Tuesday, May 01, 2007

Chavez Nationalizes Columbian Oil Projects

In a follow-up to my post on Bolivia's Evo Morales nationalization of Bolivia's oil fields, it seems that Latin Socialists are at it again. This time, it's Hugo Chavez who is holding ceremonies to nationalize four Columbian oil projects, pushing out national firms (now that they've done the hard work, of course)

There is no denying that natural resource, especially oil, artificially prop up socialist dictators by masking the damage done by their policies. And Mr. Chavez is on a mission to damage the United States as best he can. From May 1, 2007 Wall Street Journal article on the same topic.
...as long as Mr. Chávez is in charge, his government seems bent on favoring
state-run companies from governments he considers friendly. Consider the list of
winners of contracts handed out to companies to certify oil holdings in the
Orinoco region in the last two years: Vietnam, Iran, Brazil, and China. Last
month, PDVSA signed a deal with Belarus to work in the Orinoco. Meanwhile,
today's nationalization ceremony pushes out U.S. companies
Corp., ConocoPhillips and Chevron Corp., along with Britain's BP PLC, France's Total SA and Norway's Statoil ASA.

For a time I used to get frustrated about the artificial success of disgusting policies like these. I still chafe at the injustice, but I also know that once the oil becomes more expensive to develop and produce that the tarnish will show on Chavez' rhetoric and the rhetoric of those like him. The cost of extracting oil increases long before oil reservoirs are depleted (even Saudi Arabia's oil fields are nearing a marked increase in production cost once they shift to secondary production), but it happens slowly; enough time for at least one or two generations of socialist thugs like Chavez to prosper. Underneath however, one can see the impact that his policies are having.

However, Mr. Chávez's own policies may stand in the way of him carrying
out his plans. The leader's focus on social spending has turned PDVSA into a
poverty-alleviation ministry more than an oil company, and left the company with
little focus. Venezuela's output has fallen to 2.4 million barrels a day from
3.1 million barrels a day since Mr. Chávez took office in 1999. Mr. Chávez
recently paid off the last portion of debt owed the World Bank using Venezuela's
oil income and paid off all debts with the International Monetary Fund shortly
after taking office.

Raiding oil profits to pay off national debt and put the country on welfare (along with providing handouts to other socialist countries) will mean that when costs do go up. PDVSA won't have the resources to continue without help. Here's hoping that foreign oil companies don't give it to them, at least until someone better than Chavez is in office.

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