Feb 28, 2006

Pipe Dreams? Chavez Weighs Options

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(Caracas) Venezuela's oil minister warned Washington in comments Sunday that his country could decide to divert oil exports away from the US and toward markets such as China.

The threats follow the recent gas pipeline agreement between Venezuela and Colombia; the pipeline deal was signed by Venezuelan President Hugo Chavez and Colombian President Alvaro Uribe on November 24, 2005.

The Venezuela-Colombia pipeline agreement is the beginning of a larger petroleum project that will transport crude oil from Venezuela to the Pacific Ocean, where it could then be transported to Asia.

Minister Rafael Ramirez, in an interview with the newspaper Ultimas Noticias, seemed unconcerned with replacing the US as a petroleum customer.

"We're prepared to diversify our markets and will work toward that," he said. "The easiest thing is locating it. That will not be a problem."

Venezuela is the world's fifth-largest oil producer, and currently supplies over 10 percent of the US demand for imported oil. The country exported an estimated 3.3 million barrels of oil per day in 2005.

The Pacific pipeline, however, pales in comparison with a proposed partnership with
Petroleo Brasileiro SA (Petrobras), Brazil's state-owned oil company.

The natural gas pipeline would begin in Venezuela, pass through Brazil to Argentina, and provide links to Bolivia, Paraguay and Uruguay; the project could transport natural gas equivalent to 1 million barrels of oil per day to Brazil at much lower costs.

10 comments:

Anonymous said...

Chavez is smart. He's using the US and its free market ideology against them.

Bush does not want free markets when pure capitalism works against the US.

--Petrograde

historymike said...

Yes, I agree that Chavez is smart, and far from the crazy strongman that US officials like to characterize him as.

I am not sure that the Petrobras pipeline is economically feasible at $50 - $60 a barrel for oil, but the $23 billion might make more sense if oil prices go to $80 or beyond.

liberal_dem said...

...and how does the Bush administration deal with him? Like iraq, no plan, just bravado.

historymike said...

Yes. The US has been so busy screwing around in Iraq that South Americans are doing a lot of muscle-flexing.

The President needs to stratergize!

M A F said...

Chavez is crazy like a fox and is a direct threat to US hegenomy. Worse still is that the US is viewed by Chavez neighbors as a destabilizing force in the region.

Surely China is willing to invest in Venezuela (a pipeline) if it will help secure oil that China needs as it continues to grow. Such investment would offset any decrease in the per barrel cost of crude oil.

If Chavez really wants to screw with Bush and the US oil market he can always start selling oil in petro-euros rather than petro-dollars.

historymike said...

Interesting scenarios, Mac.

My, how the tables have turned. Due to South American oil, the US can no longer wield a big stick as diplomacy of the first resort.

God forbid we should all have to play nice on the playground!

Name withheld to protect the guilty said...

Chavez is politically brilliant, but as for effects on us, this is just spouting off at the mouth. Oil is what's known as a "fungible" product; any variation in one supplier will only affect the market if the total supply goes down. If Venezuela won't sell to us, someone else will, and at the exact same price.

Stefan Schmidt said...

Chavez is politically brilliant, but as for effects on us, this is just spouting off at the mouth. Oil is what's known as a "fungible" product; any variation in one supplier will only affect the market if the total supply goes down. If Venezuela won't sell to us, someone else will, and at the exact same price.
=====

Quite correct, he will have to change the currency that oil is traded (currently oil is always traded in dollars) in before any effect can be felt (Iran has threatened to change to the Euro for oil transactions).

Stephanie said...

Considering how much trouble we've been having with Chavez, this might be a good thing.

Stephanie said...

Though, I wonder if this means he'll stop his program to help US poor warm their homes?