Energy Politics

Venezuela is planning to ask fellow OPEC nations to cut production by half a million barrels a day if oil prices fall below $100.

We Americans may be addicted to oil, but someone else is addicted to our oil dollars. Chavez is going to need a lot of bank to fund his social programs, government expenses, slush funds for FARC and general subsidizing a domestic oil industy that sinks lower and lower into oblivion. That’s a lot of cheddar, and he can’t afford to have someone cut his cheese.

And once again the market pounces on any excuse to raise oil prices, as the cost of a barrel jumped up to $115 today simply based on the announcement, with no inclination that it will be followed. Anyway, Venezuela plans on bringing up the issue of cutting production at the next OPEC meeting in September. They argue that the drop in prices from $147 to $112 in just over a month is clear evidence of market tampering by speculators. They also argue that production costs have in turn raised to reflect $150 oil, and they need revenue from $100 oil to function.

Odds are the fellow cartel members will laugh off his suggestion, but it does show the serious flaw in Chavez’s financial plans. He tried to bribe his way into the people’s hearts, and as long as prices were artificially high, he was emboldened and empowered. Now that his allowance is being cut, he’s going to scramble to keep things going.

–Stephen Payne, Editor, Oil and Gas Investor This Week; www.OilandGasInvestor.com; spayne@hartenergy.com

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