For those of you who have been concerned about Hugo Chavez’s “axis of evil” Love Boat tour this summer (featuring a cameo appearance by none other than Fidel Castro), the closing of CITGO in the U.S., and the ultimate withdrawal of Venezuelan oil from the U.S., it is important to recognize the practical limitations on Chavez’s ability to simply take his crude and go home. From American Public Radio’s Marketplace on Monday:
JEFF TYLER: When deciphering pronouncements by the populist Venezuelan president Hugo Chavez, it helps to read between the lines.
TERRANCE MURRAY: “There’s Chavez and his rhetoric. And then there’s the reality of oil markets and oil trading.”
That’s Terrance Murray, who covers Latin America for the oil research firm Energy Intelligence.
Murray says that, despite his politics, Chavez needs America’s dollars and the Chinese won’t be able to replace us any time soon.
MURRAY: “It would take such a long time for China to become a viable alternative that it would probably bankrupt him and leave him out of power.”
That’s because Chavez has staked his career on a series of ambitious and expensive social programs.
To pay for it, oil-industry economist Philip Verleger says Chavez has used money from the state-owned Petroleos de Venezuela, or Pdvsa.
As a result, he says, Chavez . . .
PHILIP VERLEGER: “Essentially diverted the cash flow from Pdvsa from searching for increased oil to providing benefits to the Venezuelans. Chavez has switched it. So production is going down. So Chavez needs high prices to keep his programs going.”
The US has been a steady source of cash, and US refineries are built to better handle Venezuela’s heavy crude oil.
Full report, audio and transcript, here. People always seem to forget that it costs money to pull that junk out of the ground.