Icon Re: I don't think problem is a word I would use...
R
rosskolnikov (view)

"the companies here that are profiting from Venezuelan oil get a free pass...why do you suppose that is, Ross?"

An interesting question. At least in Texas, I think it's a realization that the refineries there were built to handle the thick Venezuelan crude efficiently and relatively cleanly. Other facilities around the world are mostly not set up to handle that stuff and hence for much of Venezuela's Orinoco belt heavy oil, there is a mutual dependence between both countries.

There is of course an irony to people wanting to boycott Citgo in order to not send cash to Chavez's regime while still filling up with other gas that sends cash there (albeit less).

This discussion has actually taken a turn to the interesting side, which is a nice change from how it started.

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One of the debates Chavez didn't really have with people in Venezuela was: what is the optimal use of the money generated from the oil industry there? He certainly demonized the international participants, but they were merely carrying out contracts negotiated when oil was near $20/barrel and a bigger slice of the pie was crucial to being able to help at all. None argued that new terms would be needed when those expired. And few (only Exxon resisted) put up a fight on mid-contract renegotiations once the price changed so much in the early 2000's. [I liken it to an NFL player who has a couple of great seasons and holds out to make sure he gets his money before getting hurt - that's what Venezuela should have done].

Instead, Chavez demonized those firms and lied about the reasons behind the existing contract terms. Of course, the the were there because there isn't enough capability in PdVSA to get the oil on their own, and falling outputs show that clearly. Now, as Chavez has raided their profits further in support of his cash hand-out programs, they are literally killing the goose that lays the golden eggs. There will be no quick turnaround as they fall further and further behind on maintenance and technology investments.

Chavez might have looked instead to the Brazilian model. There, they mounted a fairly aggressive anti-poverty campaign that would seem pretty "leftist" by US standards. And the costs of maintaining that have clearly hurt their growth in the last couple of years. But things are clearly improving because overall, they've struck a pretty good balance between allowing business to flourish and not leaving the poorest behind. They've done all that without expropriations and poisonous Communist rhetoric.

Had Chavez been less self-aggrandizing and messianic, had he taken that middle path, he would have actually been a a great leader. Instead, he's getting a Lenin or Mao-like public tomb. Those are fitting failures with whom to place him.
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.:RS:.
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