Chavez Back Pedals
Now this is pretty funny:
CARACAS, Venezuela — President Hugo Chávez, buffeted by falling oil prices that threaten to damage his efforts to establish a Socialist-inspired state, is quietly courting Western oil companies once again.
Until recently, Mr. Chávez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices with tax authorities and imposing a series of royalties increases.
But faced with the plunge in prices and a decline in domestic production, senior officials have begun soliciting bids from some of the largest Western oil companies in recent weeks — including Chevron, Royal Dutch/Shell and Total of France — promising them access to some of the world’s largest petroleum reserves, according to energy executives and industry consultants here.
Let’s see. Invite oil companies in, steal their investments when oil prices go up, kick them out, invite them in again when oil prices fall. That sounds fair. Every oil company with a few billion dollars burning a hole in their pocket is probably lining up – presuming they don’t mind losing 100% of their investment based on Chavez’s whims.
In all seriousness, I have said on numerous occasions that the oil industry in Venezuela couldn’t survive with Chavez siphoning all the profits and using them to fund his social programs. The oil industry is capital intensive. You neglect those capital requirements at the peril of future production. Someone commented on a previous essay that it was arrogant to assume that Venezuela couldn’t expand oil production without outside help. As I pointed out, heavy oil production is technically challenging. Chavez’s move here is an admission that things haven’t worked out for him as planned, and that in fact they do need outside help; help that Chavez has thoroughly alienated.
As the article points it, the biggest irony is that Chavez has celebrated the demise of capitalism in Venezuela, even though it was capitalism that enabled him to carry out his social programs. So, he is going to give capitalism another chance – but we have seen what happens when prices go up. His motto is “You take the risk, I will reap the reward.”