The Mouth from the South is at it again:
CARACAS, Venezuela (CNN) — President Hugo Chavez on Friday wrapped up his campaign to push through broad constitutional changes with a broadside attack against adversaries at home and abroad — including a threat to cut off oil exports to the United States.
Chavez told a crowd gathered in the center of Caracas that if the referendum was approved and the result was questioned — “if the ‘yes’ vote wins on Sunday and the Venezuelan oligarchy, playing the [U.S.] empire’s game, comes with their little stories of fraud” — then he would order oil shipments to the United States halted Monday.
Chavez spoke after tens of thousands, brought on buses from throughout the country, marched down the capital’s principal boulevard to rally support for Sunday’s referendum, which would free Chavez from term-limit restrictions and move the country toward institutionalized socialism.
Full article here. Chavez may be serious, but as we have reported in the past,
[Terrance] Murray [of Energy Intelligence] 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.
See my previous report here. Chavez could certainly cause a short term upset in the global markets by shutting off the tap, but to continue paying for his social programs, he will have to resume sales to the U.S. at some point.
If Chavez makes good on this threat for a short time, this will undoubtedly be the week that oil breaks through the $100 ceiling.