Coupla posts

  • Who-whom? Heard during the course of a segment on Hugo Chavez during The World This Weekend, at about 1.25pm:

    “The US depends on Venezuela for nearly a fifth of its oil imports.”

As Lenin was wont to ask about any political relationship, “Who – whom?” Meaning, who has power over whom? A quick Google is giving me that Venezuela depend son the US to buy between 60 and 80% of its oil exports. But of course the BBC wouldn’t put it that way.

In fact, as I understand it, there is a world oil market, so talk of either buyers or sellers boycotting specific countries is all a bit of a joke. You can either sell the stuff or leave it in the ground: those are the only real choices. About all a boycott of a single nation could do is impose extra costs by making some oil take the long way round, or by obliging refineries to cope with unaccustomed types of oil, or through increased fees to middlemen – but basically trying to control what happens to your oil once you’ve sold it is as futile as trying to control what happens to your dollars once you’ve used them to buy oil.

Be that as it may, the “dependency” of a customer on the guy who supplies him with a fifth of what he needs is much less than than the dependency of a supplier on the customer who buys three to four-fifths of what he supplies.

Hat tip to whoever made this point last time the alleged dependency of the US on Venezuelan oil came up on the BBC.


  • “Not bias, just unbelievably shoddy,” writes a correspondent, pointing out this report of a tragedy in Glasgow. The age of the man killed is given as 21 at the beginning of the story, then as 28 half way through. His name is given – but at the end it says that he has not yet been named. UPDATE / CORRECTION: D. Burbage says it’s twoaccidents. Re-reading, he’s right. Archonix says it could have been clearer.


Bookmark the permalink.

25 Responses to Coupla posts

  1. archonix says:

    As more of Boss Hugo’s policies come in to effect, the proportion of Venezuela’s oil that goes to the US may well rise as their capacity is reduced. Their production capacity has been trending down for the last year or so. Imagine being Chavez and finding out that you’re entirely dependent on a single customer for all your income, because you can only produce enough to satisfy that one customer. And they’re thinking about buying in from other distributors…

    Of course, as you say, it’d still get there but it would create uncertainty. Nobody likes uncertainty.


  2. D Burbage says:

    It’s not even shoddy – if you read it carefully they’re talking about two accidents. Poor style, maybe, but it’s a different bloke πŸ™‚

    Re-reading, I see you are right, Mr / Ms Burbage. Will add an update/correction.

    Edited By Siteowner


  3. archonix says:

    It could be made clearer which victim is from which accident.


  4. Fran says:

    Chavez’ Venezuela is becoming ever more anti-semitic, sorry anti-Israel as well – another reason why the BBC would approve of the regime.

    Hat tip: Venezuela News and Views

    BTW, has anyone else noticed the vitriolic reportage of Pinochet’s last rites accompanied, natch, by film of Baroness Thatcher with the old toad. Not to minimise Pinochet’s achievements in sheer vileness – which are considerable, but compare and contrast with the hagiographical attitude of the BBC towards an equally vile and repressive leader, viz Fidel Castro.

    I reckon that Castro could give Pinochet a run for his money in deaths of political opponents and torture of others any day!

    But then Castro is a left wing dictator and Pinochet is ….. not.


  5. Anon says:

    “In fact, as I understand it, there is a world oil market, so talk of either buyers or sellers boycotting specific countries is all a bit of a joke. You can either sell the stuff or leave it in the ground: those are the only real choices.”

    The arab oil emabrgo was all a bit of a joke as well then I suppose. Oh yes, oil is a fungible resource and all that, but to assume that nations cannot co-operate to target other nations with embargos is naive not to say historically innacurate. The basic premise of your argument is that if the if venezuela were not to sell its oil to the US, then market price for oil would go up for everyone due to a rise in demand for the worlds oil supply (minus chavez’s). When the arabs decided not to sell their oil to us, funnily enough the price of oil in the Eastern Bloc did not rise to reflect this. As a libertarian surely you should be aware more than most of the distorting effect that governments have on markets. According to this theory there is no need at all to keep the Saudis sweet yet US foreign policy doesn’t reflect that.

    That said, yes chavez is dependant on the US and they are dependant on him. Currently the US has available and appropriate spare refining capacity but Chavez would dearly love to sell his oil to China instead and is already trying to acheive this.


  6. Richard says:

    Ermm, I think that Castro can far excede Pinochet’s roughly 3,000 political executions. Che Guevara alone killed nearly 1,900 as Castro’s executioner, and he’s been dead for decades.

    But of course Che is suitable for a trendy T-shirt, and Pinochet is (rightly) reviled.


  7. dearieme says:

    The BBC is very fond of “controlled”, as in “Company X controls 30% of the market in Y”. God knows what it thinks it means.


  8. D Burbage says:

    it’s Mister πŸ™‚


  9. Geoff says:

    Richard, why is “Pinochet is (rightly) reviled”?

    He was a strong and great man who brought stability and security to that part of the world. That’s my opinion and I have no objection to you disagreeing.

    However as we both know (D)HYS will ask for ‘tributes’ when Castro heads towards hell and when Pinochet dies it will be ‘reaction’ or ‘comments’ at best.

    I will submit my thoughts to both threads. I bet neither of them are published because they won’t reflect the limp-wristed liberal consensus.


  10. JEM says:


    The OPEC oil embargo in the ’70s and the present day efforts/threats by Chavez are different animals.

    In the first case, OPEC stopped selling its oil to ANYONE. In the second, Chavez will not sell his oil to the US, but presumably will to someone (anyone) else. Then OPEC controlled about (I think) some 60% of world oil production, Venezuela maybe 5% now.

    So oil is indeed funhable, but it has to be sold to SOMEONE for that to apply.

    So long as the oil is sold to SOMEONE, it will make no difference in the market: that is fungability. But if it’s not sold at all, shortage will drive up prices, etc. However, for that OPEC option to work, it’s got to be a large porion of the output that’s stopped. And the people doing the stopping have got to be able to do without the income-and that is usually only for a short time.

    It’s like threatening to hold your breath until someone does what you want: you can’t do it for long.

    And prices did not change in the Eastern Bloc back in the ’70s because the market did not operate in the Socialst Paradise.


  11. Market Participant says:

    The other side of monopoly is monopsony.

    In monopsony, the buyer sucks away all of the sellers profits (i.e the normal profit in a competative market) until the sellers are reduced to selling at average variable cost.

    If atlas were to shrug, the oil exporting world would collapse.


  12. Market Participant says:

    ‘And the people doing the stopping have got to be able to do without the income-and that is usually only for a short time.’

    Thats the funny part. If the world stopped buying iranian oil, that regime would grind to halt exactly as if you drained the oil pan of an engine while it was running.


  13. Fran says:


    I’d argue that Pinochet is “rightly reviled” because the way that he brought stability to his region was through terrorising his own people, and this simply isn’t acceptable now.

    Herod the Great was a strong leader who brought stability to the Levant. He used similar methods to Pinochet, but within a context in which all rulers acted in this way.

    No doubt Ghengis Khan did much the same.

    But I’d argue that the age of accepting the methods of dictators in exchange for stability is past. Which, of course, makes the BBC’s brown-nosing of Castro all the more egregious.


  14. the_camp_commandant says:

    Venezuela’s problem is that its oil is of poor quality: heavy, sulphurous, and waxy, which means it isn’t worth very much anywhere. To refine stuff like that you have to have well-configured refineries, which the US does, and therefore it could refine other oil if it chose to. Poorly-equipped refineries can’t run Venezuelan, however, so in terms of who has more options, the US is in much the stronger position of the two.

    The US embargoed Iranian oil for about 15 years and a consequence of that was that the price of Iranian oil fell relative to similar non-embargoed grades, because taking Us demand out of the supply-demand balance appreciably lowered Iranian oil’s value. I was working for a US major at the time and our economists reckoned the US ban was costing Iran about 15 cents a barrel. Iran’s oil production is about 3.5 to 4.0 million barrels a day so over the 15 years that embargo cost them about $3 billion.

    The Arab World’s attempt to prevent its oil going to Israel has not, on the whole, worked. You can attach end-use restrictions to your oil, but it’s the enforcing them that’s a bit tricky. US companies ignore Arab countries’ attempts to enforce this and refuse to fill in the little questionnaires they send round from time to time asking us to swear we haven’t sold oil to Israel. In fact, it’s a jailable Federal offence in the US to play along with the Israel boycott.

    US strategy appears to be to ratchet up production from Alaska and to increase supply from friendlier nations like Mexico, Ecuador, and Colombia. Quite soon I would think the US will embargo Venezuela and trash its economy. Chavez is simply a posturing twit who has no idea how commercially powerful the US is – which, if he relies on the likes of the BBC for his information, would be an understandably stupid position to be in.


  15. Cockney says:

    True but the US needs to be reasonably careful if it wants to retain an influence in Latin America. It’s all very well annhilating somebody’s economy but who gets the blame – the US (irrespective of whether some ultra left imbecile would have managed it in their own time anyway). And what’s the result – more left wing governance in Latin America either via the ballot box or more sinister means.

    Problem is that right wing pro US governments have done pretty much f*** all to help the majority of Latin Americans hence the opportunities for the hard left. They don’t have a divine right to be in office irrespective of competence. Rather than playing Chavez’s game of mutual antipathy the US should encourage the promising Latin American governments by pushing on with free trade agreements. Unfortunately a Democratic congress isn’t exactly the most promising context for this to happen.


  16. knacker says:

    Poorly-equipped refineries can’t run Venezuelan… And the US refining co. best placed to handle it, Lyondell, is now in a position to make lots of money, since they recently bought out their Venezuelan shareholders and can, one imagines, squeeze a lot harder than little Hugo.

    Which doesn’t begin to explain the BBC’s mindless adoration of scruffy S. American demagogues. Something to do with boots and vigorous hand motion?


  17. Anon says:

    JEM :

    They didn’t stop selling their oil to anyone at all, get your facts right at least.

    Then OPEC controlled about (I think) some 60% of world oil production, Venezuela maybe 5% now.

    So oil is indeed funhable, but it has to be sold to SOMEONE for that to apply.

    This is true I agree, but the point is that the US have tried their hardest to find “friendly” oil suppliers as close as Mexico and as far afield as Chad. They don’t look too good though in terms of long term oil production capability since their proven reserves aren’t great. Perhaps we have different understanding about the meaning of “fungible”, but as far as I understand it all it means is that their is a single global price for oil and everyone pays the same. The only condition upon entry into the market for oil would be the ability to pay whatever the market price was. Ergo, I don’t know what you mean when you say that oil has to be sold to someone in order to be fungible.

    As much as I’m sure you’d all love to see it there is little chance of the US being able to embargo VZ oil, and Chavez obviously knows this.

    Given that world wide demand for oil will rise by an estimated 60% by 2020, and as China and India come to expand their refining capacity and capability (something they are both actively doing) there is little chance that Chavez will not be able to shift his oil I’m afraid. Someone mentioned the US embargo of Iranian oil, as far as I’m aware this may still be in place because the US still don’t get oil from Iran. Iran will have no trouble shifting their oil and this obviously emboldens them. According to those who maintain the perfect fungability of oil theory then an attack on Iran would be disastourous for the US economy since if their oil was taken off line the price would shoot up for everybody. I doubt this would actually happen though and this is why China and Russia are so unlikely to support any military action against Iran, since as direct customers they have most to lose. I’d like to see someone who knows what they’re on about discuss this since we hear a lot about about oil being fungible, and it’s a nice word, but the facts on the ground often seem to contradict it. One could also quote the US/UK coup in Iran removing believe it or not a democracy. This was all because they were trying to raise the price of their oil. In a true market economy this would punish no one but the Iranians so far as I can see. The US and UK would just get their oil from elsewhere if they didn’t want to pay the price the Iranians wanted to charge. It doesn’t quite add up.


  18. Ian says:

    The sole reason Venezuela supplies so much oil to the US in the first place was the deliberate decline in imports from Iraq. Prior to the 2003 war, Iraq produced over 3 million barrels/day, which exceeds 2006 Venezuelean production, and in the past Iraq contributed nearly 7% of US imported oil.

    As the Iraqi oilfields come online, and remember that a bulk of them lie in the Kurdish north rather than the trouble hit Sunni/Shia parts, the US will probably reduce Venezuelean imports.

    Talk about America seeking “far and wide” for oil imports is rubbish, most US oil is homemade and their biggest importer is Canada (18%) followed by Mexico (15%).


  19. knacker says:

    Talk about America seeking “far and wide” for oil imports is rubbish…
    Yes, it certainly is, though nothing new there. The noise is loudest, as usual, from Europe — where the energy problem is greatest, as usual, and the denial loudest, as usual. Also as usual, EU behavior is sleasiest of all: vide French oil leases in Iraq, French nuclear contracts in Iraq and Iran, Shroeder’s elevation to the nomenklatura in Russia (Gazprom), and — oh what’s the point in going on.

    The BBC’s opinion mongers, predictably, ignore all this. Nothing new there, either.

    Meanwhile, watch what happens to global demand and oil prices when the US economy rolls over into recession, most likely in 2007.


  20. JEM says:

    JEM : They didn’t stop selling their oil to anyone at all, get your facts right at least.

    Get your facts right. OPEC cut back their production by the amount I mentioned. That is the same thing as not selling the stuff at all. True, they continued to supply their friends, but that was relatively peanuts.

    While this condition lasted, what oil was on sale remained fungible, but due to demand exceeding supply, the price went up a great deal. The stuff never ceased to be fungible.

    If Venezuelan crude is low-grade, that fact will be reflected in the price. That’s fungibility too.

    In the end, no-one, not even the Soviet Union, can buck the market.


  21. Nom de guerre says:

    I don’t think that Pinochet should take a lot of credit for stability in Chile. The US administration ‘vetoed’ his coup with the guarantee that the economic restructuring would be left to the Chicago School of Economics. Lo and behold, within a short period Chile had the most efficient economy in the region. Indeed this is still the case today. Look at how little the regional financial crisis of the late 1990s impacted Chile in comparison to countries like Argentina and Uruguay.


  22. Umbongo says:

    Before Allende, Chile had a remarkable history (for South America) of democratic politics and civil rights. Allende – who was voted into office by a plurality (of about 36%) not a majority – undertook, before he was confirmed in office by Congress, to maintain the constitutional traditions of the country. Once confirmed, he . . er . . forgot about that undertaking and began the usual path of leftist governments in South and Central America of dispossessing the middle class (by property seizures and illegal land occupation) who resisted by strikes and demos. The leaders of the anti-Allende demos kept asking the Chilean armed forces to intervene: they kept on refusing until after a declaration by the Chilean Congress that Allende was behaving unconstitutionally: the rest is history. But please, no more econiums to Allende about the “lost revolution”: if nothing else, the clearing out of the Cuban advisers after Allende’s fall shows what Chile escaped because of the Pinochet coup. This doesn’t excuse the atrocities carried out under the Pinochet administration but the beatification of Allende (and, funnily enough by the same people, Castro) is, to say the least, overdone.

    As to Chavez – I feel very sorry for the Venezuelans – as I feel sorry for the Libyans. Here are 2 countries blessed with a pot of gold in their back gardens led by nutters who, instead of wanting the best for their people, play Mr Big on the world stage with their people’s money. Gaddafi has quietened down (well he’s been there a long time and he’s not getting any younger) but Chavez is just starting. I suspect that Libya would have been happier (and more prosperous) under King Idris, as Venezuela would – in the long run – have been happier if Chavez had lost the recent election.


  23. Fabio P.Barbieri says:

    Umbongo: what I find bewildering is that, after 200 solid years of failure and disaster, corruption and cruelty, violence and endemic civil war, some at least of the Spanish American countries can still be seduced by the magic of caudillismo. If two hundred years of history have not taught them to look with disgust on swaggering men in uniform projecting arrogance and ignorance, what will? It is however slightly reassuring that it is only some of the lesser countries – Bolivia, Ecuador, Venezuela, Nicaragua: all small and poor – who have fallen into this cultural trap. The large and leading countries – Peru, Mexico, Colombia – have decidedly rejected caudillismo of the left and right in the most recent elections, and while Chile, Argentina and Brazil are led by left-wing governments, they are very different from the Chavezes of this world.

    As for Allende, the way I hear it is that as soon as he was elected, the hardline members of his ramshackle coalition started going berserk, and, apart from violating the law all over the place, actually began to attack and abuse him for standing in the way of the “revolucion”. Allende soon became the target of his own side as well as of the opposition. Mind you, he was also stupid, it would seem: the Army refused to take action against him till he himself appointed Pinochet to head it, with Pinochet swearing all kinds of loyalty. We know where that ended. But as you mention that Congress (led at the time by Eduardo Frei’s Christian Democrats) had condemned Allende and even appealed to the Army to overthrow him, it may be as well to rememember that Frei and his party soon found out that one of Pinochet was worth ten of Allende, and those of them who survived the murderous attentions of his Directorate of National Security (which he ran personally) became his opponents.


  24. AM says:

    I sent this report to Biased BBC. The article has been rewritten after its original publication to make it plain that there were two incidents. I can assure readers that its first version was so poorly assembled that there was no suggestion of there having been more than one death.


  25. AM says:

    Scratch that. Just found my saved version. I’m wrong. Apologies!