February 12, 2008
Venezuelan President Hugo Chávez's threat to cut off U.S. oil is merely a bluff, analysts said.
Prices on oil futures rose Monday following yet another threat by Venezuelan President Hugo Chávez to cut off oil exports to the United States -- even though analysts said they believe he's bluffing.
Venezuela is the fourth-biggest supplier of oil to the United States, but provides less than 10 percent of the U.S. demand.
''Chávez would be committing political suicide,'' said Luís Vicénte León, a leading pollster in Caracas. ``Who loses more here? Chávez can't live without oil income from the United States.''
No one in Venezuela doubts the leftist Chávez's enmity toward Washington. He regularly calls it ''the Empire,'' calls President Bush ''Mr. Danger'' and accuses the U.S. government of plotting to oust or assassinate him.
But in an ironic twist, about 65 percent of Venezuela's oil export income comes from sales to the United States -- money that Chávez desperately needs to push on with his socialist ideals following recent political setbacks, analysts said.
''Venezuela needs the United States more than the United States needs Venezuela,'' said Roger Tissot, an independent energy consultant based in Canada.
Tissot noted that a 2002-03 strike by managers at PDVSA, the state oil company, practically cut off oil exports to the United States. U.S. consumers saw gas prices rise a few cents for a time, but the strike nearly caused the collapse of Venezuela's economy, he added.
The rest of Venezuela's oil exports go to Cuba and other Caribbean and Latin American countries -- small markets that would be unlikely to take in any more oil not sold in the U.S. market.
Chávez has threatened to cut off oil sales to the United Staters several times in the past, generally following undetailed allegations of U.S. plots against him -- always denied by Washington.
RISING ON MARKET
Still, oil traders around the world gave Chávez's latest statement enough credence that oil futures rose on Monday for the third straight day. Light, sweet crude for March delivery jumped $1.82 to settle at $93.59 a barrel on the New York Mercantile Exchange, after spiking earlier to a one-month high of $94.72, The Associated Press reported.
Chávez issued his threat after it was revealed last week that U.S.-based ExxonMobil had won court injunctions freezing more than $12 billion of PDVSA's assets in England, the United States, the Netherlands and the Netherlands Antilles.
''If you end up freezing [Venezuelan assets] and it harms us, we're going to harm you,'' Chávez said. ``Do you know how? We aren't going to send oil to the United States.''
ExxonMobil sought the assets freeze after the Chávez government last year expropriated majority control of two joint ExxonMobil-Venezuelan ventures.
State Department spokesman Sean McCormack said Monday that the dispute between ExxonMobil and Venezuela should ``be resolved on the basis of existing and accepted international laws and standards.''
Venezuela's oil exports and U.S. oil imports are almost inextricably linked.
Venezuela largely produces heavy crude oil and owns several refineries in the United States specially designed to process heavy crude, said Pietro Pitts, a Caracas-based analyst for Latin Petroleum magazine.
Chávez has signed oil deals with state oil companies in China, Iran and Russia, but none is anywhere close to fruition.
''Chávez wants to diversify, he has signed agreements elsewhere,'' Pitts said. ``But who has a demand for Venezuelan oil today? It is the United States, not China. Who has the refineries? The United States.''
CHALLENGE AT HOME
Chávez's latest threat comes at a time when he is facing perhaps his greatest challenge at home since the failed PDVSA strike, which ended when the president fired about 20,000 managers and senior employees.
He lost a Dec. 2 referendum on constitutional amendments that would have given him the right to seek reelection indefinitely, strengthened his already considerable powers and pushed Venezuela even further toward a government-controlled economy.
The defeat has emboldened the previously toothless opposition and cost Chávez his aura of invincibility. He had never lost a vote before.
Venezuelans are clamoring for him to reduce exorbitant crime rates, end shortages of milk, eggs and other basic foodstuffs and address Latin America's highest inflation rate, 22 percent.
''Chávez's popularity has fallen,'' said León, based on a recent survey by his company. He said the private-sector client that commissioned the poll would not allow him to release the actual numbers.
Throughout his nine years in office, Chávez has shown a near-unerring touch in making popular gestures, and Sunday's statement will likely resonate among those who support his anti-U.S. and anti-capitalist rhetoric.
''The United States has been trying to destabilize Venezuela,'' said Abelaicy González, who is studying to be a social worker at Venezuela's Central University. ``This sends a message that the United States must respect Venezuela.''
Beyond the rhetoric, at stake is how much Venezuela will have to pay ExxonMobil for the two projects. The U.S. company invested more than $1 billion in the projects, but is also seeking billions in damages, Margaret Ross, an ExxonMobil spokeswoman, said in an e-mail.
''We remain willing to engage in substantive discussions with the Venezuelan government,'' Ross wrote.
Chávez was not alone in seizing tighter control of natural resources as oil prices rose. Bolivia also ''nationalized'' its natural gas holdings by sharply raising taxes and requiring foreign gas companies to accept new contracts. Ecuadorean President Rafael Correa also is threatening unilateral action against foreign oil companies.
Tissot said ExxonMobil, the world's largest company, is the first foreign oil entity to challenge this recent wave of ``resource nationalism.''
''Exxon can afford to say no to Venezuela,'' Tissot said, adding that the oil production at stake in the two Venezuelan projects amounts to perhaps 1 percent of the company's production. ``Not many other companies can do it so easily.''
Added Pitts: ``At the end of the day, Exxon is trying to get Venezuela to the negotiating table.''