Oil and Gas

The relevant question for Venezuela is how far oil prices would have to fall before the country would begin to run an unsustainable current account deficit. This is the binding constraint for developing countries.

What would you call an organisation that when caught making false allegations, refuses to answer legitimate questions or hold an investigation? Answer: Transparency International!

On Tuesday morning the unprepossessing surroundings of the basement of the Royal Courts of Justice, Court 22 were the venue for the final main round in a battle royal between the US company Exxon, the world’s biggest private sector oil giant, and PDVSA, the state oil company of President Hugo Chávez’ Venezuela.

Exxon-Mobil, the world's largest oil company, has sued Petróleos de Venezuela S.A. (PDVSA), in the International Center for Settlement of Investment Disputes (ICSID), but we should remember that only in a very few occasions has the ICSID ruled in favor of a Third World government.

 

Exxon's move is a warning shot, and so are reports about Colombian paramilitaries entering the country in greater numbers. More destabilization will follow, and continued efforts will be made to weaken Chavez, then try to oust him.

Venezuela's intention has been to bring illegal oil projects from the rich Orinoco Oil Belt into its legal framework and thus stop the continued transferring of resources needed for social development from the People of Venezuela to the coffers of large foreign multinational companies.

An interesting dichotomy has developed with respect to Venezuela. With a highly popular president and a booming economy the place has become, at least for the moment, downright boring. On the other hand, some in the international media seem to think that Venezuela’s economy is near collapse, its president virtually a dictator, its society is facing social convulsion, and its people can’t find enough food to eat. Fortunately for Venezuela there really isn’t much more to this dichotomy than some pretty poor reporting. Case in point is “The perils of Petrocracy” in the New York Times.

National oil companies (NOCs) are in the ascendancy throughout the world, and the traditional oil and natural gas model relating to international energy development and markets must be revised accordingly.

A cartel of natural gas-producing nations similar to OPEC (Organisation of Petroleum Exporting Countries), an idea floated by countries like Iran, Russia and Venezuela, remains a distant possibility due to the nature of the market.

Energy security is one of the major policy issues facing the United States. Unfortunately, the United States is missing the opportunity of gaining a more integrated, robust and durable energy security not only for itself, but also the entire hemisphere, and, more generally, the world as a whole.