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By Robert Rapier on Jan 18, 2008 with no responses

Chavez Had Me Fooled

It seems I have been wrong about Hugo Chavez. I had thought the man didn’t have a clue about the oil business. While companies like ConocoPhillips were pulling in $15.5 billion profits*, they were investing $15.3 billion back into the business. Chavez, on the other hand, was siphoning off the profits of the national oil company of Venezuela, PDVSA, and spreading them among the public in support of his socialist platform. (Shame on those who complain about food shortages). Some, like me, probably thought “A few years of this, and he won’t have any oil profits to spread among the public.” How little I understood of his master plan.

You see, at first glance it does seem like his strategy is backfiring, as PDVSA is reportedly “facing growing operational problems” because of its failure to focus on its core business. It seemed like Chavez was running the business into the ground, as if Oil Watchdog had suddenly started to run the show. But that was before I read a story yesterday that revealed the man’s brilliant strategy:

Citgo cuts hundreds of Louisiana contractors-sources

HOUSTON, Jan 17 (Reuters) – Citgo Petroleum Corp cut more than 500 contract maintenance workers in late December at its Louisiana refinery as part of a program to increase returns to corporate parent Venezuelan state oil company PDVSA, according to sources familiar with the company’s refinery operations.

PDVSA is a key revenue generator financing Venezuelan President Hugo Chavez’s social development programs, but has drawn criticism for ignoring operational problems that have reduced oil and refined product output in Venezuela.

“Citgo wants to send 100 percent of what it makes to Venezuela,” said a source. “They’re only spending what’s needed to meet legal and regulatory obligations.”

It’s sheer genius. The profits from the oil company operations can be used to pay for social programs, and then the savings from job cuts in the refinery can be used to fund the oil company operations. Oh sure, there are naysayers, even internally:

Without the contractors, preventative maintenance at the refinery may fall off, the sources said.

“I don’t see how effective a maintenance program can be if you’re just chasing urgent jobs,” said a source.

PDVSA sources have told Reuters of similar problems at the company’s Venezuela-based refineries, lamenting the fact the company is carrying out “corrective maintenance” rather than “preventative maintenance.”

I say to these people “Don’t be so pessimistic!” After all, it is “preventative maintenance.” It’s like wearing your seat belt or motorcycle helmet: No accident, no problem. Besides, things don’t go wrong at refineries.

No, I was wrong about Chavez. He is clearly a misunderstood genius in the spirit of Vincent van Gogh. Stand back and let the man create a masterpiece.

Note: I do own ConocoPhillips stock, and I still don’t care for Hugo Chavez. It’s going to take more than a few maintenance cuts to impress me. After all, does he really need all of those operators and engineers scurrying about?