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Venezuelan president reversed U.S.-friendly oil policies in late '90s
By Jim Landers
The Dallas Morning News
CARACAS
Petroleumworld.com 06 19 06President Hugo Chávez might be the reason you're paying nearly $3 a gallon for gasoline instead of $2 or even less.
The conventional explanation for today's high oil prices involves sharp increases in demand in the United States, China and India that collided with production cuts and instability in Iraq, Nigeria and Iran.
But oil analysts here, both supporters and foes of Mr. Chávez, say the Venezuelan leader deserves the credit (or blame, depending on your perspective) for $70-a-barrel oil.
Mr. Chávez, a left-leaning nationalist sometimes called Latin America's New Fidel, took office in December 1998, when oil was selling for as little as $10 a barrel.
He quickly sought to reconcile OPEC's feuding members, agreeing to curb Venezuela's production to support an effort to raise prices.
Non-OPEC producers Mexico, Norway and Russia joined in.
By the end of 1999, oil was selling for $20 a barrel.
"The credibility of OPEC was very low when we came in," said Bernardo Alvarez.
The Chávista is Venezuela's ambassador to the United States and former vice minister of energy.
Venezuela had been a reliable ally of the United States in raising oil production when one crisis or another in the Middle East caused prices to jump.
Equally important in the 1990s, Venezuela's national oil company – Petroleos de Venezuela, or PdVSA – pursued policies to maximize oil production, distance Venezuela from OPEC and operate as a company rather than a government agency.
Multinational oil companies such as Exxon Mobil Corp. were invited to take an ownership share in heavy-oil projects in the Orinoco belt, where there are billions of barrels of heavy, tarlike oil reserves. The projects now account for as much as one-fourth of national oil production.
"If we'd stayed with the pre-Chávez policies, we'd be pumping now 7 million barrels a day, and the price would obviously not be as high as $70," said Elio Ohep, editor of Petroleumworld.com, a Caracas Internet journal.
Venezuela's current oil production is disputed (for reasons discussed below) but is variously estimated at between 2.5 million and 3.1 million barrels a day.
Mr. Chávez opposed PdVSA's orientation and brought in new management. A key adviser is Bernard Mommer, a Marxist from Germany who is now vice minister of energy for petroleum.
"He's the most important figure in [Venezuela's] oil policies of the last six or seven years," said Luis Lander, editor of an economics and social sciences journal at the Central University of Venezuela.
Mr. Mommer has written extensively about the need for state ownership of natural resources and maximizing rents collected by the government from such properties. This was an ideological turnaround from PdVSA's pre-Chávez outlook.
"Venezuela is now having a quite huge transformation in oil business relations," Mr. Lander said. Mr. Mommer "has sort of designed the whole thing, with a new, long-term view."
The clash of ideologies at PdVSA was so dramatic that it became the wellspring of opposition to Mr. Chávez. Anti-communist oil managers helped lead a 2002 coup attempt that briefly ousted Mr. Chávez. (The anti-Chávez regime's first act was to stop subsidized oil deliveries to Cuba.)
At the end of 2002, PdVSA workers led a nationwide strike designed to topple Mr. Chávez, and Venezuela's oil production was shut down. In response, Mr. Chávez fired 18,000 PdVSA workers.
Mr. Chávez's government says it has recovered all production and doesn't miss the fired strikers. The strikers say that the new PdVSA doesn't know what it's doing and is falling well below its announced production targets. (Independent accounts such as Platt's Oilgram estimate production at levels that agree with the strikers.)
Mr. Lander, who supports Mr. Chávez, and Mr. Ohep, who doesn't, both agree that Venezuela's current oil policies are better for Venezuela than the old ones. Venezuelans pay only 20 cents a gallon for gasoline.
If they're worse for the United States, well – that's not Venezuela's concern. Anything that weakens the United States tends to delight Mr. Chávez
E-mail jlanders@dallasnews.com
The Dallas Morning News
June 16, 2006
Copyright ©2006 The Dallas Morning News Co. All Rights Reserved.
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