand should continue to expand faster than demand from OECD countries. Result: The squeeze on spare capacity will be greater than ever before.

WORRIES OVER SPARE CAPACITY have been exacerbated by the civil war in Libya, which has taken 1.5 million barrels a day out of the supply stream. On the other hand, the OPEC meeting that broke up early last month with no formal deal to increase quotas was of no great concern in itself, because OPEC members had been openly exceeding quotas already. More importantly, the Saudis signaled their willingness to boost output from nine million barrels a day to more than 10 million this summer.

Assuming that the Saudis can meet their commitment on a timely basis, OPEC's spare capacity will still continue to decline. Result: higher oil prices.

One reason the U.S. is less susceptible to an oil shock than it used to be is that, for every dollar of nominal GDP, it consumes less oil than it once did.

The top chart on this page -- in which the 2011-12 data are an average of WTI and Brent -- shows that the projected monthly average of $150 per barrel would be a record high, even though all historical prices are adjusted to 2011 dollars. For example, the actual monthly high of $39.50 through April-June 1980 comes to $93.50 in today's dollars, as the chart shows.

But the $150 price peak will not mean peak consumption in the U.S., when measured as a percentage of gross domestic product. As the bottom chart shows, spending on crude accounted for 9.5% of nominal GDP for a few months in 1980. That's substantially higher than the estimated 7% if oil hits $150, as we expect it to.

Why will the toll be lower? One big factor: Since 1980, an even larger share of America's gross domestic product comes from services rather than goods. Producing more services generally requires less energy than making more widgets does. Also, the use of oil in heating and in electricity-generation has greatly declined. In 1980, 56% of all crude purchased in this country powered vehicles (planes, cars, trucks, buses, farm equipment), while today, 70% is used for that purpose, according to the U.S. Energy Information Administration. In addition, the fuel efficiency of the U.S. ground fleet, measured in total vehicle-miles per gallon, is much higher now than it was 31 years ago.

However, given Americans' appetite for SUVs and for cars with six- and eight-cylinder engines, fuel efficiency leveled off in the late 1990s, and has made no progress since then. Underlying this splurge has been complacency over oil prices. As the price chart on this page shows, apart from the brief spike in 1991, post-1980 oil prices were pretty stable for more than 20 years, until the first leg of the bull market began in 2007.

Price punishment of the sort we anticipate next spring could restart serious progress in fuel efficiency. But with new auto sales running at about an 11 million annual rate and the American light-vehicle fleet now numbering about 250 million, significant improvement will take awhile.

The assumed 1.5 point drag on growth from the $40 price hike balances various factors. The main impact would be on the consumer. Because gasoline is a necessity for many people -- they have no alternative to driving to work -- and since it's tough to quickly reduce the amount consumed by very much, funds allocated to it must come from somewhere else. And that somewhere else could be savings or money that otherwise would be spent on clothes, restaurant meals, movies or iPads.

Estimating the consumption effect, Bank of America Merrill Lynch economist Neil Dutta calculates that every $10 price rise normally trims GDP growth by 0.25 of a percentage point, which means $40 lops off a full point. (Of course, the dynamic also goes the other way when prices fall, as will happen this summer, benefiting consumer spending and growth.)

Oil at $150 a barrel would, of course, hurt businesses, too. As the cost of jet fuel soars, airlines will boost fares. That could reduce passenger traffic, leading the companies to cut flights, reducing economic activity. And, as San Diego's Hamilton notes, there is the added risk that companies, anticipating shortfalls in consumer spending, will reduce hiring, causing a multiplier effect that could worsen a bad situation.

Morgan Stanley oil bull Allidina believes the 2012 Brent price that will ration demand is about $130 for his baseline forecast. Oil analyst Michael Rothman sees a two-tiered market: $130 would ration demand in OECD countries, but nothing less than $170 is required for "demand destruction" in non-OECD nations. And $170, as noted earlier, is Rothman's price target.

Barron's believes that non-OECD demand could be more price-sensitive than Rothman assumes. For one thing, a $150 price could motivate governments to delay projects like the building of new roads, which require a lot of oil. For another, there is the stark fact that non-OECD countries are poorer than OECD countries. While it makes some sense that their hunger for "black gold" will motivate them to pay even more for it than their richer counterparts, the lash of $150 crude will decrease their willingness to pay.

IS THE WORLD RUNNING OUT OF OIL?

Probably not. Libya can eventually bring 1.5 million barrels back on stream. There is huge potential from Iraq, even greater potential from Saudi Arabia itself -- and closer to home, more supply could come from ending the de facto moratorium on drilling in the Gulf, and from tapping Alaska's wildlife reserve.

Crude at $150 will likely encourage these and other sources of supply, bringing a gradual pullback. But none of this is like to help much by spring 2012. Get ready for higher oil prices.

Colon Cancer to Kill Chavez

The medical care in Venezuela must really stink if the country's dictator bolts for Cuba for cancer treatment. No one has ever claimed Cuba's medical care is anything other than free. No one has ever claimed Cuban medical treatment is good. But when you're a dictator you can't let it get around that you've got colon cancer.

Nevertheless, word has leaked out, and now the world knows Chavez will never again run Veneuela. He'll probably die in Cuba while getting chemotherapy that doesn't work.

Chavez Says Cancer to ‘Strengthen’ Him

By Daniel Cancel - Jul 2, 2011

Venezuelan President Hugo Chavez, who recently revealed that he’s receiving treatment for cancer in Cuba, said that the illness will strengthen him and he’s optimistic he’ll return to full health.

Chavez, speaking in a live telephone call to a Cuban television program yesterday for the first time since June 12, said that Fidel Castro, the former Cuban president, detected his frail health. Castro pushed him to remove a cancerous tumor after an operation to drain a pelvic abscess.

“No one expected this illness but I’m optimistic and sure that I’ll emerge from it stronger,” he said. “If it weren’t for Fidel, who knows what labyrinth I’d be in right now.”

Until now, Chavez only had been shown in previously recorded videos and images. Chavez told Venezuelans in a nationally broadcast speech on June 30 that he was operated on twice in Cuba and that he won’t hurry his return during treatment.

The 56-year-old leader, who has run South America’s largest oil producer since 1999, has vowed to keep ruling from Cuba as long as it takes, though his political foes have called on Vice President Elias Jaua to assume his daily activities, citing articles in the constitution. Chavez had announced his intention before the illness to seek a third presidential term next year.

Peanut Butter, Lamb

Earlier yesterday, Venezuelan state television broadcast a 45-minute video from June 29 showing Chavez as his followers have grown accustomed to seeing him over the past decade: making national policy while telling jokes and humming military marches from his days as a paratrooper commander. Accompanying him was his brother, Barinas state Governor Adan Chavez, Foreign MinisterNicholas Maduro and Henry Rangel Silva, head of the nation’s military.

In a bid to project an image of normalcy after weeks of speculation over his health, Chavez told his allies that he’s recovering favorably and is running his nation’s affairs from abroad. He said Fidel Castro checks in on him almost daily, bringing peanut butter and small bits of lamb, while at night he’s reading Friedrich Nietzsche’s “Thus Spoke Zarathustra.”

“I’ve committed mistakes, fundamental mistakes as Nietzsche would say, and I apologize for it,” said Chavez. “Sometimes you get swept up in the passion and forget that you’re just made of flesh and bone and don’t take care of your health.”

Clout
Yields on the nation’s benchmark bond plunged yesterday as investors increased bets Chavez may give up a re-election bid, opening the door for a new government that could reverse policies fueling the fastest inflation in the world. Jaua would succeed Chavez if the president resigns or is declared unfit to govern.

With nobody in the government able to match Chavez’s clout with the poor, his hold on power may be challenged if he doesn’t return home soon, said Luis Vicente Leon, director of Caracas- based pollster Datanalisis.

The prospect of Chavez’s prolonged absence may further embolden the opposition, which was strengthened after winning the majority of votes in congressional elections last September. Support for Chavez fell to near the lowest in eight years in March as a 40 percent devaluation of the bolivar and the fastest inflation among 78 countries, tracked by Bloomberg, erode the purchasing power of his working-class base.

Cancer

“There is no chavismo without Chavez,” said Boris Segura, a Latin America strategist at Nomura Securities International Inc. in an interview yesterday in Caracas. “He hasn’t groomed a successor on purpose because this is a one-man project.”

The Venezuelan leader may have colon cancer that would require chemotherapy for at least six months to a year, Ramon Baeza, an oncologist with the IRAM cancer clinic in Santiago, Chile, said in a phone interview.

“It’s a common cancer in his age range,” said Baeza, who has no connection to the case and said he can’t give a medical opinion based on the information available. Chavez’s chances of recovery could be low depending on whether the abscess ruptured and if the cancer spread to the rest of the abdomen, he said.

The self-declared revolutionary socialist said yesterday that he’s received support from regional leaders, including cancer survivors Fernando Lugo of Paraguay and Brazil’s Dilma Rousseff.

Canceled Summit
Leaders of the opposition have criticized the government’s handling of the political crisis though have also gone to lengths to wish Chavez a speedy recovery.

“Chavez is still the head of state, but he can’t run the government’s daily affairs,” said Ramon Guillermo Aveledo, executive secretary of the Democratic Unity Table alliance. “The government isn’t functioning normally and they know it.”

Chavez, who canceled a July 5 summit with Latin American and Caribbean leaders on Margarita Island due to his health, said that he never had any intention of staying in Cuba so long and that his cancer was first detected at the tail end of a regional tour after he arrived on June 8.

“Truly, I was only going to spend two days here,” Chavez said in the live telephone call last night. “I feel as if I were in Venezuela amid my people. Long live Cuba, and long live Fidel.”

Oil -- the staff of life

A nation's prosperity is tied to its access to low-cost energy. Having oil beneath its own territory is a great way to ensure some oil supplies. But a healthy world market will do just as well. The history of the world's leading nations and how they advanced shows the link between abundant energy and prosperity.

But Obama thinks it's possible to break the link and continue to enjoy the prosperity. As we can see, that largest burden on Americans is the big increase in the price of gasoline and other petroleum products. Next to that, the pain is coming from higher food prices, which are affected by energy prices.

Oil Oozes Through Your Life

WHEN whales were an important energy source back in the 18th and 19th centuries, whalers made sure to use every last part of each one, given how difficult they were to kill. The blubber was boiled into oil for heat and light; the bones refashioned into women’s corsets; the teeth sold for scrimshaw carvings; the sperm reserved for cosmetics and other uses. “Such a sweetener! Such a softener! Such a delicious molifier!” — as Herman Melville’s narrator puts it in “Moby Dick.”

Since petroleum replaced whale oil as a main fuel source more than a century ago, chemical companies and refineries have found a startling range of uses for it, from asphalt to vanilla flavoring in ice cream to pills from the drugstore. It has oozed into everyday life, so reducing dependency is a more complicated proposition than some might think.

“It just turns out to be a very abundant product that is easy to manipulate chemically, so you can turn it into many different products,” said Dr. Benny Freeman, past chairman of the American Chemical Society’s polymeric materials division.

Take a typical barrel of oil. About 46 percent of it is refined into gasoline, and another 40 percent or so is turned into jet and fuel oil. Only about 2 percent becomes petrochemicals like polyethylene and benzene for everyday products (with the rest going to other uses).

Yet that 2 percent has a pervasive reach, as suggested by the accompanying chart. “Oil, no pun intended, seeps into just about everything in the economy,” said David Garfield, a managing director at the consultancy AlixPartners. And though petrochemicals usually aren’t burned for fuel, they share in the environmental impact of petroleum when extracted and refined using energy-intensive methods.

When oil prices go up, as they have markedly in the past year, companies reassess how they transport items, try to cut down on energy costs, and look for alternatives to petroleum-based materials. For example, some are replacing the hard-to-open plastic clamshell packaging that many consumers find so annoying. But, said Michael Pishko, head of the department of chemical engineering at Texas A & M, there are only a few alternatives to petroleum-based chemicals (one is natural gas as a base for polyethylene). “Beyond that, it becomes very difficult to compete with petroleum, even petroleum at $100 a barrel,” Dr. Pishko said.

Michael Watts, a professor of geography and development studies at the University of California at Berkeley, agreed. “The complexity of these hydrocarbons is sort of remarkable,” he said. Even as a critic of oil dependency, he concedes that petroleum’s versatility is impressive: Not only does the American farm and grocery network rely on cheap fuel for low-cost shipping between the coasts, but food itself is grown using petroleum-based fertilizer. (Oil byproducts for food typically fall under federal regulation, although that doesn’t satisfy critics of petroleum-derived food colorings, for example.)

What will it take to wean us off oil? Professor Watts says the question forces scrutiny of “a very complicated set of connections in which what we’re confronting, because of this dependency, is not just, ‘Let’s develop a Prius.’ ”

Dead Chavez Walking

As if we didn't know. Chavez has cancer and the only place he believes he can get treatment is Cuba. Okay. In other words, he's a good as dead. Will he be deposed in a coup? Now that he's left his country, how can he govern? Will a general seize power and tell him to stay in Cuba? Anyway, the days of Chavez are over.

Chavez cancer upends Venezuelan politics

Venezuelans stunned by Chavez cancer confirmation

CARACAS | Fri Jul 1, 2011 7:22am EDT

CARACAS (Reuters) - Venezuela's socialist leader Hugo Chavez acknowledged he had surgery for cancer, shaking the political system he has dominated for more than a decade and alarming supporters counting on him to win re-election in 2012.

The usually loquacious Chavez, 56, confirmed in a stern speech on Thursday that he had undergone surgery in Cuba to remove a cancerous tumor and was receiving more treatment. He said he needed to recover before returning to Venezuela to run his self-styled socialist revolution.

Supporters vowed they will continue his leftist drive, which has included nationalization of vast swathes of the economy, a broad diplomatic challenge to Washington's dominance of the region and a steady takeover of an oil industry that is a key supplier to the United States.

"We will live and we will conquer. Until my return!" Chavez ended Thursday night's emotion-charged address from Havana.

In poor Caracas shantytowns, where Chavez is still widely loved for using oil revenues to build new clinics and schools, supporters saluted him with fireworks. "He's alive! He's alive!" one group shouted in the poor Catia area after the speech.

Opposition leaders, seeking to rally around a unity candidate to be picked in February for the 2012 presidential vote, may take the news as a sign Chavez is weakened and less likely to win next year's vote after sweeping repeated elections since 1998.

"For the Republic, the best thing that can happen is for the president to recover and to take over full governance, so that the natural political process can evolve, which is to carry out elections next year," said Teodoro Petkoff, who runs the opposition newspaper Tal Cual.

The opposition was trying hard to avoid appearing gleeful at Chavez's ill health, though some detractors posted vitriolic messages on Twitter and other sites.

Financial markets will watch closely for precise details of his condition or a timeframe for when he could return to power. Venezuelan bonds have rallied on hopes his absence may spur changes in the country's state-dominated economy.

"It is impossible to deduce if he will or will not be in a physical state and the right mood to go into the 2012 campaign," said local analyst Luis-Vicente Leon.

VENEZUELA'S FUTURE

Known for eight-hour speeches and frequent camera appearances, Chavez left Venezuela in near silence and its government functioning at half-steam for almost three weeks after a June 10 operation to remove a pelvic abscess.

His continued convalescence raises questions about how he can still govern from Cuba, whether or not he can control his sometimes unruly coalition, and whether he will in fact be able to rule for another decade as he has often vowed.

Perhaps to answer fears of a power vacuum or succession fight, Chavez said he remained "at the helm" of government" in "permanent communication" with his Vice President Elias Jaua.

Chavez's ministers said the government would remain united and, in their joint appearance immediately after the president's address, pledged commitment to his socialist reforms even in his absence.

Supporters seemed shocked and at times in denial at the news of his cancer, which government supporters had until Thursday passed off as idle rumor spread by the opposition.

Chavez's combative rhetoric, Caribbean folksy charm and social programs from rural villages to shantytowns have allowed him to win almost all the elections his coalition has confronted, undermining the argument of critics who call him a dictator.

But he has alienated many with his authoritarian streak, reflected in his stranglehold on government and belligerent treatment of political opponents, and his aggressive nationalization of a wide range of industries.

His popularity has been weakened in recent years as he has struggled to keep up with bread-and-butter government tasks such as keeping electricity flowing, putting criminals in jail and providing housing for the poor.

Remaining in Cuba could further compromise advances in those areas, especially since state leaders are notoriously slow to make decisions without his direct involvement.

(