In the Newtonian world, every action has an equal and opposite reaction. So it should come as no surprise to any reasonable person, that Exxon would react to autocratic seizing of their Orinoco project assets by Venezuela.
Unfortunately, Chavez and his cronies are far from reasonable. They expected that a company that pulled in $40billion in profits to just roll over. Exxon has secured injunctions in the US, Europe, and the Carribbean against PvDSA to prevent them from selling any of their $12billion in assets before arbitration over Venezuela's seizing of the Orinoco site. The spin from Venezuela is - this is an attempt to create anxiety in the country.
Notice in the article they claim to be producing 3.3 million barrels a day. According to OPEC, the production declined to 2.37 million barrels a day in 2007. Inflation is running at 22.5% and the economy shrunk by 5.3%. Venezuela is a country on the cusp of imploding due to gross mis-management. So what does Chavez do to keep himself in charge? Promise to keep doling out the cash as if oil production is not falling. Which any student of history knows is a recipe for disaster. One day the bread will run out and the people will rise up and reclaim their country.
Now if Exxon wins their case against Venezuela and Chavez has to repay, my what interesting times Hugo will live in. Now if the rest of the country can survive.
2 comments:
I feel bad for the people of Venezuela. Things are likely to go from bad to worse and could get really, REALLY nasty.
I can't wait to see the last of Chavez.
Chavez just might off himself with this latest stunt. It seems only the US has the refineries neccesary to refine the fould brew Hugo pumps out. So Hugo, who's country produces nothing except oil, is pticking off his sole customer. Talk about not understanding economics. If you are a sole supplier, then yes you can play monopoly.. but Hugo is not so is trying to commit economic suicide.
Now for real fun. Crude is selling for about $90/barrel. Lets say Hugo is making $10 profit off each barrel. And he is basing his revenue from oil on the 3.3 million barrels/day but actual production is only 2.37 million barrels/day. So a shortfall per day of 930,000 barrels. Or a shortfall of $9.3million/day. Can we say oncoming crash?
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