Monday, July 23, 2007

Wanted: Reporters with calculators. 

Yesterday President Chavez famously asserted that foreigners who said that Venezuela was a dictatorship or otherwise spoke ill of the government would be expelled from the country. Certainly it is frustrating to see the non-sense that emanates daily from foreign correspondents based in Venezuela. But personally, I think Chavez is being a bit harsh in this case. What may seem to be slanderous accusations meant to smear the government may instead simply be the reporter not understanding the subject at hand, or even benignly, not knowing how to do simple calculations.

Take this article in today’s New York Times by Simon Romero. While talking in part about a corruption scandal that has erupted involving the purchase of some drilling rigs it also makes claims about Venezuelan oil production being lower than official figures indicate:

Venezuela, with some of the largest oil reserves outside the Middle East, officially claims to produce almost 3.1 million barrels of oil a day, but institutions like the International Energy Agency in Paris put output at 2.37 million barrels a day, down about 230,000 from a year ago.

Other energy analysts say output problems are potentially even more broadly troubling. The country’s oil exports fell 15 percent while overall production dropped 7 percent in the first quarter of this year, said Ramón Espinasa, a chief economist at Petróleos de Venezuela in the pre-Chávez era and now a respected consultant, citing both the difficulties with hiring rigs and a surge in domestic fuel consumption driven by subsidized prices.

Combined with lower global oil prices during part of this year, Venezuela’s income from oil exports may decline by about 24 percent in 2007, to $45.6 billion compared with $60.4 billion last year, by Mr. Espinasa’s estimate.

Wow, Venezuela producing 2.37 million barrels and declining. Sounds bad! Makes me want to see what else was said. Unfortunately I am not a New York Times reporter so I didn’t get invited to the presentation. Nevertheless some of the slides from the “respected consultant” Espinasa have made it into the public domain.

This one looks nasty:

Total, production is only 2.37 million barrels per day and declining. Almost as bad, domestic consumption, shown by the blue line, is steadily increasing. With production declining and domestic consumption increasing exports have to be taking a hit and indeed they are according to this slide:

Right now Venezuelan oil exports are down to 1.6 million barrels per day from 1.75 million last year.

Now this is where things get interesting. You see, one of the things reporters are supposed to do is ask questions, especially when information appears suspect. So had Mr. Romero been on top of his game he would have raised his hand and said something like this:

Mr. Espinoso your chart shows that oil exports last year were 1.75 million barrels per day. You also said that last year revenues from Venezuelan oil exports were $60. 4 billion dollars.

Yet when I multiply 1.75 million barrels per day by 365 days by $56 per barrel, last years average oil price, I come up with $36 billion dollars, not the $60.4 billion you give. Where is the extra $24 billion dollars that Venezuela actually got coming from if it is exporting as little as you claim?

Could the explanation for where all that money is coming from be that the country is actually producing as much oil as it says it is?

Boy wouldn’t it have been nice to have been a fly on the wall when that question got asked? One of the most obvious things to do when someone tells you how much oil is being exported and how much export revenue is being generated would be to see if those numbers are consistent. And in this case they are so wildly inconsistent as to make it clear that the “respected consultant” giving this presentation either has no idea what he is doing, or, more likely, is trying to mislead.

Why did this very simple question go unasked by our intrepid New York Times reporter? I really don’t know. Maybe he was distracted for a moment by a very good looking RCTV correspondent (gosh aren’t we glad they are back). Maybe he forgot to bring his pocket calculator with him. Or maybe he just doesn’t have a clue about such things so that no matter how obvious the question might seem to us it never occurred to him.

Regardless, the point is that Chavez shouldn’t jump to conclusions, assume this guy is out to slander Venezuela and have him flown out of the country. After all, maybe this misunderstanding could be completely resolved by just buying the guy one of those cheap little solar powered calculators.

And just to show my willingness to help, if Mr. Romero reads this "respected blog" tomorrow I might tell him what the deal is with the drilling rigs.


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