This recent Exxon ICSIT court victory being the trigger to bring Mr. Chavez out of hibernation and itching to rumble again with the international community.
Many ask if this shipment disruption will substantively hurt the U.S. or Exxon? Not in the least, as the Analyst previously analyzed and assessed in the prior Venezuelan article (link below). This represents but a small fraction of Exxon’s global oil supply (see Note below), and as Reuter’s Rebekah Kabede notes in her Feb. 12, 2008 article, “The U.S. government has received assurances that the world's top oil producers could compensate for any Venezuelan disruption, a U.S. government official, who declined to be named, told Reuters.”
Note: The same February 13, 2008 BBC article noted above states “Exxon receives about 2% of its supply from Venezuela”.
The disruption is therefore not significant to Exxon, and the PDVSA asset freeze comfortably in large degree, backstops the nationalized Exxon reserve base by Mr. Chavez. Mr. Chavez will likely too not extend the disruption beyond Exxon to other oil companies, given his economy teetering on freefall, if not moving toward inevitable collapse, amid growing discontent over food shortages and skyrocketing inflation, even with a new currency. He (desperately) needs the cash.
To underscore how bad the inflation (and overall economic) situation is, and reflecting the lack of confidence in the currency (and economy), even the new one, the “Strong Bolivar”, the government is desperately now even reaching back into history for a solution.
In a Jan. 1, 2008 Bloomberg article by Matthew Walter, he notes “Venezuelan President Hugo Chavez's latest effort to reduce Latin America's highest inflation rate revives a coin rooted in Venezuela's colonial past: the “locha'' …….”Chavez may be bringing back the locha to restore confidence in the economy amid the fastest inflation in almost five years and shortages of milk, eggs and sugar. If so, the attempt isn't likely to succeed”, said Miguel Carpio, chief economist at Banco Federal SA in Caracas….”One of the intentions of this monetary conversion is, in some ways, to bring back these memories of good times, when really the indicators say the opposite,'' Carpio said.
The currency, inflation and freedom of speech crisis is further corroborated in Wikipedia, which as a proxy indicator to the larger picture, notes :
“The Central Bank of Venezuela is promoting the new currency with an ad campaign and the slogan: "Una economia fuerte, un bolivar fuerte, un pais fuerte" (lit. “strong economy, a strong bolívar, a strong country"). Despite such campaigns, as of February 2008 the black market value of the bolívar fuerte hovers at around 5.2 to the U.S. dollar, less than half of the fixed exchange rate of 2.15. This statistic is illegal to publish in Venezuela.”
Analyst Questions: Can anyone imagine (no, make that guarantee) the enormous Constitutional outcry (and rightly so) by the U.S. public if the U.S. government made it illegal to publish the U.S. dollar exchange rate or anything of equal importance....or for that matter, anything of any importance? Any ideas why then the Venezuelan people don’t likewise aggressively push back on their government regarding this significant freedom of speech/press breach/restriction?.........Exactly, and Agreed.
As a point of reference for those not familiar with the difference or relationship between a Bolivar and a Strong Bolivar, it simply is:
1 Strong Bolivar = 1000 Bolivars (i.e. the new currency purpose being to lose the 3 zeros, to provide aesthetic improvement - 1:1,000 exchange. Call it an inflation facelift.)
So does anyone smell an economic Hail Mary pass? If the legendary master of the Hail Mary, former Boston College QB Doug Flutie, was analyzing this, a good guess he might be inclined to say it’s probably easier throwing a final second, 50 yard end zone TD pass with a football into 4 or more huddled defenders, than it is for a last ditch locha hurl scoring one for the Strong Bolivar. If I’m wrong Doug, please chime in.
Bottom line, Mr. Chavez needs Exxon and the U.S. more than either need Mr. Chavez. In fact, neither needs him nor his oil at all, and precisely why Exxon is apparently taking him on.
The Analyst wrote at length about the Venezuelan oil situation last fall in the attached article titled "Divorce Venezuela, Marry Brazil". The analysis and assessment presented become even more relevant now:
http://www.opednews.com/articles/4/opedne_brock_no_071202_u_s__national_securi.htm
Note: Reference too the other Analyst’s OpEdNews article on the Venezuelan Referendum results.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
