ExxonMobil has won a court battle to freeze $12 billion in assets of Petroleos de Venezuela as compensation for nationalization of projects.

NEW YORK (Reuters) - Exxon Mobil Corp (XOM.N: Quote, Profile, Research) has won court orders freezing up to $12 billion in Venezuelan assets around the world as it fights for compensation for operations lost to President Hugo Chavez's nationalization drive.

The largest U.S. company sought the asset freeze to guarantee repayment should it win arbitration over the Cerro Negro heavy oil project.

The move is the boldest challenge yet by an international oil major against any of the governments around the world that have moved to increase their holds on natural resources as energy and commodity prices have soared.

Exxon -- which last week posted the largest ever year's profit by a U.S. company -- said on Thursday it has received court orders in Britain, the Netherlands and the Netherlands Antilles each freezing up to $12 billion in assets of Venezuela state oil firm PDVSA. An Exxon spokeswoman said the total that could be frozen worldwide was $12 billion.

Exxon also won a court order from the U.S. District Court for the Southern District of New York in December freezing more than $300 million belonging to PDVSA, seeking to guarantee repayment should it win the arbitration.

http://uk.reuters.com/article/oilRpt/idUKN0628848620080206
http://www.businessweek.com/bwdaily/dnflash/content/feb2008/db2008027_652741.htm

2/11/2008 12:55:10 AM

explain to me again...

What did Venezuela do that was illegal?

2/11/2008 1:03:01 AM

Clearly you can't comprehend the written text as was highlighted in what LoneSnark posted:

Quote :

"compensation for operations lost to President Hugo Chavez's nationalization drive."

So I'll use pictures instead:



[Edited on February 11, 2008 at 1:12 AM. Reason : >.<]

2/11/2008 1:12:23 AM

rofl

2/11/2008 1:17:56 AM

^^ Classic.

http://niggastolemybike.ytmnd.com/

And from the second article:

Quote :

"Last July, Venezuela forced six oil giants, including ExxonMobil and ConocoPhillips, to hand over equity stakes of 60% or more in four important ventures to PDVSA. Four of the companies, including Chevron (CVX), BP, France's Total (TOT), and Norway's Statoil (STO), agreed to the handover. The seizures included ExxonMobil's Cerro Negro affiliate and its profit-sharing venture to develop the La Ceiba oil field."

...stole my bike.

[Edited on February 11, 2008 at 1:23 AM. Reason : er, oil.]

2/11/2008 1:19:01 AM

lol, that's what they get for trying to build a bike making factory next to... you know.

2/11/2008 1:34:32 AM

And if Chavez makes good on his threat to cut the US off from Venezuelan oil?

http://www.breitbart.com/article.php?id=D8UNM7SG0&show_article=1

2/11/2008 3:20:49 AM

maybe we'll just sue them in international court again.

2/11/2008 3:52:30 AM

So did venezuela take 60% of the ventures there, or take over the ventures entirely?

2/11/2008 3:55:22 AM

Quote :

"The seizures included ExxonMobil's Cerro Negro affiliate "

actually, it looks like the nigga was stolen

2/11/2008 8:30:05 AM

i was under the impression that Hugo was paying for what he took. sort of like eminent domain.

2/11/2008 10:10:42 AM

If I gave you a dollar and stole your car because I look sexier in it and thats clearly in the public's interest, would it be fair?

Same thing. Except with a egotistical quasi-wannabe-dictator who invented a new timezone so that he could...well nobody really knows why.

2/11/2008 10:13:50 AM

from what i've read briefly, he was paying fair value, not a dollar per car type deal. don't have time to dig up articles right now - i think LoneSnark knows..

2/11/2008 10:43:41 AM

ExXon knew the risks when they started operating in Venezuela....

2/11/2008 11:17:02 AM

Chavez did pay 'fair market value' for his other nationalizations: the telephone companies, the power companies, etc. But even then it was not really fair: he would announce the companies were being nationalized, the market valuations would collapse, and then Venezuela would pay the new price to the holders, which was usually only a fraction of the original price.

He did this because to properly take over a company you need the help of management. But in the case of oil sector nationalizations, PDVSA (Venezuela's national oil company) already held 40% ownership and was therefore already privey to the internal workings of the projects.

That said, I have no doubt that Chavez expected he would eventually be forced by western courts to settle with Exxon and others, since as a condition for investment back in the 90s PDVSA and the Venezuelan government agreed to external arbitration in the event of nationalization, with PDVSA overseas holdings as collateral.

Perhaps Chavez felt it would be politically beneficial to compensate Exxon a far larger amount in damages five years from now than go ahead and settle. At least then he could call Exxon a transnational terrorist organization that is trying to "take the country hostage".

Quote :

"Tissot says Chávez may emerge the big winner in the standoff with ExxonMobil, using it to boost his own flagging popularity. "Exxon is giving Chávez a great opportunity to engage in a nationalistic confrontation. Now he can blame the embargo—as Castro has done in Cuba for 50 years—as the culprit of any economic hardship in Venezuela.""

[Edited on February 11, 2008 at 11:33 AM. Reason : .,.]

2/11/2008 11:21:16 AM

Quote :

"If I gave you a dollar and stole your car because I look sexier in it and thats clearly in the public's interest, would it be fair?"

It's not fair, but we do it all the time, it's called eminent domain.


Whether it is good or not, nationalization of oil reserves will only increase in the future. And 12 billion dollars is little.

[Edited on February 11, 2008 at 11:27 AM. Reason : /]

2/11/2008 11:24:18 AM

Quote :

"ExXon knew the risks when they started operating in Venezuela...."

Please elaborate on this. I'd venture to guess you don't know what you are talking about.

2/11/2008 11:28:44 AM

Quote :

"i was under the impression that Hugo was paying for what he took. sort of like eminent domain."

yeah, Exxon just wasn't satisfied with the offer or what has already been paid or something.

I'm surprised it went to international court and they passed this judgment, I mean, that's kind of crazy when it's countries you're talking about and not people. One way or the other, you can't make them pay. You can freeze assets in banks cooperative with international court, but hope that you don't have much of your own nation's money sunk into Venezuela, b/c they can "nationalize" any project within their border to their heart's content. Of course, I guess you could invade them and turn the world further against the most disliked government and company on Earth. International government FTL.

[Edited on February 11, 2008 at 11:31 AM. Reason : ]

2/11/2008 11:30:10 AM

^ Not exactly. They are not suing Venezuela, but PDVSA, which has vast international holdings. They can do this because PDVSA agreed back in the 90s to have its overseas assets used as collateral against such disputes.

Overseas assets
Citgo Petroleum Corporation, USA - Citgo is 100% owned by PDVSA.
Ruhr Oel, Germany - PDVSA holds 50% of Ruhr Oel, the other half belonging to BP's German unit Aral AG.
Nynäs Petroleum, Sweden - PDVSA owns a 50% stake with Finland's Neste Oil Oyj holding the other 50%.
Bahamas Oil Refining Company (BORCO), Bahamas - PDVSA is the sole owner of this oil storage terminal in the Caribbean.
Hovensa LLC refinery, US Virgin Islands - Hovensa is jointly owned by PDVSA and Hess Oil Virgin Islands Corp.
Isla refinery, Curacao - PDVSA leases the Isla refinery in the Netherlands Antilles.

[Edited on February 11, 2008 at 11:37 AM. Reason : .,.]

2/11/2008 11:36:14 AM

I doubt Chavez redirecting exports to other countries will happen. Even if it does, the outcome for the U.S. is debateable. IF he decides to export to other countries, the imports to those countries will be changed to reflect demand in the U.S. market, and their former imports will be our new imports.

The nationalization of the oil segment is coming at huge costs to Ven. He is already stripping the profits of the oil to fund his massive social agenda, leaving very little for investment in infrastructure and maintenance. They are producing 20% less oil in the short time he has taken over. he has reduced maintenance to dangerous levels in US refinery operations (means more downtime more often= less gas on the market). he is basically running it into the ground. And I believe I read before the Exxon issue that he was asking for outside investment. Good luck after you shafted everyone else!

Oh, on another note. FUCK CHAVEZ

[Edited on February 11, 2008 at 11:44 AM. Reason : .]

2/11/2008 11:40:19 AM

Quote :

"I doubt Chavez redirecting exports to other countries will happen. Even if it does, the outcome for the U.S. is debateable. IF he decides to export to other countries, the imports to those countries will be changed to reflect demand in the U.S. market, and their former imports will be our new imports. [quote]The nationalization of the oil segment is coming at huge costs to Ven. He is already stripping the profits of the oil to fund his massive social agenda, leaving very little for investment in infrastructure and maintenance."

To be perfectly honest, while the oil being pumped is obviously declining under Venezuelan national ownership, if you're a Venezuelan making a few bucks an hour, you're better off with that money being reinvested in Venezuela as opposed to most of the profits going to ExxonMobil's shareholders, who are primarily American. And that's one reason why Chavez got elected in the first case with 56%, was cause more Venezuelans were thinking they were being left out on this financial windfall that's being pumped out of Venezuelan soil.

I'm not saying it's good for us, it's just reality. It's a bad case of the not-so-well-off of a country saying "this is our oil, it's in our ground, why aren't we profiting from it more?" As the price of oil continues to go up and as oil resources steadily head downward, we're going to see it more and more. It's why I think the long-term prospects for the private oil companies are not very good. Most countries will be having oil nationalized to keep the profits in-state. It's too important a resource to allow a third party to handle.

[Edited on February 11, 2008 at 11:57 AM. Reason : /]

2/11/2008 11:55:15 AM

The people in that country are not going to be very well off when the only asset they have is being run straight into the ground. It may be a short term gain for some, but its going to be a long term loss with this guy in charge.

2/11/2008 12:34:17 PM

Oil is not their only asset.

They have/had a respectably large and educated middle class.

2/11/2008 12:35:27 PM

Quote :

"Please elaborate on this. I'd venture to guess you don't know what you are talking about."

When you make a huge investment in the natural resources of a country led by a politician who is unfriendly to the US you have to calculate this as a liability. ExXon does business in Venezuela with the consent of the Venezuelan government. I laugh though about how shitty Chavez's nationalized oil company is doing in comparison. Maybe in the future he will not shoot himself in the foot but fucking over the business leaders running the show that know what they are doing.

Regardless the Venezuelan people are better off with more oil profits staying internal.

2/11/2008 12:37:01 PM

According to UNICEF, their GNI per captia is $4810. Thats pretty bad. However, when I was referring to assets, I was referring to their raw exportable commodities. I am sure they export other things, but nothing like oil (in terms of revenue)

Article on capitalization needs in Venezuela:
http://www.reuters.com/article/reutersEdge/idUSN0628848620080206?rpc=401&feedType=RSS&feedName=reutersEdge&rpc=401&pageNumber=1&virtualBrandChannel=0

Quote :

"Regardless the Venezuelan people are better off with more oil profits staying internal."

Of course the people are going to do better when more money is returned to the people. However, the management of those assets by government does not necessarily mean more money to the people. Governments do not run businesses well, being inefficient and cumbersome. Corporations are are going to do a much better job. Chavez's poor mismanagement in just a short period of time is threatening the biggest social plan financer they have. Congrats, Chavez. You have diverted funds to the people in a time of record oil profits. But now you have to play catch up, and you dont have the money. Where's the money going to come from?


[Edited on February 11, 2008 at 12:50 PM. Reason : .]

2/11/2008 12:41:21 PM

i agree with you and not really trying to argue socialism v. capitalism.

my only input is its their country and if they want to fuck it up i don't give a shit

2/11/2008 12:51:05 PM

Quote :

"The people in that country are not going to be very well off when the only asset they have is being run straight into the ground. It may be a short term gain for some, but its going to be a long term loss with this guy in charge."

Since when do voters anywhere think long-term? Heck, in our own country, we run up record deficits, are now at $9.2 trillion, and then give out tax cuts that everyone cheers. And no one asks the question of how it is all going to be paid back. No, the electorate will vote for bread and circuses and as for problems...eh, leave that for the next generation.

[Edited on February 11, 2008 at 1:16 PM. Reason : /]

2/11/2008 1:03:08 PM

talk about off the subject. First of all, the U.S. continues to get investment in its economy. it isnt scaring away investors like Venezuela. We can continue to charge, and get away it. Im sure there is a lot of people dieing to put their money into an economy where Chavez might wake up one morning and decide to nationalize another industry.

Second of all, the U.S. isnt charging much more compared to the national debt/GDP ratio of a lot of other countries in the civilized world. See the link below... These countries, while the national debt isnt as big in literal dollars, is in most cases much bigger in percentage of GDP than the U.S.. I had a chart from an eonomist magazine (recent month) but couldnt find it online. basically, the U.S. is near the top of all developed democracies in the world, over most of the powerful EU members, in terms of this very important ratio.

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

for the record, I'd love to get our national debt down. its just not keeping me up at night.

[Edited on February 11, 2008 at 1:49 PM. Reason : .]

2/11/2008 1:26:21 PM

Quote :

"Flyin Ryan: I'm not saying it's good for us, it's just reality. It's a bad case of the not-so-well-off of a country saying "this is our oil, it's in our ground, why aren't we profiting from it more?" As the price of oil continues to go up and as oil resources steadily head downward, we're going to see it more and more. It's why I think the long-term prospects for the private oil companies are not very good. Most countries will be having oil nationalized to keep the profits in-state. It's too important a resource to allow a third party to handle."

Here's the problem with this logic - oil is a capital-intensive resource. Which means it takes immense amounts of infrastructure and expertise to actually get out of the ground (and therefore have value). This means that attracting private investment is typically how many countries can effectively manage to extract their oil resources - many don't have the in-house talent, resources, and so forth to do it entirely on their own. As a result, they typically charge royalties instead - i.e., you pay us X% of the profits coming out of this well. (This was going on in Venezuela for awhile - Chavez even went so far as to alter the standing royalty contracts, up from a few percent to 30% - this still wasn't enough for him.)

Nationalization turns the previous agreements on their ear - Company Z invests in the infrastructure of oil extraction and training a workforce, all while doing the actual exploration work as well, and then when things are up and running someone like Chavez swoops in and effectively steals it.

For one thing, moves like that are a sure way to guarantee a lack of future investment by private companies in the oil industry - which means unless they've got a well-developed industry that also has the freedom to invest back into infrastructure (rather than have profits diverted away to other purposes, as in the case of Venezuela), it means your production will inevitably decline.

Further, moves like nationalizing industries tend to scare away other capital - if you're nationalizing oil, what's next? On the balance, it's a bad move when you actually need foreign capital to invest in business and infrastructure.

Quote :

"HUR When you make a huge investment in the natural resources of a country led by a politician who is unfriendly to the US you have to calculate this as a liability. ExXon does business in Venezuela with the consent of the Venezuelan government. I laugh though about how shitty Chavez's nationalized oil company is doing in comparison. Maybe in the future he will not shoot himself in the foot but fucking over the business leaders running the show that know what they are doing."

Dude. She was walking on a dark street at night in a bad neighborhood wearing skimpy clothes. She knew the risks, and she totally got what's coming to her.

Am I close, here?

[Edited on February 11, 2008 at 1:41 PM. Reason : .]

2/11/2008 1:38:31 PM

Quote :

"for the record, I'd love to get our national debt down. its just not keeping me up at night."

Double your taxes (in real terms) and half the government services in 25 years, will that do the trick?

Quote :

"Here's the problem with this logic - oil is a capital-intensive resource. Which means it takes immense amounts of infrastructure and expertise to actually get out of the ground (and therefore have value). This means that attracting private investment is typically how many countries can effectively manage to extract their oil resources - many don't have the in-house talent, resources, and so forth to do it entirely on their own. As a result, they typically charge royalties instead - i.e., you pay us X% of the profits coming out of this well. (This was going on in Venezuela for awhile - Chavez even went so far as to alter the standing royalty contracts, up from a few percent to 30% - this still wasn't enough for him.) Nationalization turns the previous agreements on their ear - Company Z invests in the infrastructure of oil extraction and training a workforce, all while doing the actual exploration work as well, and then when things are up and running someone like Chavez swoops in and effectively steals it. "

It's only stealing if the authorities say it is. In this case, the authorities are the Venezuelan government.

Your problem is that you are trying to apply logic. The reason the oil industry in Venezuela got nationalized is not logical. Talk to the typical run-of-the-mill Venezuelan voter from 1998, and tell him what you just said. Do you honestly think he or she would accept that line of thinking? You're leaving emotion out of this and that's what is hurting your point of view. Humans are not robots, we do not weigh the pros and cons on all decisions. That's how politicians make their livings, is by playing to the fears and wills of their constituents in such a way that can convince the voters to do what the politician wants. George W. Bush is very good at that most of the time, Hugo Chavez is very good at that most of the time.

[Edited on February 11, 2008 at 2:50 PM. Reason : ,]

2/11/2008 2:45:26 PM

Quote :

"Double your taxes (in real terms) and half the government services in 25 years, will that do the trick?"

I cant figure you out. exactly what argument are you making?

We can cut down the national deficit, and eventually the national debt if we start a slow process to rein in growth in government spending. Taxing people more isnt the way to tackle the deficit or national debt.

Quote :

"It's only stealing if the authorities say it is. "

Bull shit. Are you a lawyer? I guess a woman really is an adulterer in Iran if she is raped since the government says it is. Wow.

[Edited on February 11, 2008 at 3:28 PM. Reason : .]

2/11/2008 3:18:00 PM

Quote :

"Dude. She was walking on a dark street at night in a bad neighborhood wearing skimpy clothes. She knew the risks, and she totally got what's coming to her. Am I close, here?"

well WTF do you propose then. ExXon tooks it case to the courts and was able to get 12billion asset of PDV froozen. Should we rally the US 2nd airborne, roll our tanks into Venezuela, and tell Chavez " you will let our oil companies exploit your natural resources OR ELSE!"

2/11/2008 3:35:21 PM

Quote :

"I cant figure you out. exactly what argument are you making? We can cut down the national deficit, and eventually the national debt if we start a slow process to rein in growth in government spending. Taxing people more isnt the way to tackle the deficit or national debt."

And that will never occur. Why? Because I'm a realist and see who is elected to Congress.

What's going to happen is politicians in both parties will ignore the problem as long as they can, and then one day they'll realize they can't ignore it anymore, and they will drastically cut spending alongside increasing their revenue (taxes) just to pay the bills.

Quote :

"Bull shit. Are you a lawyer? I guess a woman really is an adulterer in Iran if she is raped since the government says it is. Wow."

You're talking about absolute law. Since when does that apply to "real law" that takes place in a courtroom?

It's a bit like how the U.S. government will only allow you to sue them if they agree to it. Is that right? Of course not. But it does not matter because they make the rules and have jurisdiction.

[Edited on February 11, 2008 at 3:52 PM. Reason : /]

2/11/2008 3:51:13 PM

Quote :

"Chavez did pay 'fair market value' for his other nationalizations: the telephone companies, the power companies, etc. But even then it was not really fair: he would announce the companies were being nationalized, the market valuations would collapse, and then Venezuela would pay the new price to the holders, which was usually only a fraction of the original price. "

Thats exactly what happened to my grandfather during the revolution in Egypt. He and most of his friends lost their big businesses to nationalization.

2/11/2008 4:02:01 PM

Quote :

"^ Not exactly. They are not suing Venezuela, but PDVSA, which has vast international holdings. They can do this because PDVSA agreed back in the 90s to have its overseas assets used as collateral against such disputes. Overseas assets Citgo Petroleum Corporation, USA - Citgo is 100% owned by PDVSA. Ruhr Oel, Germany - PDVSA holds 50% of Ruhr Oel, the other half belonging to BP's German unit Aral AG. Nynäs Petroleum, Sweden - PDVSA owns a 50% stake with Finland's Neste Oil Oyj holding the other 50%. Bahamas Oil Refining Company (BORCO), Bahamas - PDVSA is the sole owner of this oil storage terminal in the Caribbean. Hovensa LLC refinery, US Virgin Islands - Hovensa is jointly owned by PDVSA and Hess Oil Virgin Islands Corp. Isla refinery, Curacao - PDVSA leases the Isla refinery in the Netherlands Antilles."

Dammit, why do you have to keep knowing what you're talking about

But yeah, this is just what I wanted to know. I hate it how no news stories include background as simple as this...

--going off topic--
The national debt is a problem. Just because other nations are screwing themselves over doesn't we have nothing to worry about. Japan, for instance, with it's national debt, PLUS massively growing retiree population and a shrinking workforce, they are SCREWED. They have more debt, and a heavier SS problem, but we on the other hand don't have a large external trade surplus (including all private investments in and out of the country), and in fact have the opposite - a huge deficit to China. Economically, you can say that while Japan's future industry flounders, replacing the non-existent workers with robots and Chinese people, they can "call in" debt that it gained by exporting so much in the past in order to care for their (very rich) elderly.

We played a REALLY large role in engineering the entire system of holding large national debts. The entire world economy is subject to this government debt problem, though a considerable portion is actually held by national banks in other countries that [also] have a similar debt. Given any given number of parties, you can borrow as much as you want between each other regardless of what their means were to begin with. I'm yet to be convinced how this is a good thing.

Every country's situation is different, but when fairly evaluated, we do have a serious, serious problem. If you include the SS-like implied deficits, our government owes around 50 trillion dollars, by most estimates.

That's going to come out of our paycheck.

[Edited on February 11, 2008 at 4:17 PM. Reason : ]

2/11/2008 4:13:37 PM

Quote :

"Flyin Ryan: Your problem is that you are trying to apply logic. The reason the oil industry in Venezuela got nationalized is not logical. Talk to the typical run-of-the-mill Venezuelan voter from 1998, and tell him what you just said. Do you honestly think he or she would accept that line of thinking? You're leaving emotion out of this and that's what is hurting your point of view. Humans are not robots, we do not weigh the pros and cons on all decisions. That's how politicians make their livings, is by playing to the fears and wills of their constituents in such a way that can convince the voters to do what the politician wants. George W. Bush is very good at that most of the time, Hugo Chavez is very good at that most of the time."

I'm not arguing that your point about economic populism as a reason for this being done is incorrect, but simply that nationalization, on the balance, is bad policy. Given that, I'm not so sure that we can explicitly count on the number to rise, as you say - the fact that investment will dry up would certainly put the brakes on many plans for a quick capital-grab by national governments.

In other words, the need for special resources to extract oil and maintain facilities will, on the balance, eventually outweigh the short-term benefits of nationalization - especially for countries that hold off on doing so while investment (and production) plummets in those that don't.

Quote :

"HUR: well WTF do you propose then. ExXon tooks it case to the courts and was able to get 12billion asset of PDV froozen. Should we rally the US 2nd airborne, roll our tanks into Venezuela, and tell Chavez " you will let our oil companies exploit your natural resources OR ELSE!""

I propose nothing other than the status quo. I'm simply faulting your logic of arguing that Exxon somehow "had it coming" by doing business in the (Venezuelan) neighborhood. Regardless of this fact, it doesn't make what Chavez did right or excusable,, nor does it put Exxon at fault or make the matter not subject to reprisal - in this case, freezing the assets of the national oil company to compensate for losses.

Your logic essentially blames Exxon for doing business in a bad neighborhood - or, in other words, "asking for it to happen."

2/11/2008 4:49:02 PM

Quote :

"It's a bit like how the U.S. government will only allow you to sue them if they agree to it. Is that right? Of course not. But it does not matter because they make the rules and have jurisdiction."

But in many instances soverigns will bind themselves to arbitration as a condition of contract with a private company, as occured here.

All things considered, it is too bad for Chavez that Venezuela was once a prosperous middle-class country. It was the independence of PDVSA that drove it to seek international holdings in the 80s and 90s, which are now being held as collateral for Chavez's behavior.

Then again, it is doubtful that the oil investment projects in question would have been built by Exxon and others were it not for PDVSA's international holdings being available as collateral against future nationalization.

What this means is that Chavez is managing to wreck the availability of future investment without actually inflicting any harm upon ExxonMobil and ConocoPhillips, which will be able to take what they want of PDVSA's foreign property to recoup any actual harm including lawyer fees

2/11/2008 5:01:45 PM

Quote :

"What this means is that Chavez is managing to wreck the availability of future investment without actually inflicting any harm upon ExxonMobil and ConocoPhillips, which will be able to take what they want of PDVSA's foreign property to recoup any actual harm including lawyer fees "

Nationalized garnishment.

2/11/2008 5:10:57 PM

This is priceless:

CARACAS, Venezuela — President Hugo Chavez on Sunday threatened to cut off oil sales to the United States if Exxon Mobil Corp. wins court judgments to seize billions of dollars in Venezuelan assets.

"If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said, directing his words to U.S. President George W. Bush. "Do you know how? We aren't going to send oil to the United States. Take note, Mr. Bush, Mr. Danger."

Exxon Mobil has gone after the assets of Venezuela's state oil company, Petroleos de Venezuela SA, in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar (euro) oil project by Chavez's government last year. A British court has issued an injunction "freezing" as much as $12 billion in assets.

"I speak to the U.S. empire, because that's the master: continue and you will see that we won't sent one drop of oil to the empire of the United States," Chavez said during his weekly radio and television program, "Hello, President."

"The outlaws of Exxon Mobil will never again rob us," Chavez said, saying the Irving, Texas-based oil major acts in concert with Washington and is part of corporate "worldwide mafias."

Chavez has repeatedly threatened to cut off oil shipments to the United States, which is Venezuela's No. 1 client, if Washington tries to oust him. Chavez's warnings on Sunday appeared to extend that threat to attempts by oil companies to challenge his government's nationalization drive in courts internationally.

"If the economic war continues against Venezuela, the price of oil is going to reach $200 (a barrel) and Venezuela will join the economic war," Chavez said. "And more than one country is willing to accompany us in the economic war."

http://www.foxnews.com/story/0,2933,330252,00.html

Maybe it is just Fox News, but Chavez sounds like a raving maniac here.

2/11/2008 5:37:43 PM

LoneSnark,

You appear like someone who knows a lot about oil and the oil industry. If Venezuela were to stop selling to the US, wouldn't that hurt Venezuela a lot more than it would hurt us? I was under the impression that Venezuelan oil had a lot of impurities or something in it that only we could refine efficiently?

2/11/2008 5:49:16 PM

I suspect you are correct. He can try to divert his oil to China, but there are only so many refineries in the world capable of processing Venezuelan heavy crude, almost all of them are in the U.S. Since Venezuela does not own a tanker fleet itself, it really has no say over where the oil is shipped. Just because it only sells to tankers leased to Chinese companies does not mean the oil actually goes to China.

But, if Chavez instead shut down all exports without prior warning, regardless of destination, then world prices would skyrocket, potentially reaching $200 as he said. That would be about $5 a gallon here in North Carolina. This would be very harmful to the citizens of the world. The effects should be similar to what was experienced in North America after Katrina, where U.S. supplies of gasoline vanished from damaged refineries and pipelines. The difference would be that instead of primarily hitting North American supplies of refined products, since oil is easily tradeable the impact would be global, inflicting far more harm upon the world's poor, triggering unrest, civil war, and potentially starvation.

2/11/2008 6:09:50 PM

1973 over again?

2/11/2008 10:32:21 PM

I suspect 2005 is a better example, just worldwide. 1973 had price controls, 2005 did not. I doubt 2009 would have price controls.

2/11/2008 11:50:24 PM

Good article from businessweek:
http://www.businessweek.com/bwdaily/dnflash/content/feb2008/db20080211_052826.htm
excerpts:

Quote :

"Any embargo would also lose its effectiveness in about 30 days, the time the U.S. needs to tap oil from Saudi Arabia and other alternative producers to replace lost Venezuelan crude, says James Williams, who heads the London (Ark.)-based WTRG oil consultancy firm: "Yes, Venezuela could cut sales, and there would be a spike in prices, but its effectiveness would only last as long as long as it took to find alternative supplies." Any impact would also be mitigated by the U.S. drawing down its strategic reserves, he says. Venezuela currently produces about 2.4 million barrels of oil a day, of which it exports an average of 1.8 million to 1.9 million barrels daily. Two-thirds of that go to the U.S. Oil accounts for about 70% of Venezuela's exports and more than half of government revenues. That dependence on oil limits room for Chavez to maneuver. "Unless Chavez cuts off his nose to spite his face, it's an empty threat," says Craig Pirrong, professor of finance and energy markets at the University of Houston's Bauer College of Business. Pirrong says that PDVSA has been "cratering" financially, even as Chavez has built expectations for massive expenditures on social programs. "

Quote :

"PDVSA is expected to appeal court rulings in the U.S., the Netherlands, and Britain that put the freeze in place. The Venezuelan company could probably get the rulings overturned if it were to open its books to the courts, something it is loath to do, as it would reveal how much it is sending Chavez to pay for his social programs, say analysts. Opening the books would also reveal the company's true rate of oil production—a closely guarded secret. Chavez says Venezuelan oil output is now 3.2 million barrels a day, a number rejected by OPEC as well as most analysts who put output at least a quarter lower. Oil output has fallen 25% since Chavez took office in 1999, partially due to the firing of more than 20,000 PDVSA employees in 2002-03 during an abortive strike to force Chavez from office. If an agreement with Exxon isn't reached quickly, Brazil and Mexico may profit over the long haul, says Pitts. Although Venezuela has the region's largest reserves, international companies could turn to Brazil and Mexico, especially if the latter moves to open its energy industry to private investment. Brazil also is revving up its energy industry and has found significant offshore reserves. Exploiting those reserves, however, will take years. "

2/11/2008 11:58:49 PM

And it just seemed like just yesterday when charitable Chavez was sending free heating oil to poor Americans.

2/12/2008 12:09:54 AM

^^ or we could reduce... our consumption maybe?

never mind, that won't happen.

2/12/2008 10:13:23 AM

CHAVEZ YOU KNOW WHAT HAPPENS WHEN U FUCK WITH TEXAS AND DON'T SUBMIT TO OUR DEMANDS ON YOUR OIL EXPORTS...

2/12/2008 10:39:02 AM

First of all, Venzuela couldnt shut down exports completely without committing economic suicide. As I stated way up in then post, they would only be able to sell to others, that have less ability to store and process excess crude than the U.S.. this means that we would get supply from new sources. Crude would go up during this period, but Im not sure how much. I certainly dont see much over a $20 premium on current levels (just a guess). if Venezuela shut off completely, I would expect a much bigger increase in crude and gas.

Gas would be higher than the $5 the poster ahead mentioned. Currently, the crack is not spectacular for refineries. The price of gas would have to double for them to afford to refine the product. This would almost overnight create a economic nightmare for the entire world, which would siginificantly affect the demand for crude (it would plummit). So that means when Venezuela comes back online, they are going to be selling crude for a lot less money than before because they have destroyed the demand structure.

So, V is fucked either way.

2/12/2008 1:33:06 PM

what do you mean "destroy the demand structure"? Do you mean that we'll essentially develop infrastructure to pump oil out harder from all other places? Like I was saying, i wouldn't be worrying about people reducing consumption...

2/12/2008 1:44:09 PM

Demand structure would be destroyed because consumption of gasoline would sharply decline if gas were to go to $6 a gallon. This would mean $12+ gallon in Europe. You would see car pooling like never before... Many offices would allow people to telecommute that were never allowed before. Lower class folks wouldnt be able to afford gas at all, and would be left with public transportation. We have already seen public transportation use up a lot with prices at $3 a gallon. Demand in Japan is way down from energy spikes. Demand in the U.S. has been flat with $3 a gallon, and its possible to actually retract with $3+ gallon gas.

I see a correction in the price of oil coming sooner rather than later. I am convinced that with prices being this high, people are looking for more efficient vehicles, and the next gen models really arent available yet (2-3 years). I see the overall U.S. motor pool efficiency inceasing substancially, enough for us to use less oil in 5-7 years than we do today. Just look at how bad Ford and GM are doing now... they just cant move those gas guzzeling SUVs and trucks. Personally, I am holding out for a next gen hybrid (plug in). So I cant make the move for another 2-3 years to do my part.

[Edited on February 12, 2008 at 1:52 PM. Reason : .]

2/12/2008 1:47:11 PM