The Terrorist in the $10 Gallon Hat
At the recent global energy summit in Jidda, Saudi Arabia, where no one could figure out why an oil barrel is selling for $140 or when its price would peak, the voice of Hugo Chavez was unusually silent. That is because he is the prime mover behind the high price, which he hopes will reach $200 per barrel in 2008, collapsing American economic and political power and thus widening space for regional superpowers such as Iran's Mahmoud Ahmadinejad in the Middle East and himself in Latin America.
Chavez has led the fight to reduce supply and increase global political risk, the two factors that explain oil's skyrocketing price.
Before Chavez took power in 1999, Venezuela planned to increase production from 3.6 million barrels per day (mbd) to 5.5mbd by 2008. Instead, Chavez has reduced Venezuela's output to 2.3mbd and is lying to the world that he is producing more. Even Iraq at war is producing more oil than Venezuela at peace and with reportedly as many reserves as Saudi Arabia.
There's reason to this madness. The 3.2mbd missing from Venezuela, if added to the 85mbd produced and consumed in the world today, would plunge the oil price to a fraction of $140, even in the face of rising demand from China and India that had increased world consumption by 10mbd since 1998. That is the opposite of what Chavez wants.
Chavez started to reduce Venezuela's supply in 1999, when an oil barrel sold for only $10. After the 2002 national strike in Venezuela, he fired 18,000 striking oil workers and replaced them with political loyalists who gutted oil production capacity. In 2003, Chavez stopped reporting oil production information, which became a state secret. Thereafter, production declined but the price went up, easily compensating Chavez for cutting supply.
Chavez also convinced the Organization of Petroleum Exporting Countries to follow suit. In 2000, Venezuela and Iran - oil price hawks -- defeated Saudi Arabia's position that a high oil price causes global recessions and is thus self-defeating for OPEC.
The Saudis were right. Global recessions had followed the Arab oil embargo after the Yom Kippur war in 1973, the Iranian revolution in 1979, and the Persian Gulf War in 1990. But a global recession was precisely what Venezuela and Iran secretly wanted. A weakened American superpower held the promise of Iranian hegemony in the Middle East and Venezuelan hegemony in Latin America.
As supply was squeezed, the oil barrel price rose to $60 by 2007. But what catapulted the price to $140 and could take it to $200 before 2008 closes is political uncertainty in oil producing regions. Markets hate uncertainty and pay dearly to avoid it, which draws speculative investment in a time of capital market decline, which is the situation we face today.
In 2006, the Saudi Minister of Energy, Ali al-Naimi, estimated that the "political risk premium" accounted for 40% of the oil price. At today's $140 a barrel and 85mbd, a 40% political uncertainty premium costs world consumers $4.8 billion a day.
The political uncertainty roiling the markets also comes primarily from Venezuela and Iran, which are in a well-publicized strategic alliance to create it.
Iran supports the insurgency in Iraq via Hezbollah and Venezuela provides training and money-laundering to Hezbollah. Iran wants Israel destroyed and Venezuela is helping Hamas. Iran may be building a nuclear weapon and Venezuela supported Iran's right to do that in its 2006 campaign for a seat on the UN National Security Council, where Chavez got a surprising 77 nations to vote for him.
Venezuela mines uranium and may be shipping it to Iran via Alcasa, its state aluminum enterprise. In Bogota, 30 kilos of non-enriched uranium that could be used in a dirty nuclear bomb were found in a FARC terrorist safe house. Venezuela supports the FARC terrorists in an effort to overthrow the democratic government of Colombia -- Chavez's recent statements to the contrary notwithstanding. Iran and Venezuela facilitate safe havens, arms purchasing, money-laundering and military training for FARC, Hezbollah and other terrorist groups.
Threats of war involving Iran and Venezuela have been in the news almost every day as the price of oil shot from $60 to $140 and the US economy went south. That is not coincidental.
The Bush administration could have prevented today's oil crisis in 2007 but chose not to do so. Sufficient evidence has warranted declaring Venezuela a State Sponsor of Terrorism and cutting off its oil. Bush refused to act fearing the oil price would rise when by not doing so the oil price doubled anyway.
Chavez is extremely vulnerable to a US oil cut-off. One-third of his oil is too sulfuric to be refined anywhere but the US and he has no place to store oil during an embargo. With his oil industry in shambles and his income severely cut, Chavez would face the wrath of his own supporters who have long opposed his anti-American, pro-terrorist, lavish foreign spending, while half of them are unfairly mired in poverty. In fighting terrorism, Bush has underestimated Venezuela just as he did Iraq.
This Independence Day weekend, if you happen to gas up at one of Venezuela's CITGO stations, patriotically festooned with American flags, ask yourself if you want to add to the $37 billion Americans will pay to Chavez this year for his over-priced gas -- money he's spending to trigger a recession and schedule American jobs for extinction. If government won't do anything about the threat, maybe you can.
Michael Rowan and Douglas Schoen are political consultants and writers who have lived or worked in Venezuela since 1993. They are co-authors of "The Threat Closer to Home" which will be published by the Free Press in January, 2009.
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The only part that is accurate here is the opening assumption about Hugo trying to clip the militaristic Americans’ wings. Bush and Company orchestrated the coup against Hugo and when they failed at that helped put together the oil strike that he then had to deal with. Classic CIA destabilization tricks. Review Chile in the 70’s. I guess if someone did that to me I’d be annoyed as well. But to pin a global recession on him – or Iran – is ludicrous. Remember that little mortgage problem, and then of course the trillion-dollar war (which has more importantly cost hundreds of thousands of Iraqis their lives) all piled on top of Clinton’s NAFTA/GATT ravaged industrial base? Hugo Chavez put us into this economic conundrum? Hugo Chavez and Iran are creating the speculative bubble compliments of their being targets? They are creating the recession? And when Israel bombs Iran the following depression will be Iran’s fault, not Israel’s? Ohhh Orwell
Chavez is not wearing a HAT!? Obama wears a hat ... is this image/headline supposedly subliminal?
Any mention of Chavez's "free" oil to America!?
Just how long did America think we would be able to obtain "cheap" oil from Arabia and at the same time threaten it's mere existance with war more wars and the reduction of their own armed forces to "terrorists groups!!" ??? How long was that supposed to last?
Boycott all Citgo Stations. Put them out of business.
So half of Chavez's supporters are mired in poverty. Maybe that's because he helps those in poverty and thus the poor support him. The well-off Venezuelans predictably are supporters of the US and hate Chavez because he is helping the poor. Also this supposed enemy of the US has spent more energy attempting to help Americans than Bush has ever done. Days before FEMA showed up in New Orleans after Katrina, aid from Chavez arrived in the form of clean water and water purification equipment. Of course it was turned away by Bush who did not want to be seen as caring less for his people than a foreign leader. Chavez is also known to have offered heating oil at reduced prices to needy Americans. When was the last time that you heard of Bush doing anything for the poor? Who sounds like they have the welfare of Americans at heart now, Bush or Chavez?
Read this post along with the other responses to your above article. We ain't buying what you're selling.
True!
Any leader of any nation that has oil and has nationalized it has become "a terrorist threat to the United States"...
Osama Bin Laden in his writings and messages to his people said he wanted three things:
1.) The US out of Saudi Arabia, after the Cole Bombing Bush pulled US troops out of Saudi Arabia
2.) Oil to go over $100 a barrell, the dude is a Saudi after all and his family owns one of the state's largest companies so they are hooked in good with the family.
3.) The US involved in a untenable war like the Soviets had with Afghanistan in the 80's. A war that would break our back.
Looks like Osama Bin Laden got everything he wanted. You're telling me Chavez is major threat to America? Give me a freaking break. Last time I checked Osama was still kickin it and besides China, the Saudis own a good chunk of our debt and property as well. Who is a threat to our nation and sovereignty? Not Venezuela you idiots.
Chavez gives heating oil to poor Americans and uses the country's oil proceeds to help his own people. If the US left him alone, he'd leave us alone. But we won't....w
The Saudi's are not our friends. I hope McCain and Obama realize this. They are a terrorist country.
neocon-con
Why is this NeoCon propaganda piece even given space here? Anyone foolish enough to buy this nonsense will believe ANYTHING..
True!
And the massive increase of the price of oil has nothing to due with the deregulation of the futures markets, a law pushed by those patriots at ENRON and their puppet, Phil Gramm of Texas, signed by the President for sale, Bill Clinton. This was in 1999.
PLEASE. Except that experts estimate that is responsible for at least half of the increase. And if you believe that increasing domestic oil will lower this price, that so-called American oil companies will give we in the U.S. a break, I have some dry wells to steal you. They just want more subsidies, the continuation of the raid on the U.S. Treasury for the friends of Emperor Bush.
I am so sure that Venezuela and Iran want to weaken Bush so they can survive but there are other factors.
"Hugo Chavez was unusually silent. That is because he is the prime mover behind the high price..."
So the falling value of the dollar has no effect on the runup of oil prices; or are you suggesting Hugo is responsible for this too? To call him the "prime mover" is complete nonesense. You have zero credibility guys.
True!
"Iran supports the insurgency in Iraq via Hezbollah and Venezuela provides training and money-laundering to Hezbollah. Iran wants Israel destroyed and Venezuela is helping Hamas. Iran may be building a nuclear weapon and Venezuela supported Iran's right to do that in its 2006 campaign for a seat on the UN National Security Council, where Chavez got a surprising 77 nations to vote for him."
Can we all just make stuff up?
How was that put? If you say say it thrice....
This is an intriging post. Why on Huffington?
How credible is it?
I would guess it is naive to assume that Chavez, or Iran, are the sole or most important factors manipulating the price of oil. As though there aren't speculators out there, and what about the "Enron loophole"?
Just guessing, but these seem more plausible causes of the price increases.
Supply is still ample most likely; it's just those who price that supply. And that is not solely Chavez or Iran.
Speculators and those who all those who benefit from high prices in the short run - e.g. oil companies, Saudi Arabia - are the chief suspects.
The Enron loophole has been closed, but gas is still rising.
Let me get this straight. Chavez is a bad guy because he doesn't want to pump all of the oil out of the ground as fast as possible and sell it at discount rates so that Americans can continue to waste it driving huge SUVs while warming the earth. This is bad?
So good and bad are defined merely by what some Americans perceive benificial, mostly to them.
What Chavez is doing, despite his intent, is helping to conserve a finite supply of a precious resource. All the whining in the world won't make America's wasteful ways acceptable to a world that sees what most Americans refuse to see.
"The political uncertainty roiling the markets also comes primarily from Venezuela and Iran, which are in a well-publicized strategic alliance to create it."
And certainly, the current frck-up in Iraq has absolutely nothing to do with it.
Chavez is no more a criminal or terrorist than George W. Bush. When he went to the U.N. and said Bush was the devil, I agreed wholeheartedly. Your neocon agenda is just that. To continue to conquer those that you deem weaker, but more importantly, for their oil. What started out as a democracy has now turned into wandering war mongering horde. Genghis Khan would be proud.
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