With oil, Venezuela's Hugo Chavez fueled a revolution based on Marxism and his own swaggering persona. But with oil prices now plunging, he and his near-dictatorship may also go bust.
What goes up must come down. That's the reality of oil prices, which in the past decade have fluctuated from $9 to $178 a barrel in global markets.
But that reality's been disregarded in Venezuela, where $800 billion in oil earnings in the past decade provided the engine of Hugo Chavez's socialist rule.
Premising his government spending on perpetual rises in oil prices, he's now facing an economy with 40% inflation and not enough foreign reserves to cover exports. It's a classic recipe for trouble.
Wild price fluctuations are a fact of life in the oil industry. They explain why private oil companies aren't as profitable as headlines suggest. Fact is, price highs and lows average out profits to just 9% of revenues over a decade, nothing like the 15% returns seen in other industries, such as drugs.
But even on a price roller coaster, oil companies survive by investing in new production when prices are high, and subsidizing production when they're low. The state of Alaska also does this. Gov. Sarah Palin emphasized to IBD last summer that in managing Alaska's oil bonanza, her priority was "saving for a rainy day."
Petro-states dominated by state-owned oil companies employ no such strategy. In booms, their revenues overwhelm their economies, driving out small, non-oil businesses and leaving oil as the only game in town. They also tempt governments to become dictatorships. Flush with oil cash, rulers can slash taxes for their supporters, who will demand even less transparency and accountability.
But it never lasts, and the hangover when prices fall is always ugly. "I call petroleum the devil's excrement. It brings trouble," as Juan Pablo Perez Alfonso, once Venezuela's oil minister, famously said in 1975. "Look at this lunacy -- waste, corruption, consumption, our public services falling apart. And debt, debt we shall have for years."
The sad thing is that Venezuela's Chavez has learned nothing from history. He's ignored every lesson from the past, confident oil would remain high forever, while claiming he'd created a new paradigm. Venezuela's "Bolivarian Revolution," built around one-man rule by Chavez, was "different," he insisted.
After posting a surplus of 12.5% of GDP this year, and spending at least 4.5% of GDP on a stimulus package of soup kitchen offerings, Chavez is now down to his last $87 billion in reserves, having created nothing of permanent value. Next year, S&P estimates a wild swing into deficit by Venezuela, forcing devaluation.
Venezuelan oil prices are now $34 a barrel. Producing 2.3 million barrels a day, down 16% from 2005, and now consuming 795,000 barrels of that, as Caracas investment banker Miguel Octavio estimated on his blog, "The Devil's Excrement," he doesn't even have enough earnings to finance imports. He's given away about 424,000 barrels of oil output, and must make do on sales of about 1 million barrels. With oil down, Chavez has entered the worst phase of the oil cycle.
The cash he used to buy elections in 2004 and 2006 is no more, and his hasty call for a new measure to end term limits -- and enable him to be president for life -- is pretty much a desperate effort to end any calls for accountability in the wake of the bust.
He's not likely to last in these conditions any more than the other strongmen thrown out in Venezuelan history. The irony is that he sold his revolution on faith in socialism.
In reality, it was an ungodly faith in high oil prices. With oil prices falling, the devil is coming for his due.
Posted by: Fred ||
12/12/2008 00:00 ||
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Well, oil was just frosting on the Communist cake anyway. I guess Chavez can always fall back on the inherent virtues of Marxism to sustain his economy.
There are so many things to love about the Rod Blagojevich scandal its hard to know where to begin. . . . For starters, the folks at the Chicago Tribune are Christmas Pony Happy because Blago tried to strong-arm the Tribs owners to fire members of the editorial board. Instead, Trib editors will get to have a big tailgate party outside Blagos cell window.
Newspaper people love that sort of thing.
For the more historically minded, its a time for nostalgia. The past comes alive as Chicagos grand tradition of corruption is sustained for another generation. As the Chicago Tribune once wrote, corruption has been as much a part of the landscape as corn, soybeans and skyscrapers. . . .
For partisans, theres the schadenfreude that comes with watching the Democrats self-proclaimed anti-corruption zealots in recent years explain why Blagojevich shouldnt be lumped in with Congressmen Charlie Rangel (cut himself sweetheart deals), William Jefferson ($90,000 in his freezer) and Tim Mahoney (tried to bribe an aide he was sleeping with not to sue him and you thought romance was dead) as part of a new Democratic culture of corruption storyline.
Theres the enormous I-should-have-had-a-V8! moment as the mainstream press collectively thwacks itself in the forehead, realizing it blew it again. . . .
Rep. Jesse Jackson Jr. himself the son of a shakedown artist is alleged to have offered (through a minion) a half-million bucks for Barack Obamas vacant U.S. Senate seat. Jackson replaced former Rep. Mel Reynolds, who went to jail for getting jiggy with a 16-year-old campaign staffer and stayed in jail because of various fraud convictions. Reynolds, in turn, was the reformer who had replaced Rep. Gus Savage, the thug-congressman who groped a Peace Corps volunteer in Zaire while on a fact-finding trip. Savage held off Reynolds attempts to replace him for several years by claiming Reynolds was financed by racist Jews.
Man, what isnt there to love about Chicago politics?
It would be premature, not to mention un-festive, to discard any of these delicious immoral morsels from this cornucopia of corrupt crapulence. . . . But, there is a nice moral to the story here. For the last several years, weve heard a lot about new politics. We are going to start fresh and put aside the old politics and the old ways. So far, it looks like Obama did nothing wrong, and I hope that remains the case. But its worth remembering that there really isnt any such thing as a new politics. Politics is eternal because human nature is unchanging. Even Barack Obama, hero-saint light-worker Jedi Knight Messiah that he is, came from a political culture that would not be unrecognizable to Caligula.
Hopefully, Obama will take away from this the humility that comes with realizing we are all even The One built from the crooked timber of humanity. Hence the genius of the Founders who built a government that took our imperfection into account. As James Madison said, If men were bleeping angels ...
Posted by: Mike ||
12/12/2008 10:31 ||
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Kind of off topic but had an interesting discussion with my brother last night and he posed a chilling question.
If Obama goes down (which I do not belive will be the case) who would become President? Biden or Pelosi?
Is there an answer or would this create a Constitional Crisis? If the outcome was not so grave it might be kind of fun to watch.
Posted by: Kelly ||
12/12/2008 11:00 Comments ||
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We should not be blaming The One. Al Capone was a pretty good guy. He liked kids, wimin, Lucky Strikes, a cold glass a beer. He just surrounded himself with..... well, so many criminals.
#3
If Obama goes down (which I do not belive will be the case) who would become President? Biden or Pelosi?
My prediction.... Biden resigns due to.....ill health, Rahm and Axel covered with cooties, under indictment, The One asks Clinton to step up, her staff already in place. The One resigns and there you have it. Clinton redux.
#4
I have a feeling that Hillary and her band of Machiavellian schemers have had this type of thing in their contingency plans. If you cannot get the prize through the front door, go around through the back door.
Posted by: Alaska Paul ||
12/12/2008 11:26 Comments ||
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Well, of course, Biden. Then Pelooser. But Billary have StretchFace in their targets as she was one of the prime entities in the Dummo faction elevating the Bambalooza from obscurity up to lead pony. So, Biden may have health issues reoccur, but SanFranNan could have an unexpected accident. Ya never know.
#10
I sort of think that Woozle Elmeter is right. I would suspect that it might Supreme Court decision followed by a constitutional amendment to nail it down.
Short of a coup I do see any way that the Clintons to assume the office. That option makes no Constutional sense.
Posted by: Kelly ||
12/12/2008 14:55 Comments ||
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25th amendment gives power of appointing a new vice president to the president.
That is how Gerald Ford became VP to Nixon....
"When Spiro Agnew resigned the office of Vice President of the United States late in 1973, after pleading no contest to a charge of income tax evasion, President Nixon was empowered by the 25th Amendment to appoint a new vice president."
Biden becomes president, he can appoints new VP.
Some answer that Article 2 of the Constitution gives the appointment power.
#13
The 25th amendment allows a president to fill a vacancy in the office of vice-president with the concurrence of a majority of both houses of Congress.
Posted by: Steve White ||
12/12/2008 17:40 Comments ||
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It might be worth remembering that Nixon's primary criteria in selecting Ford was the job security he thought he would drive from the general fear of the Presidency devolving upon someone who could not walk and chew gum at the same time.
He was wrong.
And Ford was a good, if not great, President. He will get much more credit for the distasteful pardon from history than he did from his ungrateful contemporaries.
Events have the most startling capacity to draw greatness from the ordinary.
#15
devolving upon someone who could not walk and chew gum at the same time.
Ford was probably the best athlete ever to occupy the office. The Press was in it's heyday during his tenure. But yes, he played football (with helmet) All-American Centre, Boxer and Boxing Coach, took up golf late in life but managed to nail 2 reporters from 150 yards with a 3 wood.
#17
Slightly off topic, but here it is: Ford's supposed klutziness was a media invention. He tripped once or twice on camera and the media made a big deal over it.
#18
I read an interesting comment about SanFranNan in the SF Chronicle. Seems there are some SF types (the few conservatives left out there, mostly curmudgeons who have refused to be driven out by the leftie insanity) who absolutely HATE Pelosi and strongly decry her association with SF. They refer to her as "the Baltimore Bitch" since she "carpetbagged" her way across the country from one corrupt liberal state to another.
Is the Lashkar-i-Taiba -- or the organisation it has morphed into, Jamaat-ud-Dawa -- guilty of terrorism? Did it have a hand in the Mumbai attacks? India says it has proof and the United States is all but openly supporting India's point of view. Pakistan has received warnings and veiled threats. There is also the joke of someone pretending to be the Indian foreign minister and calling up President Zardari and it is a measure of the incompetence prevailing in Islamabad that this hoax call was taken seriously.
But warnings and threats apart Pakistan has received no definitive proof. Yet such is the pressure mounted on Pakistan that to appease Washington and New Delhi it has started moving against the Jamaat-ud-Dawa, some of whose offices in Kashmir and Hazara have been raided and some of its officials taken into custody.
Continued on Page 49
Posted by: john frum ||
12/12/2008 00:00 ||
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Money quote: "There is nothing in Pakistan, not even the 'jihadi' organisations like the Lashkar dedicated to vague causes, to compare with the courage and organisation of Hizbollah. And there is no leader in Pakistan, or indeed across the embattled world of Islam -- a religion which we disgrace by our incompetence and cowardice -- to match Hasan Nasrullah."
Summary: Dead Indians and Americans rock! But our leaders are idiots... we (Pakies) should work a two-faced game and just play those hillbilly Waziris against the dumb Yanks while sitting out any actual combat (or helping anyone).
My analysis: All of Pakistan needs to be nuked into a day-glow parking lot, if not by the Indians, then by us 'merkins.
#2
It is 3?4 Iran, and the rest ISI sees in idiot ad hoc groups. Mumbia crew used bhetter equipment than I would have, but they were stupid and made calls.
Pakistan, you are on the line today. Tomorrow, you may be OBAMAS BITCH.
#3
What you don't understand Ayaz, that---unlike Israel---India won't be dictated to by the greatest moron ever to occupy White House and his girl Friday.
#4
You know what makes you look like a criminal? Committing crimes. Boy, howdy, does that look bad. Especially when your homies take commemorative photos & the papers get ahold of 'em.
Posted by: Mitch H. ||
12/12/2008 10:58 Comments ||
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But warnings and threats apart Pakistan has received no definitive proof.
How about the fact that all 10 assasins are from Pakistan?
How about the commemorative photos (see above) taken in Pakistan?
How about the phone calls made to LiT officials just before they got into their boats? (Recorded on the cell phone recovered on the drifting ship)
How about Pakistan's Naval Commandos training the 10 murderers and 490 of their closest friends?
The degrading thing is having a military that makes enemies out of potential friends.
Posted by: Frozen Al ||
12/12/2008 11:49 Comments ||
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With Iran racing down the homestretch toward a nuclear bomb, the United Nations Security Council has spent more than two years expressing "serious concern." By now, Iran is under U.N. sanctions, and in flagrant violation of five Security Council resolutions demanding that it stop enriching uranium. If anything, as a chronic abuser of the U.N. charter, Iran's despotic, terrorist-backing, nuclear-wannabe regime ought to qualify for expulsion from the 192-member U.N. At the very least, one might suppose that on U.N. premises, Iran would be something of a pariah. But at the U.N., that's not how it works. Although Iran lost its bid this year for a seat on the 15-member Security Council, Iran's government has the U.N. so well-wired, in so many ways, that it's hard to find an angle Iran is not busy exploiting. That ought to be of serious concern to President-elect Obama, who has promised to give the U.N. a far bigger role in U.S. policy.
As it is, America provides the main U.N. premises in New York, suffers the related traffic jams and tries to ride herd on the alleged spies (two Iranian guards at Iran's U.N. Mission in Manhattan were deported in 2004, after they were seen filming landmark buildings and parts of the transportation system). American taxpayers bankroll roughly one-quarter of the U.N.'s total budget, now swollen to well over $20 billion, and on top of that look likely to get stuck with the $2 billion-plus tab for the renovation now underway of U.N. headquarters. Meanwhile, Iran, which pays a paltry 0.18% of the U.N.'s core budget, or less than 1/100th of the U.S. contribution, has wangled itself an astounding array of influential U.N. slots, which by next year will include seats on the governing bodies of at least eight prominent U.N. agencies. That setup serves both to legitimize the same Iranian regime that is busy violating the U.N. charter, and gives Iran a say in how billions in U.N. funds--much of that money supplied by U.S. taxpayers--get spent around the world.
For a glimpse of this setup, you don't have to wait for Iranian President Mahmoud Ahmadinejad's annual rant on the U.N. General Assembly stage. All you have to do is stroll through the main visitors' lobby of the landmark U.N. building in Manhattan. In that lobby, by far the most prominent display is a row of eight portraits, framed in gold, and showing the lineup of secretaries-general from the U.N.'s founding at the end of World War II, through the current Ban Ki-Moon. But these are no ordinary portraits. Each is actually a silk carpet, and under the woven picture of each secretary-general, there appears the woven inscription: "Presented by the Islamic Republic of Iran." The first seven of these carpets were accepted from Iran en masse by former Secretary-General Kofi Annan in 1997. The eighth, depicting Ban Ki-Moon, was accepted by Ban last year and placed beside the others. And though the U.S. State Department seems oblivious to this use of the U.N. lobby as a showcase for Iranian gifts tailored to flatter the secretariat's top boss, it's a good bet that both the Iranian delegates and Ban are aware, when they look at those rug-portraits, that beneath the name of each secretary-general is inscribed the name of Iran's Islamic Republic.
But that's just the lobby. Next year, Iran is slated to begin a three-year term on the 36-member executive board of the U.N.'s flagship agency, the U.N. Development Program, or UNDP. The UNDP fields a presence in 166 countries and disperses some $9 billion around the globe every year--$5 billion from its own budget, and another $4 billion on behalf of other U.N. operations. The UNDP is the agency that early last year, when North Korea was rounding out a term on its board, became embroiled in the cash-for-Kim scandal--in which it turned out that the UNDP, in violation of its own rules, had been serving both as a source of hard cash for the rogue nuclear state of North Korea and as a money laundering vehicle for North Korean weapons and nuclear proliferation networks.
"He had been hunted, kidnapped, and told he was filming his own execution. But CNN correspondent Michael Ware had no plans to leave Iraq. Now, it wont leave him."
#1
The American military is guilty of an unmitigated war crime, Ware says, his face flush. For the first time since we met, he falls silent. Near beer. In any civilized army that goes to war, the fundamental rule is two cans, per man, per day. This rule about no alcohol for the soldiers is absurd. Thats what Nuremberg was about, all right. hahaha
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
With oil, Venezuela's Hugo Chavez fueled a revolution based on Marxism and his own swaggering persona. But with oil prices now plunging, he and his near-dictatorship may also go bust.
By Claudia Rosett
