Chávez seeks to peg oil at $50 a barrel

[Rosco T.]

http://business.guardian.co.uk/story/0,,1745467,00.html

Chávez seeks to peg oil at $50 a barrel


Venezuelan president Hugo Chávez is poised to launch a bid to transform the global politics of oil by seeking a deal with consumer countries which would lock in a price of $50 a barrel.

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"We have the largest oil reserves in the world, we have oil for 200 years." Mr Chávez told the BBC's Newsnight programme in an interview to be broadcast tonight. "$50 a barrel - that's a fair price, not a high price."

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According to US sources, Venezuela holds 90% of the world's extra heavy crude oil - deposits which have to be turned into synthetic light crude before they can be refined and which only become economic to operate with the oil price at about $40 a barrel. Newsnight cites a report from the US Energy Information Administrator, Guy Caruso, suggesting Venezuela could have more than a trillion barrels of reserves.

A $50-a-barrel lock-in would open the way for Venezuela, already the world's fifth-largest oil exporter, to demand a huge increase in its official oil reserves - allowing it to demand a big increase in its production allowance within Opec.

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[pitohui]

1. good for him if he can pull it off

i think it's a fair price but the reality is that *co/halliburton want an extortionate price

i don't believe *co will tolerate any bid for $50 a barrel oil

[BeFree]

2. Chavez does it again

He's thrown the bastards for a loop.

Can't wait to hear how they argue we should be paying more than $50 bbl.

[northzax]

7. because that's the open market price?

This will drive the price of oil for everyone not in his scheme up, once Venezuela leaves the open market. There's a finite amount of oil being pulled from the ground every year, and more and more people are bidding on that finite commodity. Hence, the price goes up.

[BeFree]

11. You think its an open market?

No way. It's a monopolized market, at best. Chavez sees that and is willing to separate his country's resource from OPEC's. He will drive down the price, just wait and see.

Now, we all have heard about peak-oil. And the monopolies took advantage of that to jack the price sky-high. We will run out of oil one day, but like Chavez says: Venezuela has 200 years of resource.

[northzax]

12. Venezuela doesn't have the reserves to destroy OPEC

and they think they have 200 years, at today's production rates. But you know what? if we actually burn that oil, WE won't have 200 years to enjoy it. we should not be looking for more cheap imported oil, especially the more polluting heavy crude. we should be looking for more alternatives to it.

Opec produces more oil today than at any time in the past 25 years, the reason for the increases in the price of oil is not OPEC, directly, it's the fact that we are bidding against China and India. Peak oil has nothing to do with it, really. Every day the world uses more oil than the day before. And new production is not keeping pace with global demand. Even with 200 years of capacity, we can't really pump all that more than we already are.

By the way, this has nothing to do with US gasoline prices, which do not track the global prices as well as they should.

[RoyGBiv]

13. That's the point here ...

Chavez is trying to get Venezuela's counted reserves bumped by including the reserves of extra-heavy crude, which is what the "200 years capacity" refers to. Besides allowing Venezuela to increase its daily output, this puts his nation in a much better position of power within OPEC.

Not disagreeing, just expanding.

[northzax]

14. yes, thanks

what I meant to say and didn't. But still, this is the worst possible type of petroleum to use, envrionmentally, at least. It takes more energy to refine, because of that, it releases more global warming gassses over its lifetime than light, sweet crude. This is not something we should be celebrating, imho.

[MadMaddie]

3. This is interesting... Chavez is daring * to come out against this

because if * does...it proves he has never had any intention of checking the price of oil....

The * Cabal will find a way to attack Chavez.......

[AndyA]

4. How will the Repugs spin this one?

They will have to find a way to explain how Venezuela can make a profit at $50/barrel, but no one else can.

Lights will be burning late tonight at the White House.

[HillDem]

5. This is retarded

They have poverty in Venezuela, so why are they refusing an extra 10 bucks a barrel? Chavez really makes me scratch my head.

[bemildred]

6. Extra heavy crude brings a lower price. nt

[northzax]

8. because high oil prices

lead to conservation and everntually replacement technologies. At $60-70/bbl, more and more people start finding ways to not use petroleum. Which, as we all know, is good for the planet, but not for the Petro-mafia, right?

[RoyGBiv]

9. As mentioned ...

He's talking about extra heavy crude, which Venezuela has in abundance, not light-sweet crude, which it does not. Extra-heavy crude does not trade at the same high price as light-sweet. Many reasons exist for this. E-H crude, as it exists naturally, cannot be transported via pipeline. A process called orimulsion transforms the crude into something that can be so transported, but that costs money. Also, heavy crude is more difficult to refine into gasoline. The process involved belches out 3x the volume of greenhouse gasses of refining light-sweet. IOW, refining heavy crude into usable products is less efficient, which in terms of profits means the E-H raw material doesn't have as much value as light-sweet because it costs more to produce a marketable product.

What he's trying to do here, in a nutshell, is legitimize Venezuela's E-H crude production, i.e. make it viable and position Venezuela as a leader, a controlling leader actually, in the future market. This one simple thing has a lot of internal politics going on with it. Never let it be said that Chavez does not think about the future in terms of his country's place in the oil economy.

[Freedom_Aflaim]

10. Sounds good, but it seems to me that all he has to do

is simply price his oil at $50 a barrel.

Certainly if I were a buyer of oil by the barrel, I would then go to Chavez to buy it, rather than from anyone else at $65

I suppose there are other considerations, but Venezuela is afterall a soveign country, so I don't see why they would be required to sell their oil above prices they deem unfair.

[northzax]

15. it's an OPEC requirement.

Venezuela is a member of that not very august body, and as such, has quotas to meet of maximum production overall.

[RB TexLa]

17. And after it is bought for $50

How does he propose to keep people from then reselling it at the market price?

[mmonk]

16. Here, here!