Tuesday, May 24, 2005

Even Bush gets it 

Last Fall President Chavez increased the royalties that oil companies operating in Venezuela's Orinoco Belt had to pay from 1% to 16.66%. The absurdly low 1% royalty had been negotiated by previous administrations which were much more pliant to big oil's interests than is Chavez. And Chavez of course needed the royalties to fund his ever growing social program.

Predictably, there arose a hue and cry from the opposition and those who always bent over backwards to accommodate foreign oil interests. They claimed that to raise the royalties to such high levels would scare away the oil companies. And to these peoples way of thinking the worst thing you can do is cross an oil company.

Today in the Wall Street Journal there was an editorial that spoke exactly to this issue in a very interesting way. Here is an excerpt:

Drilling for Dollars
All this takes place within the context of a larger debate over "royalty relief." Since 1995, the federal government has waived its traditional 16.6% royalty on many offshore leases; currently some three-fourths of all the oil and gas being drilled in the Gulf of Mexico's deep waters is subject to relief. That may have made sense when oil prices were low. But now House leaders want to extend royalty relief for future lease sales in deep waters, on the grounds that it would encourage further exploration, particularly by smaller energy companies.

Maybe so, but it's also a giveaway to the larger ones, which already have the technology and resources to go after these deposits. As President Bush put it recently, "With oil at more than $50 a barrel... energy companies do not need taxpayer-funded incentives to explore for oil and gas."

Amazing, even the Wall Street Journal and George Bush can see that when oil prices are high letting oil companies get away with paying only 1% royalties is absurd. Isn't it interesting that Bush and the WSJ can stick up for the U.S. government's interests but when Chavez does the same in Venezuela he receives nothing but criticism from the "vendepatrias" of Eastern Caracas.

What is a "vendepatria"? Translated literally it is someone who sells out their country. And that is what the people who ran Venezuela's oil industry prior to Chavez were. They always conducted Venezuelan oil policy to benefit foreign interests, be is busting OPEC quotas to help keep prices low or giving sweetheart deals, like 1% royalties, to foreign oil companies. In turn they got nice "commissions" and cushy jobs working for big oil - screw your own country for a nice bank account in Miami.

Fortunately the days of the vendepatrias are over.


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