May 8, 2006

Chavez: Venezuela to Impose New Extraction Tax

Share
Left: Chavez with Bolivian President Morales

(Caracas, Venezuela) Venezuelan President Hugo Chavez said Sunday night that the country would impose a new tax on corporations that extract oil to increase revenues from its petroleum industry. The move is expected to raise at elast $1 billion in new revenues for Venezuela.

"We are going to create a new oil tax, called the tax on extraction," said Chavez. "The companies that are pumping oil in Venezuela are making a lot of money."

Chavez said that Venezuela also plans to raise income taxes to 50 percent from 34 percent for the largest oil companies operating along the Orinoco River, while raising taxes on natural gas firms that operate in the country.

The companies operating in the country's Faja ("heavy- oil") region- Exxon-Mobil, Chevron, ConocoPhillips, Total BP, and Statoil ASA - produce about 600,000 barrels of synthetic crude oil a day. This is transported to the coast where it is refined before being exported.

Chavez also praised the decision by Bolivian President Evo Morales to nationalize his country's natural gas and oil industries.

"Hopefully, all Bolivians will understand that this is vital for Bolivia's future, just like what we are doing is vital for the future of Venezuela," Chavez said.

It appears that nations in the Western Hemisphere are calculating that the United States possesses neither the will nor the means to back up its traditional hemispheric hegemony with military force. This lack of a credible military threat, coupled with increasing global demand for ever more scarce oil reserves, will continue to prompt more nations to test the patience limits of US leaders.

Chavez knows that he can turn off the spigots and cause a significant disruption to the US economy, as Venezuela is the world's fifth-largest oil producer. He also likely believes that Venezuela could ride out a temporary cessation of production better than could the US.

6 comments:

-Sepp said...

I'll bet that 50% income tax on companies will soon extend it's self onto the citizens. Absolute power does what?

historymike said...

Maybe so, Sepp.

I am trying to make sense of the changes in our hemisphere in the past 10 years.

If the Venezuelans choose a socialist state, so be it. Chavez was freely elected, and he is in an excellent position given the fact that Venezuela controls so much oil.

I believe that, as oil grows more scarce in the next 10 years, there will be more countries like Venezuela thumbing their noses at the US.

That is, unless we embark on some serious moves to embrace alternative energy sources.

The surest way to maintain US world leadership would be to become energy-independent through the development of new energy technologies.

Not only would we no longer be subject to the whims of OPEC, but we would be in a position to market such technology to the rest of the world.

Hooda Thunkit said...

Mike,
"Venezuelan President Hugo Chavez said Sunday night that the country would impose a new tax on corporations that extract oil to increase revenues from its petroleum industry."

An extortion tax, plain and simple.

Now does anyone still question the need to switch to alternative energy in the long term and uncap our own oil resources in the short term, to counter all of the oil thieves (both foreign and domestic)?

Name withheld to protect the guilty said...

"Now does anyone still question the need to switch to alternative energy in the long term and uncap our own oil resources in the short term, to counter all of the oil thieves (both foreign and domestic)?"

And the best way to encourage the switch, ironically, is $3 gas. This is the best thing that could have ever happened to the environment and our national security, even though the short run will be pretty painful.

liberal_dem said...

... impose a new tax on corporations that extract oil

Why not? Seems like it's a good move for the government. For too long, European nations have been raping the natural resources from 3rd world nations, then abandoning them when there was nothing left to steal.

-Sepp said...

Sure the guy was freely elected HM but, people always seem to think "it won't happen here" when they elect a socialist leader and then are surprised when all sorts of taxes are sprung on them and property rights and other freedoms start to go away.
This move may generate some short term revenue and a bargaining chip to use with it's neighbors but, all that equipment pumping oil and refining it still belong to the companies that invested there. Sure they can be taxed but, they can also shut down their facilities. Of course, El presidente sent in his military to prevent that.