Tuesday, February 12, 2008

Chavez' Crudities

Remember the Jim Croce song, "Don't Mess Around with Jim?" The lyrics were all about things most folks with a modicom of sense would never do: Spitting into the wind, pulling on Superman's cape, etc.

Alas, we lost Jim prematurely in a plane crash in 1973, but were he writing songs today, he might have a comeback or a remix of that hit by adding a lyric about barking at Exxon Mobil.

Pretty sure Croce would have found some entertainment value in the ongoing hate/hate relationship between Venezuelan President Hugo Chavez and his biggest customer, the United States of (Oil Consumers in) America. He's been making squeaky noises about stopping Venezuelan oil sales to America because Exxon has frozen some of his assets because Chavez nationalized oil operations in Venezuela. Chavez reminds me of an over-grown yappy-dog, a chihuahua in a red shirt, yipping and growling at what ever large-breed canine you wish to associate with the US.

I am not too worried about Chavez’ threats to halt oil exports to the United States. As the rest of the world has discovered during the credit and finance crunch, Chavez needs the United States more than we need his oil.
He might find alternative buyers for his country’s crude, but it's not likely any time soon, and the significant cost of such a move would errode his power base, further negating his threat.

Back on Sunday El Presidente Chavez threatened to end oil exports to the US if ExxonMobil wins the legal suit it filed against Venezuelan state oil monopoly, Petroleos de Venezuela.
Petroleos de Venezuelaaah.
I love the way that name rolls off the tongue.
Practice using it in a sentance today, and impress your friends.

ExxonMobil has already won some preliminary legal rounds against PDVSA that are preventing the sale of about $36-billion in foreign assets. Even dictators gotta have dough to roll. So the state chihuahua is back to calling names and making threats and acting like the banana republic thug that he is. Just chill your jet, Hughie. Here’s why you’re not going to do anything of the sort.

First, the US is Venezuela’s natural market for its crude exports. This is true because of both geography and chemistry.
Look on the map.
See V-ville?
See the US.
See anyone else close-by big enough to pick up the slack if we stop buyin'?
Who ya' gonna call, Chuck?

According to an analysis by our crack team of researchers at Stratfor-dot-com, 90% of Venezuela’s 2 million barrels per day in crude exports either goes to U.S. refineries that are explicitly designed to process the poorer grade of crude, or is refined into products that are evenutally sold to the United States.

Venezuelan crude oil is dirty, nasty stuff.
You just can’t sell it to anyone, and only U.S. refineries have been specifically engineered to process the sulfurous ooze. Even with the price of oil at $90/bbl, not many other industrialized countries are going to be in the mood to re-configure existing plants, or even build new, specialized refineries capable of refining Venezuelan crude.

And there’s that geography thing.
The US is the only country in the 'hood with the tools and toys to play with Venezuelan oil. If Senior Bully did decide to take his oil and sell it elsewhere, he’d have to pay increased shipping costs. He’d probably have to discount his price, too—remember, it’s nasty, skanky stuff to process…and I would imagine there’s a hefty PITA* premium most countries would impose for having to deal with this tropical tyrant.

Another reason Little Hughie won’t take his oil away is because he can’t afford to. Remember the Venezuelan government is no Swiss financial center, and there’s a very thin margin of error for fiscal disruption in his country. It is this very money-for-oil/chica’s-for-free formula that has kept this bozo in power up to this point.
Chavez has to sell his oil to keep up the payments to his power base.

Finally, we’ve heard these kinds of rantings from the vitriolic Venezuelan before.
He’s all talk and no action.
He’s a wind bag.
Actually, he’s a gas bag, and if there were many more like him, maybe we could tap them (no pun intended) as an alternative source of energy. This guy makes the Energizer Bunny tired. But he's not going anywhere with that oil.

It would take at least a couple of years to re-jigger someone else's refineries to handle Venezuelan crude, and promises/threats in the past by PDVSA to wean away from its reliance on the U.S. market have not come panned out.
(Sound familiar?)

Then there's the fact that the US could more easily replace Venezuelan petroleum in our production facilities than they could replace the us as their prime customer.

And as a final trump card, if the idiot does goes postal on us, it would be no sweat to pull a trick from his own playbook, and simply seize Venezuelan assets in this country—namely Citgo refineries owned by Petroleos de Venezuela.
That sort of slides off the tongue, too.
Seize assets.
Seize Citgo.

Hugo Chavez not as stupid as he acts, though.
Yesterday he began transferring funds into Swiss bank accounts to dodge the asset freezes.
Crazy like a fox...terrier.

*PITA = Pain In The A**

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