Right now, Hugo Chavez reminds me of that famous quote about US foriegn policy: "You never make simple stupid moves, only complex stupid moves that make the rest of us wonder if we might be missing something." As threatened, Petroleos de Venezuela SA, the Venezuelan state-owned oil company better known as PDVSA (pronounced "PedeVEHsa"), has cut off supplies of oil to ExxonMobil. This is in retaliation for ExxonMobil's legal victory regarding the nationalization of its Venezuelan fields last year, which authorized the company to seize Venezuelan assets abroad.
This move is all kinds of stupid.
1. It's too small--50,000 barrels a day is not going to scare anyone.
2. Oil is a fungible commodity, which is why the Arab embargo of America failed so miserably. If Venezuela sells the oil to someone else, there's nothing stopping them from turning around and selling it to the US. Unless Venezuela pulls the crude off the market entirely, this will at best achieve a minor reshuffling of suppliers to American refineries.
3. Venezuela is further poisoning its relations with the only country that is set up to refine its low-quality, extremely sulphurous crude.
4. If Venezuela does pull the oil off the market, the IEA and the US will simply open up their rather lavishly stocked strategic reserves. They can almost certainly dribble out 50,000 barrels a day for longer than Chavez can stay in power with falling oil revenues.
It's probably good political theater at home--but for the first time, Venezuelans are going to have to pay actual cash money for Chavez's anti-US theatrics. It will be interesting to see what their demand curve looks like, now that his tactics have an explicit price.
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