2006/04/03

Venezuela's End Run Around OPEC

Venezuela has concocted a nifty plan for an end run around OPEC's quota system. The Guardian reports that Hugo Chavez' government is attempting to negotiate a $50.00 per barrel price floor for his country's oil.

"Big deal," many say, "oil is currently in the $60.00's". But there's more here than meets the eye. With guaranteed contracts from 17 buyers and the new price, Chavez can now force OPEC to recognize Venezuela's heavy crude as guaranteed reserves. The key is the price, $10 above the level required to make refining heavy crude economically viable, and since Venezuela's reserves may be as large as 312 billion barrels (50B more than Saudi Arabia's), they would get a huge increase in their pumping allocation. This would guarantee Venezuela's petroleum income for decades to come and fundamentally change the dynamics of world oil markets.

Considering the hostility that the Chavez regime has shown the US in recent years, this turn of events must have Bu$hCo, not to mention the Saudi's, in a snit. Seems that while the US was positioning it's pieces in the competition for access to oil, Venezuela was preparing to change the rules of the game. I'll leave it to wiser heads to determine what effect this will have on the US consumer, but I would say that selling the car is looking better and better all the time.

14 Comments:

I smell preemption, baby! Three to one, we'll start hearing about the rising threat of Venezuela in the war on terror... Maybe even connections to Iran. This is going to be fun.
I think (as little as possible these days) but I think that epm may have something here. However, it doesn't sound like much fun, it sounds like it might be a rerun.
A snit is right. epm's kind of snit!
"I love the smell of preemption in the morning Smells like...hypocrisy. You know someday this oil's gonna end."
Flex fuel is it... cars can run on ethanol/gas mixtures. We could be independent from importing oil in years if we all started switching now...
Kathleen, I've got a different idea on the whole energy independence situation. Stay tuned...
It will be interesting to see how this all plays out...

Looks like Argentina isn't crying for anyone these days, and making powerful political statements, to boot.
That is very interesting. I have no idea at all how this will play out.
I will...
Kathleen, posted just before lunch. I'm on a tear about cars (not surprising since I don't own one).
Chavez has been openly hostile towards Bush since they backed a coup attempt to overthrow him in 2001. Also, Chavez sells his gas in urban areas at least twenty cents lower than the other stations do (CITGO). He has brokered a deal with China for his oil. And the Bush administration has been trying to link them to Iran in the past few weeks. No wonder Pat Robertson suggested we "take him out."
Kvatch,
When I lived in Colorado, I didn't bring my car out and bought a mountain bike instead. Not only did I get in great shape, but I felt good about not polluting.

You in SFran? Remember reading about the BART... if I lived there, I might not have one either.

Here, were it's 115 degrees in the summer and miles from the nearest grocery store/ doctor/ etc., we don't have a choice. No public tranportation option, either... I understand why you feel this way, though...
funny how we back the Saudis and their oppressive regime, but not Chavez and his democratic country.

we need to invest in some alternative energy for sure. I have heard coal from Montana and ND, corn ethanol. Brazil, i think, is completely energy independent. Lets look at what they are doing. Living in an area like I do (ND) it is not really possible to go without transportation, everything is too spread out. i have never owned a car that gets less than 30 miles a gallon though.
i have never owned a car that gets less than 30 miles a gallon though.

Graeme, Kathleen, it's like I said above, you do what you can, but every method that can be tried should be tried because with Venezuela having a much larger voice in OPEC, things could get very dicey indeed for the US.

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