VOLUME 2, NUMBER 3, DECEMBER 2002
“THE OIL STRIKE IN
Index
- East Timor and
- Unrest in
- Political Stand-Off
- More Turbulence to Come
· Keep Counting on
- The World as a
· The Mideast Conflict
- The Pro-Israel Lobby
- Changes of Government May Mean Changes in Oil Policy
Editor: Stuart Wilkinson
Director: Mazhar Al-Shereidah
“THE OIL STRIKE IN
Whether or not oil is a synonym of political unrest at this time of the year is yet to be established, but the fact is that in many OPEC member countries things are turning troublesome, to say the least, and that is something to worry about.
East Timor and
After the national independence leader Sukarno was overthrown by a military putch in 1965, General Suharto established a fierce anti-communist regime in
Then, just some five years ago, change was due and Democracy at last had its chance.
People are no longer attracted to Marxist slogans, but calls for justice and social and economic freedom is music to the ears of tens of millions of young unemployed Indonesians. Islam is the religion of the majority, and because Islam, just as any other religion, speaks in the name of the poor and the powerless, any party that embraces the cause of this wide sector’s demands coincides in some way or another with the broad principles of Islam. When these people attend Friday prayers and listen to the Imam’s sermon, they can draw possible parallels between the Imam’s words on the necessity for justice and a popular leader’s speech in a party meeting.
For those who examine the acceptance and spread of globalization in such vast markets as
Theoretically what has just been said does not imply that by definition Islam is opposed to globalization. It is more the question of economic well-being, as a sociological pattern, that determines Moslem people’s attitudes towards imported cultural values. That is to say that the more cosmopolitan and prosperous a Moslem society is, the less resistance it offers to globalization. On the ground, however, it is difficult to find frequent examples of such societies in the
The
Now elections are due in this highest populated African country. The US views West African oil as a promising source of future supply, so if Nigerian President Obasango is to repeat his mandate, he should first show that he can subordinate the northern traditional leaders who pretend impose Islamic ”Sharia” laws in the country.
As war against Iraq seems to be inevitable, in the neighbouring Iran confrontation becomes more belligerent between the radical Islamist establishment and the liberalist section - a scenario widely recommended by think tanks close to policy makers in Washington, while others consider President Khatami as too weak. (
On the other coast of the Gulf,
It remains to be seen how the “Guardian of the Holy Cites” , will explain this concession to its fellow Arab countries in the Arab League where a unanimous resolution was adopted to oppose any military act against
In case war breaks out it is much more comfortable for the US commanders to count on a variety of Arab-Moslem of allies bordering Iraq such as Kuwait, Saudi Arabia and Jordan, in addition to closely located military bases in Qatar, Bahrain and Oman. Non-Arab Turkey is a definite friend of Washington, especially after the recent visit of Under-Secretary of Defence, Paul Wolfovitz, to Ankara and his promises to convince the Christian European Union to accept Moslem Turkey in its ranks.
These promises by Wolfovitz, nicknamed the " Unilateralist ", are most appealing and doubtful when it comes at the same time as voices as that of William Pfaff (International Herald Tribune, 5th Dec. 2002) “Stop calling Islam the enemy”, because the under secretary of defence is opposed to the very nature of European foreign policy thinking and is at the same time part of the neo-conservative intelligencia in Washington.
Unrest in
So far,
At the same time it should be remembered that no matter how President Chávez emphasised his government’s adherence to the OPEC quota system, 2001-2002 figures show another story. Yet from the
Political Stand-Off...
Additionally, the oil strike has complicated matters both inside and outside of
“The eleven day strike in
Before the strike PDVSA produced 2.85 million barrels of crude, with l.3 million barrels per day exported to the
The strike has led to a virtual shutdown of
The main users of Venezuelan oil imports into the
“At first glance PDVSA-owned US-based CITGO appears to be most vulnerable to the strike. CITGO refines 865,000 b/d, with approximately 500,000 b/d of crude provided by
Other
ConocoPhillips’ upstream production from the heavy crude project Petrozuata, in the Orinoco Oil Belt, has been influenced by the inadequate supply of hydrogen to run the coker in
Though the impact of the Venezuelan strike is a negative for Petrozuata, and will trigger a scramble for substitute crude feedstocks at the
Valero says that the diminished supply of gasoline has benefited its refining margins. Valero, which refines 1.5 million b/d, reports that
Venezuelan oil’s presence in the US East Coast is a result of PDVSA’s acquisition of refining facilities under the policy of “Internationalization” that had its roots in the early 1980s.
The policy of the Rafael Caldera government, immediately prior to that of Hugo Chávez, with regard to Venezuelan participation in US-Based refinery operations can be seen clearly from the following extract from a PetroAnalysis sister publication Enfoque Petrolero in 1997:
“PDVSA currently has full or part ownership in six
Venezuela’s determination to find a home in the US for as much of its growing crude oil production as possible - whether by acquisition, expansion, or supply arrangement - may have the spin-off effects of boosting overall US crude oil processing capacity and of reordering the top ranks of the US refining industry.
Energy Compass says that PDV is in one stage or another of talks with several
Talks with Basis come on top of discussions with Mobil for a possible PDV stake in that company’s 160,000 b/d refinery at
Petroleum lntelligence Weekly adds that PDVSA continues to expand its heavy crude sales into the
Coastal Corp. plans a $200 million upgrade at its 100,000 barrel per day
And Lyondell-CITGO refining Co. is ‘debugging’ a $1.1 billion upgrade of its
By the year 2000, CITGO had become the “lance-point” of PDVSA’s international operations.
More Turbulence to Come...
“As the strike enters its third week, the level of Venezuelan oil production has fallen to below 1 million b/d from the 3 million b/d level produced before the strike. Were the dispute to be settled immediately, then allowing for the lags to return oil flows to normal, the loss to world supplies might be limited to 30 million barrels, and the loss of US imports limited to 20 million barrels. However, the obvious cause for concern is that an immediate and lasting resolution does not appear to be particularly likely at this juncture. There is a growing fear in the market that
We would not at this stage wish to play down the gravity of the Venezuelan crisis. It is not even possible to rule out a scenario where Venezuelan events become as important to oil markets in 2003 as the unfolding of the situation in
On Christmas Eve it was reported that:
“Crude production has fallen to below 200,000 b/d compared to 3.1 million b/d in November. Exports have averaged 200,000 b/d since PDVSA declared force majeur more than two weeks ago because of the strike. In contrast, the country exported 2.7 million b/d in November. The refining complexes that have a capacity of 1.3 million b/d have reduced their production to 60,000 b/d.” (4)
Part of the seriousness of the problem derives from the relative lack of fungibility, i.e. “substitutability”, thus, logically, touching on the question of Energy Security:
“...First, short haul crude oil is not, in the short term, substitutable by long haul supplies. This is one problem with the view that
The second source of low substitutability is quality of oil. The bulk of world supplies are medium crude oil (with a gravity of between 25-35°API). There are many sources of medium crude oil, and if worst comes to worst, heavier grades can be lightened in a refinery by blending with light grades or condensate. However, for refineries geared for heavy crude oil (i.e. most of the refining industry in the US Gulf), running lighter grades means that output yields cannot be optimized.” (5)
Keep Counting on
Geo-political and geo-strategic considerations play a key role within the wider context of energy security with respect to safety or control of supply. It is clear that
US relations with
Even with regard to
If Washington persists in its hostility towards Islam, then the US will have a serious need to locate very large reserves, but first of all not in Islamic countries, and second it should prevent competitors from having preferential access to Islamic oil reserves and supplies. When one puts someone in a corner and the enemy has no way of surviving, even blowing up all his oil wells will not solve the problem: it took Kuwait, for example, just less than a year to be exporting again - so no matter how big is the damage it can be repaired.
It is quite amazing to see how isolated the
It would be extremely lamentable if the
The World as a
In its 27th June issue, The Economist published an interesting article by its editor Bill Emmott “Present at the Creation” in which the idea is presented that “for the first time (...) since 1989 (or) 1945,
Quite different views are expressed in the July-August issue of Foreign Policy in the article “The Eagle has Crash Landed” where the senior research scholar of
What is interesting here is the fact that a variety of theories and schools of thought are focusing simultaneously on the
For those whose main interest is the structure of the oil world and the international relations that govern it, the above-mentioned essays are of genuine importance. This stems from the assumption that oil constitutes a basic issue, and its ownership, dominance or control contributes basically to any superpower’s strength. Without such due strength, arm-twisting has shown itself to be effective. This, perhaps, reflects a policy motivated by fear, or as William Pfaff wrote on 4th July in the International Herald Tribune “When Patriotism turns into Paranoia”. But just how long can this last without backfiring?
Generally speaking, the world’s largest oil reserves are located in small and weak countries that are unable to defend themselves from aggressions carried out, hypothetically, by a superpower let alone the sole hegemonic one – the
Were the
Reserves-Consumption-Production
| Country | Reserves (billion bls) | Consumption (million bls) | Reserves to Production Ratio (years) | Duration of reserves if production for domestic market only |
| USA | 28.3 | 18.745 | 10.4 | 4 |
| Europe | 19.1 | 16.0 | 7.7 | 6 |
| China | 24.0 | 4.8 | 20 | Less than 12 |
| FSU | 65.0 | 3.5 | 23 | 51 |
Source: “El Petróleo en Tiempos de Reordenamiento Geostratégico Global”, paper given at Pdvsa CIED, Mazhar Al-Shereidah, 6th March 2002
The problem remains as a complex one in the
One can also forget about paying attention to rhetoric about national security...
On 13.03.02, the Senate voted down a proposal by John Kerry and John McCain to raise mileage standards on automobiles. What does it mean? Was it yet another victory for special interests at the expense of the national interest?
No, it was much worse than that. You do not know with how little wisdom the world is governed. Paul Krugman claims.
What prevailed 13.03.02, Krugman says was an alliance between conservatives who hate the very idea of conservation, on one side, and union leaders trying to demonstrate their influence by making politicians jump.
Take for example, the Case of ANWR, the Arctic National Wildlife Refuge...
The New York Times recently had an eye-opening article, that oil companies are not behind the push for drilling there - indeed, they are notably unexcited by the prospect. Studies by the U.S Geological Survey suggest why: Arctic oil is so expensive to get at that it’s barely worth extracting at current market prices. For energy companies it’s the rest of the Bush Energy Plan, which would give them about $35 billion in tax breaks and subsidies, that really matters.
ANWR drilling would supposedly create 700,000 jobs. One suspects that the union's leadership knows that this figure is at least 10 times too high.
There are signs the Bush strategy of highlighting the current crisis might be starting to work. Scott Segal, an energy lobbyist, predicts that the oil and petrol price increases would be “foremost in the minds of the senators” as they continue to debate the bill. “It’s hard to deny the need for more domestic production,” he argues.
Spencer Abraham, the Energy Secretary, called for the immediate passage of a bill that includes “a responsible ANWR component in the Senate energy bill”.
The
Before conflict flared up between Israel and the Palestinians, a there was a contest between the claims of oil drillers versus porcupine caribou, all indications were that the caribou were poised to win the war on the Senate floor.
Republican supporters admitted to being well short of the 60 votes needed to stop them.
But new threats of cutoffs in Arab oil are giving a higher profile to proposals to develop alternative sources of domestic energy.
“As the Mideast continues to spin out of control, folks are taking another look at the
Drilling in the wildlife refuge would produce more than 1 million barrels of oil a day from perhaps 10 billion barrels of recoverable reserves, he said.
US officials are increasingly concerned that the surge in oil prices that has accompanied the latest phase of the struggle between
During 2001, lraq was the sixth largest
The Pro-Israel Lobby...
Republicans are enlisting leading Jewish or pro-Israeli groups - many of whom have never taken a stand on environmental politics - to lobby wavering senators on behalf of ANWR. The views can be related to internal pressure groups in the
“Back in the late 1970s when there was a debate over the building of the
Other groups that are now urging senators to move on comprehensive energy legislation include the Zionist Organization of
“Generally, Jewish groups have been very liberal on environmental issues. But I think that now Jewish organizations understand that energy independence is such an important issue that it’s even more important than the environment,” he adds.
New oil from the
A bill backed by Mr. Bush passed the House of Representatives late last year, but is stalled in the Senate. It gives the oil and gas industry more than $15bn in new production incentives over the next five years, in addition to the $15bn already in effect, according to Keith Ashdown of Taxpayers for Common Sense, a pressure group that argues for fiscal restraint.
The world is holding 7.3-7.8 million barrels per day of excess oil production capacity, its highest levels since 1987. Two-fifths of that excess is located in
It was the sudden spike in oil prices following the Iraqi invasion of
Now George W. Bush is hoping to wrest control of the Senate back from obstructionist Democrats. A weakening economy is likely to hurt Republicans, especially if blame can be laid at their door. (8)
Once the general strike was declared in
The Bush Energy Plan itself recognizes that in the Western Hemisphere Venezuela has no substitute, and thus one can appreciate further the importance of the current oil strike for both
The Plan also recognises the fact of the grave
One can read the following, for example:
“The US influence on overall world markets is substantial in terms of production and consumption (...) In 2000, nearly 55% of US gross oil imports came from four countries: 15% from Canada , 14% each from Saudi Arabia and Venezuela , and 12% from Mexico US
And on page 8-10 of the Energy Plan one finds the following:
“
· In this hemisphere, to emphasize the point, Venezuela has no substitute. And this is because of the following:
· The manifest official disposition to continue being a secure and trustworthy source of supply.
· The volume and type of crudes supplied.
· The quantity of refined products that it exports.
· The refined products that Curaçao exports.
· The oil deposits that PDVSA maintains close to the USA.
· The volume that CITGO refines, distributes and sells in that market.
· The matrix of links and perspectives that so many US companies have with the hydrocarbons sector in Venezuela.
These facts are of significant importance, especially when one considers that:
“It doesn’t matter how many holes are drilled in American territory, we will simply not be able to drill our way to energy independence”.
(The New York Times editorial of the 18th February 2002)
Competitive costs of production are determinant for the feasibility of projects with strategic importance. This rule has greater validity in the case of countries that do not use force as a resource of power.
On 14th March
Eleven years have passed since then. Again there is war in Central Asia and perspectives of war in Southwest Asia (the
In 1991 the OPEC oil basket had an average price of $18.62/b, which in constant 1960 dollars represented $3.08/b. At this moment, March 2002, the OPEC basket stands at $3.24/b in real terms and in current dollars is $18.60/b.
One can verify the great similarity of the conjuncture during which the above quoted article was written with the present situation. The values are almost identical. In 1991
In comparison,
The Venezuelan newspaper El Nacional (17th February 2002) published an article the author of which proposed that the country should leave OPEC and raise oil production to 8 million b/d.
Looking at the situation, to produce 3 million b/d
The alternative of producing at capacity was the supposed unfitness, which led the author of the article in 1991 to give the sentence “There is nothing more unproductive than useless effort”. To increase production now would be to repeat the painful experience of 1997-98 that ended in Venezuelan crude prices at around $5/b. (9)
Veteran PDVSA oil experts with inconsistent positions have been of little help to President Chávez’s efforts to formulate a long-term oil policy. Rather, the government found itself in the unpleasant position of fighting its own national state oil company. The private news media systematically voice PDVSA’s point of view, whilst the government lacks proper information channels.
As one can see from the following published in a PetroAnalysis Editorial in June 2002, the
“Neal A. Stanley, vice president of the western region for Forrest Oil, told the Senate committee that whilst low gas prices had helped spur the economy the oil and gas industry is a ‘shadow of its former self’ having lost 400,000 jobs since 1981. The domestic oil and gas business had been in a severe depression since the oil price collapse of 1986, he added, “In most areas, wells could not be drilled economically due to the low oil and gas prices.” According to
Mark Helm, spokesman for Friends of the Earth, said “If they really want to drill for oil, they should start by drilling right under
In the opinion of Matthew R. Simmons, president of Simmons & Co, the
Senator Jeff Bingaman of
President of the American Petroleum Institute, Red Cavaney, said “The US is operating at or near its maximum in most energy production areas … We need everything.”
This can be seen from the fact that
Nevertheless, the unpredictable ups and downs of oil prices would still play a role. The
Aware of his country’s need for Venezuelan oil, Spencer Abraham, US Energy Secretary, emphasized the interactive nature of the oil relationship between the US and Venezuela, saying:
“In spite of many political matters that enter into the dynamic, in the most significant levels there is a certainty that Venezuela will continue working with the United States in its oil sales … our role as consumers is a source of stability for the Venezuelan economy.”
One may ask what will happen to the stability of the Venezuela economy if the country’s oil is not sold to the US
Alvaro Silva Calderón, the then Venezuelan Oil Minister under the Hugo Chávez administration, when he presented a paper at the University of Georgetown on the 9th February 2001 made it clear that:
“We are and will continue to be secure and trustworthy suppliers. We need a fair recompense for oil, not only to be able to undertake the necessary investments in order to build and have installations to support a petroleum structure that allows the recuperation of invested capital, an adequate profitability for the investors, and fair prices that serve to achieve the economic well-being and social stability which are indispensable for the favourable development of economic activities and for the fulfilment of our international compromise as secure oil suppliers.”
It should be understood that the “many political matters” referred to by Secretary Abraham had nothing to do with oil prices but rather with the very essential political concepts of Hugo Chávez. This takes one to the subject of oil prices.
Here it is worth noting some observations made by the Venezuelan Fransisco Parra, who was OPEC Secretary General from 1962 to 1965 and who currently is still active as an international oil adviser. He was writing a reply to the Editor of the Middle East Economic Survey (MEES) on a report on the Second International Oil Summit sponsored by the Institut Français du Petrole and Petrostrategies, held in
“I was surprised to read the reported comments of Robert Priddle, Executive Director of the International Energy Agency (IEA). He said: ´Don’t be mislead by occasional remarks last year by representatives of consuming countries appearing to endorse a target price of $25/b… continuing satisfaction with such a price should not be counted upon.’ … It is perfectly clear that at this juncture, a significantly lower crude oil price would not suit the US Administration at all, as it seeks to justify a new, supply-oriented energy policy with emphasis on the development of domestic resources … I for one take the US Administration at face value when it speaks of a “low 20s” price for oil. And everyone understands the reasons for the fudge involved in not picking a precise figure or spelling out the grade of crude to which it refers … Mr Priddle, though conceding that if the price of oil is set at an “artificially high level”, it might be there “temporarily” by producer intervention, but “sustained intervention which holds the oil price at an unrealistic level contains within it the seeds of its own destruction.” (11)
In November 2000 oil prices were no longer front-page news around the world:
“This is a healthy situation and it seems to be generally accepted that prices around 25 dollars are fine.
Through the band system OPEC supplied the market with sufficient crudes in spite of the resistance of many of its important members, and
OPEC Cuts and Increases
| Date | Action |
| 2000: 29 March | Increase prod. 1.7 million b/d |
| 21 June | Increase prod. 1 million b/d |
| 11 September | Increase prod. 800,000 b/d |
| 30 October | Increase prod. 500,000 b/d |
| 13 November | Maintain levels |
| 2001: 17 January | Reduce prod. 1.5 million b/d |
| 17 March | Reduce prod. 1 million b/d |
| 5 June | Maintain levels |
Evolution of Oil Prices 1998 to 2001 ($/b)
| | Venezuela | OPEC Basket |
Year 1998 | 10.57 | 12.33 |
Year 1999 | 16.04 | 17.47 |
Year 2000 | 25.91 | 27.55 |
| First Quarter | 25.42 | 26.03 |
| Second Quarter | 25.37 | 26.34 |
| Third Quarter | 27.14 | 29.22 |
| Fourth Quarter | 25.87 | 28.56 |
Year 2001 | 22.11 | 24.99 |
| 2001 First Quarter | 21.94 | 24.36 |
| April | 22.29 | 24.38 |
| May | 22.70 | 26.25 |
| June (month) | 21.71 | 26.65 |
| June 11Th to 15th | 22.12 | 27.42 |
| June 18th to 22nd | 20.77 | 25.69 |
Source: Ministry of Energy and Mines, Venezuela
What was disturbing was a statement made at that time by State Secretary Madeleine Albright on relations with
It can be documented that during the last two years there has been a very positive working atmosphere between the Venezuelan oil authorities, mainly in the person of Alí Rodríguez Araque, and Energy Secretary Bill Richardson. Furthermore, Rodríguez’s appointment as OPEC Secretary General was classified by
It is very well known that since the appointment of Alí Rodríguez Araque in January 1999, Venezuelan official oil policy has been in favour of supplying the market with sufficient oil, but the then oil minister Rodríguez had always stated that there was a dangerous situation in hand, that of oversupply. He had also stated that the problem in the
When the time comes to foot the bill, however, neither OPEC nor
As far back as October 1990 PetroAnalysis has been considering the question of oil security in the Western hemisphere. In the October report of that year, the Editorial “
“
In December 1988 once Carlos Andrés Pérez became president of Venezuela for the second time, his first period was 1974-78, one of the then PDVSA Directors, Carlos Vogeler Rincones, gave a paper in Washington on “Mutual Concerns; Mutual Interest: Venezuela’s Role in US Energy Security”. Then, as now, this subject ranked as most important in Venezuelan oil policy. PetroAnalysis published extracts in the January 1989 report:
“As a principal supplier of petroleum and petroleum products to the
Perhaps the most significant, and successful, development to date has been our national oil industry’s ability to fortify its resource base. In recent years we have engaged in an intensive domestic exploration program that has been very successful, indeed beyond our initial expectations. During the last decade, our proved reserves of conventional crude oil have increased over threefold to more than 58 billion barrels. In comparative terms,
Particularly noteworthy is the fact that we have recently made the most important discovery of light and medium crudes in the last thirty years. Initial results indicate the existence of giant accumulations of petroleum in the northeastern part of the country which could ultimately rival
Nevertheless, the magnitude of
In addition to the enormous resources of the
Our approach to downstream investments, like all of our policies, is fundamentally designed to enhance stability in the oil market. We believe that operational continuity is an important element for this stability. For that reason, we have entered into the downstream sector in association with highly reputable companies that have an established presence in the market.
As you may know, we have made significant investments in the refineries and distribution systems of two companies in the
These joint ventures, although different in refining capacity as well as in marketing reach, provide our national oil industry with dependable markets in
These business operations reflect my company’s willingness and desire to link itself to its natural markets in the Atlantic basin through commercial relationships with stable companies. These relationships provide common ground for long-term cooperation between our two countries.
Certainly, it is in the best interests for both nations to foster this cooperation.
To conclude, let me say that at Petróleos de Venezuela, we believe that our nations’ complementary needs can become a source of mutual cooperation in Hemispheric energy affairs: secure supplies for the
The ”idle production capacity”, referred to by Carlos Vogeler Rincones, was fully used to provide the
“In 1991, President Bush telephoned Venezuelan Head-of-State Carlos Andrés Pérez, known by his initials as “CAP”, again to see if they could meet during CAP’s private visit in May to the
On this subject James Baker, at the 1998 CIED conference in
In a light-hearted way, a cartoon referring to - or perhaps even reflecting in some eyes - US-Venezuelan relations at that time was published in a local daily: Head-of-State Carlos Andrés Pérez was saying “The New International Order is advancing so quickly that this year we are not going to send letters to Father Christmas: we are going to ask Bush directly..” (16)
Former president Bush, Bush “
The US-Venezuela oil relationship can be further clarified by considering what PetroAnalysis published in the 16th August 1990 report:
“Current events in the Gulf again bring up oil-related issues between
There are changes occurring In the Gulf which affect the whole world situation including
·
·
·
These considerations put
Historically,
During the Venezuelan Foreign Debt negotiations the
The man in the street here is asking why once again Venezuela is expected to pull people out of the mud. Particularly since Venezuela is in no way responsible for the complex dilemma now occurring in the Middle East. And especially when major oil companies ‘are just plundering the US people’ according to certain US Congressmen.
Venezuela and OPEC...
In this context of ‘plunder’ - and since OPEC is usually held responsible for price hikes - it is time for people in the US
Crucial decisions on production capacity expansion...
Now it's a political
Questions may also be raised about Orimulsion's potential market share in the power utilities sector. All this is negative for
One should also remember that the Chávez government offered
At the end of 1990 the
This brings up the need to look at the situation in a context of reciprocal security, an idea which takes importance when the Bush Administration is suggesting the setting up of a Hemispheric Common Market.
US Gratitude to
The question is for how long can the
These countries are going to return to the market sooner or later regardless of whether or not OPEC survives. Oil producers just as anyone else, have a memory for good and bad acts. They will definitely consider that increasing oil production and supplies under the present circumstances to the
Two weeks after the invasion of
He stated that
· Increase production and oil exports by an additional 500,000 b/d. to help the
· Create a hemispheric strategic oil reserve to confront situations similar to what is occurring now. For this,
Some people in the
Although one could consider that reciprocity entails bargaining. You don’t get anything for nothing, even between friends.
True US-Venezuela reciprocity? ...
Now, there are voices in the US asking allies who are highly dependent an oil imports from the Middle East, such as Japan and Germany, to share the financial costs of the US military actions in that area. On the same basis, shouldn’t
Six years later in 1996, former president Bush was in
“On the 20th and 21st of November, PDVSA’s subsidiary company CIED - the International Centre for Education and Development - held the conference ‘Petroleum: Opening to the 21st. Century’. Both the former
George Bush, President of the
“Six years ago I asked the nations of the regions to join in something we call ‘Enterprise for the Americas’, among other things, I called for creating a free trade zone throughout our hemisphere. Remarkable progress is taking place - reworking debts, democracy, stability, the market-based economy is on the move, and I marvel at the great strides your region - which is vitally important to my country - has made. Today Latin
In late 1997 - just a year before the presidential elections -
“In a decision regarded by many as quite advantageous for the Venezuelan oil industry, the country was accepted to join The Energy Council of the United States as its second international partner after
Regarding this, in his speech during The Energy Council annual meeting held in Anchorage, Alaska, on September 26th, Foreign Minister in the Rafael Caldera administration Miguel Angel Burelli Rivas said the decision showed that ‘Venezuela is regaining its key role as an efficient and reliable oil producer, and it is ready to face the energy challenges of the 21st century.’ (19)
Changes of Government may mean Changes in Oil Policy...
As may be appreciated, these events were occurring before, and face to face with, the 1998 presidential election year: the newly-elected president of the country would be taking office at the beginning of
Hugo Chávez won the elections with the highest percentage victory in Venezuelan voting history.
The Venezuelan resource base had not changed dramatically during the decade since the senior PDVSA executive announced, in December 1988, the ‘most important discovery of light and medium crudes in the past thirty years’. In spite of heavy investments, PDVSA was unable to make ‘the existence of giant accumulations of petroleum in the north-eastern part of the country’ materialize.
The new administration in
“It has yet to implement the cuts pledged in the last agreement, although it promised that it would do so by the time of 23rd March OPEC meeting. However, there is a strong opposition on the part of domestic service companies, oil trade unions, the press, PDVSA and political parties to any further cuts. Venezuelan oil officials argue that their country has cut the most in terms of the percentage of its total output, and they want to see the other large producers bear their fair share of the cuts this time around. It is therefore understood that
Within the context of a new Administration with a different vision of what the Venezuelan oil industry should be, or perhaps what the industry should emphasize as its priorities, PetroAnalysis in its 9th February 2001 Editorial considered that “A Fair Price is Possible” since it was clear that President Chávez could not be successful if he had continued the policy of volume maximization pursued by his predecessors.
“Through George Bush the US was able to take control of the Gulf and its oil. Venezuela, in spite of its geographical distance from this area, was the oil exporting country that received the most ‘collateral damage’ in strategic terms. This was due to the fact that the Venezuelan oil doctrine which proclaimed the country to be a ‘secure and trustworthy supplier of oil in times of war and peace’ had lost its relevance. Washington had imposed the ‘Pax Americana’ on the world, converted the Gulf into its ‘Mare Nostrum’, and put the ‘rebel crudes’ from Iran, Libya and Iraq under embargo. Secure oil supply was no longer a Venezuelan logo: it was universal. This, however, was only one part of the structural damage that Venezuelan oil policy suffered. The other no less painful knock was that OPEC, a Venezuelan creation, lost the little autonomy it enjoyed: just the same as all the other international organizations it had to adapt itself to circumstances and bow down.
All Agree On Need For Higher Prices...
In Venezuela it was not viable to continue governing the country within a democratic system with such low prices. Maximum production capacity had been reached, but each barrel added had contributed to a further lowering in the price, and thus to a lower income. The scenario of the ‘survival of the fittest’ was shown to be not viable for PDVSA.
The Venezuelan policy of production expansion explicitly led to the displacement of more expensive barrels from the market. But it was here that some sensitive toes were stepped on: specifically, the member companies of the American Petroleum Institute.
This coincidence of interests, as outlined above, is what explains the recuperation of prices from April 1999.
The instrument used for the recuperation was a reduction in the offer and OPEC, which supplies 60% of oil traded, was the vehicle to achieve this common objective. Norway, Russia, Mexico, Oman and Angola co-operated with this common objective, and discipline on Venezuela’s part contributed to price recuperation.
The Department of Energy in Washington observed this recuperation with satisfaction until the end of January 2000 when the price seemed to stabilize around $ 25/b. The country that consumes the most oil in the world produces only 40% of its needs and its dependence on imports is increasing. Furthermore, for further production to be attractive in Alaska the oil price needs to be $ 25/b, not $ 12/b as it was in 1998.
It was a difficult balancing act in an electoral year. Bill Richardson was completely successful, asking his allies in OPEC to increase all that had been cut in
The strategic value of Venezuelan oil in this hemisphere and in these conditions is recuperating. There are more opportunities for the success of a scenario of fair prices for Venezuela around $ 28/b by means of discipline in OPEC, co-operation with other producers and dialogue with consumers.
Now that president Chávez is on his way to Saudi Arabia, there is every opportunity to draw up the main pillars of a common strategy for the achievement and stabilization of the above-mentioned fair price. It is not necessary to argue with anybody, neither to look for unnecessary antagonism.
The world needs more oil to be discovered. It has to be looked for by sharing responsibilities and assuring remunerative prices even for the marginal producer. There is space in the market for everyone.” (20)
On various substantial questions and in different geographical regions, the United States, previous to the tragedy of the 11th September, had serious differences with a considerable number of countries in the world and with its own population: the US did not ratify the Kyoto Treaty; there were anti-globalization protests; growing hostility to G-7 Summits; the International Penal Court for War Crimes was opposed; the Earth Mines Treaty was not signed; the SALT agreement was rejected; the anti-missile shield that worries and threatens Russia and Europe came up; there was confrontation with China; the peace process in the Middle East failed; exclusion from the UN Commission of Human Rights; withdrawal from the Anti-Racist Conference, Durban South Africa; and no desire shown to agree on a dialogue between oil producing and consuming countries.
In its recent attempt to establish a global geo-strategic table that corresponds to its interests, the US government is recurring to methods, language and actions that deepen its distancing from the rest of the international community.
An interesting thing for the group of oil exporting countries is the determination of President Bush (25th February 2002) to ‘reduce American dependence on oil imports from volatile Middle East nations, that, to be frank, sometimes... do not like us very much’.
It is implicit here that Venezuela’s importance was growing, but the oil strike in April of this year was both bad news and a bad omen, putting Venezuela on Washington’s agenda. Now more so, with the general strike in the country and oil exports at almost zero. (21)
The present world context is characterized by an international system in which “unipolarity” prevails...
The unipolar superpower – that is, the
- Establish its military dominance through ‘Star Wars’.
- Obtain control of oil.
Whilst the first aim is mainly related to NATO,
The superpower, so far, has named only three countries as integrants of the ‘Axis of Evil’:
Furthermore it has announced its determination to engage in ‘Regime Change’ as a means of achieving its strategic objectives. Where this practise is going to be used is yet to be seen. Now while nobody doubts that
President Bush has had to postpone his war plans in
Under Hugo Chávez, however,
Bush cannot build a strategic alliance with a Latin American leader like the present occupant of “Miraflores”, who in former president Carter’s words came to power through “a peaceful democratic revolution”. If there were to be one, a possible “regime change” would have to be internal. This would have to occur very soon because timing is everything... the PDVSA strike is losing sympathy amongst the public and they may turn anti-American as well. □
References:
(1) JP Morgan, 13 Dec. 2002. “PDVSA: Strike Disrupts Exports; US Refining Margins Improve”
(2) As above
(3) Enfoque Petrolero, March-April 1997. “Targeting refineries in the
(4) El Universal, Caracas, 24 Dec. 2002
(5) JP Morgan, December 17th, 2002. “Why
(6) Petroanalysis 25th June, 2002. “
(7) Petroanalysis 14th July, 2002. “Unilateralism versus Arm-Twisting for Oil”
(8) Petroanalysis 10th April, 2002. "Timing is Everything in Energy Politics"
(9) Petroanalysis, 21st March, 2002. “The Promotion of “Useless Effort”
(10) Petroanalysis 27th June, 2001. “US: Energy Woes”
(11) Petroanalysis 10th July, 2001. “Who’s in the Driving Seat?”
(12) Petroanlysis 15th November 2000. “Issues in Play”
(13) Petroanalysis, October 1990. “
(14) Extract from the speech “Mutual Concerns; Mutual Interest:
(15) Petroanalysis, May 1991
(16) Petroanalysis November 1990. “What will come out of Bush's Visit?”
(17) Petroanalysis16 August 1990. “Time of Crisis...
(18) Enfoque Petrolero Nov-Dec 1996. “Major Conference in Caracas”
(19) Enfoque Petrolero October 1997
(20) Petroanalysis 9th February,2001. “A Fair Price is Possible”
(21) Petroanalysis 7th March 2002. “The Minute of Silence has Ended”
