Sunday, May 21, 2006

Some people never learn 

You would think having watched Chavez revitalize OPEC and oil revenues increase the opposition would have learned something and would be in favor of continueing those policies in any future government. You could be forgiven for thinking that (after all, continueing successful policies would seem the rational thing to do) but you would be wrong.

Just this month a review of Chavez's tenure came out which gave some revealing opinions. I won't analyze it all, people who are interested can read it here. But I do want to comment on what they had to say about the Venezuela's oil industry. First we have this little gem by Oscar Mendoza (never heard of him before):

In 1968, oil production in Venezuela was at 3.6 mbpd and it was in third place among world producers, with about 10 percent of the global share in production. In 1975, the government went full steam ahead with the nationalization of the oil industry, taking control over the whole operation.

Fast forward to 2006, and production is well below 2.5 mbpd. And declining. Venezuela’s government is using oil and the generous income it generates as a geopolitical weapon against the interests of its own people.

Hopefully, I've done enough posts on the oil industry recently for people to instantly recognize the falsehoods peddled here. Suffice it to say, as this graph shows, Venezuela is producing over 3 MBPD of oil and its production is increasing, not decreasing. Sadly, these falsehoods are par for the course when it comes to the opposition.

He then goes on to say:

Due to Venezuela’s role as one of the main energy producers in the Western Hemisphere, it is imperative that the oil industry regain the importance it had decades ago. The so-called oil liberalization strategy (Plan de Apertura Petrolera), developed in 1991, aimed to have production up to 6 mbpd by the year 2006. If it had been implemented as planned, we would be producing that amount today. A wide privatization strategy to increase production by 8 mbpd is not completely out of the question. We need change. We need a government that looks after the real interests of the nation. It is not easy, but a large number of Venezuelans are fighting for it.

Yeah, sure, spend tens of billions on increased production and have prices go back down to $8 per barrel just like the last time that was done. Sorry, but Venezuela does have a government that looks "after the real interests of the nation" instead of just making more jobs for oil industry managers. Thats why they cut back production and increased revenues.

Its also interesting to note this person advocates privatization of the oil industry. Maybe he has a lot of Exxon-Mobil stock in his portfolio? In any event most Venezuelans are fully conscious of what a losing proposition that is for Venezuela so I doubt many of their presidential candidates will make it the conerstone of their campeigns.

Then we get to Roberto Smith who actually IS a presidential candidate (though he is currently only polling 1%):

The political polarization in Venezuela has made the impossible quite possible: The qualified, trained and expert personnel that used to run the country’s oil business were fired and blacklisted by the government. In other words, the people who used to run our oil industry are barred from participating in it at any level. Not only are they barred from PDVSA’s operations, but also from any company related to the state-owned oil industry.

As a result, Venezuela’s oil production has decreased. Currently, our country’s actual production level is 2.6 mbpd. To make matters worse, refining problems have forced several products out of the normal production line. Finally, it is hard to quantify the effects of the pressure placed on foreign companies that have invested in Venezuela’s oil industry. Companies have been forced into joint-venture agreements that make it very difficult for foreign investors to consider our country as a secure investment destination.

As is the norm for opposition types he can't be bothered to get basic facts right. First, he talks about people being fired from PDVSA without once mentioning what they did to get fired. Most likely because he too supported the oil strike. Then he falsely claims that "as a result" Venezuela's oil production is down. But again, not true. The decline came in 1999 when cutbacks were intentionally made. The production in 2005 is the same as 2001 so he is giving us nothing but the standard opposition distortions.

Moreover he thinks Venezuela having re-written contracts to collect a fair share of taxes and royalties will deter foriegn investors. If all the foreign investors want is Venezuelan oil to be given to them for almost nothing then its probably a good thing for them to be scared away. All the oil operations that the foreign companies are operating make less money for Venezuela than if the country simply pumped the oil itself. So the approprate thing to say to big oil is "don't let the door hit you on the way out".

Then he gets to his vision for Venezuela's oil industry:

The future for our country, undoubtedly, is to build a strong and growing oil industry. Reaching production levels never reached before, levels that could generate income that would allow Venezuelans to benefit directly, should be a primary goal.

So lets see, in the 1990s Venezuela opened up its oil industry to foriegn investment, had the government pour in billions of dollars to greatly expand output, and what it got in return was $8 a barrel oil and greatly reduced revenue. Such a great outcome sure cries out to be repeated doesn't it - at least to opposition minds apparently. Fortunately Venezuelans are smart enough to have learned from the past and not want to see such fiascos repeated. That is probably why Smith is polling only 1%.

So come December 3rd Venezuelans have a choice. They can vote to continue with the current policies of supporting OPEC, restricting production, defending prices, and reaping increased oil revenues. Or they can go back to the policies of the 90's where oil profits are used to increase production with no regard for OPEC quotas and prices go through the floor. There is a very clear choice to be made. I have little doubt Venezuelans will make the right choice


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