Hugo Chavez Makes His Move:
Hugo Chavez is setting the stage for the next chapter in world oil history. In a Monday night interview with the BBC, he indicated that he wants Venezuela to take the lead in the OPEC cartel. Chavez is planning to propose that OPEC members increase their long-term oil target price to $50 per barrel. At this price, a portion of Venezuela's Orinoco Tar Sands become economically viable, and Venezuela can officially increase its proven reserves to 312 billion barrels -- 50 billion barrels more than Saudi Arabia.The article includes an excellent background. For example:
In 1998, with oil near $10 a barrel, Hugo Chavez was elected president of Venezuela. That was the turning point...The BBC interview to which this story links is also worth a look:
Given the possibly weakening position of OPEC, perhaps President Chavez believes he has the cartel over a barrel, and that now is the time to make his move. Whatever his thinking, it will be interesting to see how the cartel responds, and how this drama plays out in the world's oil markets.
The DoE estimates that the Venezuelan government controls 1.3 trillion barrels of oil - more than the entire declared oil reserves of the rest of the planet.Balancing Chavez's talk of oil for another hundred years is this little episode which casts doubts on the stated reserves of other OPEC members:
Mr Chavez told Newsnight that "Venezuela has the largest oil reserves in the world. In the future Venezuela won't have any more oil - but that's in the 22nd Century."
He will ask the Opec meeting in June to formally accept that Venezuela's reserves are now bigger than Saudi Arabia's.
Mr Chavez's increased muscle will not go down well in Washington, which is deeply opposed to his government.
Ironically, by invading Iraq, George W Bush has boosted oil prices and effectively transferred billions of dollars from American consumers to the Venezuelan government.
Up to $200m a day - half of it from the US - is flooding into Caracas.
Mr Chavez is spending this on building infrastructure and increasing the minimum wage and improving health and education in the poor ranchos which surround the cities.
As a result even his opponents accept that Mr Chavez is extremely popular and will easily win the next presidential election in December.
Mr Chavez is also spending billions in the rest of Latin America - exchanging contracts for oil tankers and infrastructure projects and buying up debt in Argentina and Brazil.
He has made cheap oil deals with Ecuador and the Caribbean.
He has also spent some of the dollars which have come in from the US to support Fidel Castro in Cuba. In return Cuba has supplied the thousands of doctors and teachers who are transforming conditions in the barrios of Caracas.
Most of the increase in world reserves has been within OPEC, and occurred in 1987 and to a lesser extent in 1989. These were years with low oil prices. "OPEC countries boosted their reserve figures as a way [under their calculation method] to increase their shares of OPEC production through the quota system." A negotiating ploy to boost earnings to pay for their rising debt? "It was simply a trick," he says. Either the newfound oil existed only on paper, or it had been there all along but the owners hadn't declared it. In either case, not new oil.