06-25-07 by dugan
ExxonMobil and Conoco Philllips are playing a high-stakes game of chicken with Venezuelan strongman Hugo Chavez over his seizure of control in the companies’ Orinoco oilfields. The worst-case result could be the loss of enough oil out of Venezuela, at least in the short term, to send prices rocketing up.
Nobody on either side is willing to go on the record, but the usual “sources” on both sides describe a standoff over a clause demanding that the oil companies help keep the oilfields operating.
In essence Exxon and Conoco, who have the biggest stakes in the Venezuelan Amazon, are saying that they’ll leave the country and see Chavez in court. So far the oil markets haven’t reacted strongly, because it may only be a negotiating dare. BP has agreed to the Chavez deal, along with France’s Total and Norway’s Statoil.
Chavez’s deadline is tomorrow, but some analysts are betting on an extension. The unnamed sources on the Venezuelan side say they’re open to more talks. Venezuela could have big trouble operating the oilfields on its own, aside from the complications of an international court case.
In the longer term, Chavez is increasingly using his oil as a political tool, selling at a discount to allies (Cuba, for one, and he is making a deal with the Kenyan government.). He made a news splash two winters ago with his offer to sell cut-rate heating oil to chilly New Englanders as domestic prices were rising. In Venezuela, gasoline goes for 24 cents a gallon, though the government has announced small increases.
Chavez is the front-page face of a larger trend. As oil prices rise and stay high, 2nd and 3rd-world nations are certain to exert increasing control over oil assets, both to keep domestic consumers placated and as a direct foreign policy tool.
The outcome of the Venezuelan standoff is uncertain, but it’s one more reason for the U.S. Congress to take intense conservation and biofuels far more seriously.
The energy bill that emerged last week from the Senate was stripped of the Big Oil tax loophole closures that could have funded biofuel development. It also contains a loophole in an excessively modest new auto efficiency standard: Detroit could get off the hook for “economic” reasons if the automakers weep enough tears.
What’s going on in Venezuela would, in a rational world, stiffen the House version of the bill. Stay tuned for OilWatchdog calls to action aimed at key House members.