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Hugo: Use OPEC as a political tool (updated)
Posted by: McQ on Monday, November 19, 2007

Frankly I'm surprised it has taken him so long to realize the potential.
Venezuelan President Hugo Chavez wants to turn OPEC into "an organization of monopoly and exploitation," according to Saudi King Abdullah.

The Arab leader rebuked his South American counterpart during this weekend's rare meeting of leaders of oil-producing states. Here's an excerpt from the 23-minute speech that drew his ire:

"OPEC was born as a geopolitical force and not only as a technical or economic one in the '60s," Chavez said, according to Bloomberg News. "We should continue to strengthen OPEC, but beyond that, OPEC should set itself up as an active political agent."
Hugo's two for two in pissing off Kings this month. But don't take this lightly. Obviously Abdullah isn't for it right now, but things and circumstances change. Chavez realizes the potential of such an organization even if he is too dumb to keep quiet about it. But it is certainly in the back of every person's mind who talks about breaking our dependence on foreign oil. Chavez's veiled threat seems to me to be the perfect excuse to revisit drilling in ANWR.

UPDATE: More Hugo earlier in the week speaking about OPEC:
"I always say it would be marvelous if we sold oil to the rich countries at $200 a barrel and to the poor countries at $5 a barrel. It would be a marvelous mechanism of redistribution of the world's wealth, but it's an explosive issue," he said.
And he claims to be putting his oil where his mouth is:
It remained unclear whether Chavez would ask OPEC to sell oil to poor countries at lower prices than those paid by wealthy nations. He said Venezuela — a major oil supplier to the United States — is setting an example by selling oil under preferential credit terms to Latin American and Caribbean countries.
UPDATE II: A large number of Spaniards so enjoyed their King telling Hugo to shut up that a half million of them have downloaded it and made it their new ringtone.
 
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How much is oil really a weapon?

 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
That’s what the whole Second Oil Shock was about...it lasted about 3 years, until everyone kept busting their OPEC quota. Politics is nice, but money in the bank has a powerful allure. I’m not looking forward to an oil shock, but I bet ole’ Hugo and Achmadinajad won’t enjoy how it all turns out either. Truthfully, they remind me of Jello Biafra, who thought Punk Rock was a social/revolutionary movement. Turns out it the music you swill beer to and slam dance to...OPEC bringing the West to it’s knees, until everyone realizes that it’s really all about the Benjamins.
 
Written By: Joe
URL: http://
Joe,

Well, the oil shock also brought about a fairly rapid response to deal with the issue on a technological level; increased MPG for cars, dramatic decreases in the use of oil for power generation (to the point where its use is almost non-existant in the West for such); etc.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
Isn’t Anwar a province in Iraq? As oppossed to the Artic National Wildlife Refuge (ANWR) up in Alaska.

Yes, it does make sense to drill in ANWR but the environmentalists and the Democrats in their pocket won’t have it. So we get to suffer the fickle whims of dictators for it. Ain’t politics grand?

 
Written By: tkc
URL: http://
While I’ve got no real problem with drilling in ANWR (so as long as the non-government parties are sufficiently compensated, etc.) I don’t think it is a solution to oil dependency - or even if oil dependency is even much of a problem. Even at the current high estimates yearly production would only make up a small fraction of our current oil use. So yeah, drill in ANWR, but don’t expect it effect our use of overseas oil much.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
Isn’t Anwar a province in Iraq?
More like Anbar, but I get the point.
 
Written By: McQ
URL: http://www.qando.net/blog
From the quoted article:
Venezuelan President Hugo Chavez wants to turn OPEC into "an organization of monopoly and exploitation," according to Saudi King Abdullah.
Is King Abdullah trying to pretend that OPEC is or has ever been something other than that?

The specific point of OPEC is to coordinate oil output as a means of controlling prices. It’s an attempt to prevent competition, even though it routinely porks itself in the patootie by precipitating steep price collapses, like the one in the 90s.

The Saudis face extraction costs of around $5 a barrel. What do they call it when they manage to get $95 a barrel, the law of supply and demand?

Their dive will come when oil that costs $15 or more a barrel to extract comes on line to take advantage of the huge profits now available. As inventories rise and prices begin to decline the Saudis will pump more oil themselves to maintain their new levels of profits. That will drive prices down further, requiring more production, and eventually OPEC will go to the "every man for himself" policy. Hugo Chavez will be eating out of his diaper as they take him off to Devil’s Island. King Abdullah will start using his frequent flyer miles. And the investors who went after the high-extraction cost oil will keep their fingers crossed to see how long it takes for the prices to fall.

Oil prices are cyclical. OPEC loves those peaks but the principals flee the ship in the troughs.
 
Written By: Martin McPhillips
URL: http://mcphillips.blogspot.com/
One of the biggest beneficiaries of the higher oil prices has it seems been the Russian economy. I don’t think it has helped out the middle east all that much.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
The price of oil is set just low enough to keep most of the West, primarily the US, from switching to Nuclear Power.

The highest oil price ever reached in inflation adjusted dollars was at the end of the same year of the Three Mile Island accident.

Yes there was a lot going on that year, the build up to the Iran/Iraq War for one. But during the war itself and the years prior to TMI, there always seemed to be a lot going on. But TMI was the death nell of nuclear power for the US.

I believe both the oil producers and gasoline manufacturers are somewhat sensitive to this. Although the latter is getting greedy and starting to shoot itself in the foot. OPEC, however, is being much smarter and realizes if oil prices got to ridiculous we would invest in real alternate power sources like nuclear.

They want to keep the prices high, but not high enough that we tell enviro-wackos to stfu and stfd.
 
Written By: jpm100
URL: http://
"How much is oil really a weapon?"

That article was certainly true in 2001 when oil was < $35/bbl and producers were struggling. That is not the case today; prices are up-up-up and supplies are tight. The much vaunted "alternatives" are still years away from making any appreciable difference in terms of tipping either side of the supply/demand equation. Even a relatively small temporary reduction in output will have catastrophic economic impacts for huge segments of the global economy. And ~60% of producing reserves are in the hands of state owned monopolies; many avowedly unfriendly to the US and allied states.

Oil is, at present, a potent weapon in the hands of those who would love do us harm and will remain so for a while.
 
Written By: D
URL: http://
jpm100,

Much of the fuel for nuclear power plants come from fairly unstable regions as well. Anyway, the use of oil has little to do with nuclear power at the moment, since the West uses it in only marginal ways for electrical power generation. For the U.S. this means a couple of % of electricity generation comes via oil.

D,

There was an attempt to use oil as a weapon in the 1970s when oil was used in far more significant ways outside of the transportation sector. While the effort was economically painful for a period it was ultimately unsuccessful.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
jpm100,

But during the war itself and the years prior to TMI, there always seemed to be a lot going on. But TMI was the death nell of nuclear power for the US.

There were a lot of reasons why it fizzled; part of it simply had to do with the fact that a lot of the projected power needs simply didn’t surface. The panic of the 1970s morphed into the relatively energy rich 1980s. Plus, a cheaper alternative* was found for oil as an electricity generator - namely natural gas. Strangely enough natural gas was predicted in the 1960s and 1970s to be of no consequence in energy future of the U.S.; but then deregulation of the natural gas market came about and its use took off. These days it is difficult to imagine but the plethora of natural gas fired electricity producing plants that exist today are a relatively new phenomenon.

*Both as a fuel in comparison to oil and in capital costs as compared to nuclear power.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
So yeah, drill in ANWR, but don’t expect it effect our use of overseas oil much.
I’m not sure anyone would think ANWR as the solution to our dependence on foreign oil. ANWR would be part of the solution.

Interesting article about a couple of new BP platforms in the Gulf called Thunder Horse and Atlantis. When they finally produce they will make a bit of a dent in our foreign dependence:
When it hits full tilt, Thunder Horse alone will boost overall U.S. production by 3.6 percent. Add Atlantis at full capacity, and the boost will be 6.4 percent.

"Adding 6.4 percent is probably the biggest surge of production from just two locations that we’ve experienced in a decade in this country," said John Parry, an analyst with John S. Herold.
Add an ANWR or three and a couple more in the Thunder Horse and Atlantis category and we might see some real progress toward the goal.
 
Written By: McQ
URL: http://www.qando.net/blog
I think it’s time to call the Department of A Few Guys Named ’Victor’ and have them send a message to Chavez.
 
Written By: Joel C.
URL: http://
McQ,

So what does an increase of 6.4% equal in terms of overall use? I’d also be curious to see how much of that production actually makes it to the U.S. A lot of it might go to China, for example.

When they finally produce they will make a bit of a dent in our foreign dependence:

Anyway, I’m just not terribly concerned with our "foreign dependence" on oil, in part because those foreigners depend on us to pay them for their stuff.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
He said Venezuela - a major oil supplier to the United States - is setting an example by selling oil under preferential credit terms to Latin American and Caribbean countries.

Yeah, Venezuela sells it at a significantly reduced rate in Venezuela, but that was the case if I recall correctly even before Chavez came to power. The question is of course whether selling it that cheap is sustainable; over the medium term even it probably isn’t since it encourages car sales, thus more car use per capita, etc. Then the question becomes what happens when economics puts pressure on the government to increase prices? Which I think is even happening right now.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
So what does an increase of 6.4% equal in terms of overall use? I’d also be curious to see how much of that production actually makes it to the U.S. A lot of it might go to China, for example.
More than likely this would all go to the US as it is shipped, by pipeline, from the platforms to US refineries.
Anyway, I’m just not terribly concerned with our "foreign dependence" on oil, in part because those foreigners depend on us to pay them for their stuff.
For the most part we agree, but I’m the type which likes to see a significant part of any strategic commodity in our hands and not those of a potential enemy (or a nation who wishes to manipulate us for their gain).
 
Written By: McQ
URL: http://www.qando.net/blog
No war for oil? Well, I suppose its OK if Venezuela’s doing?
 
Written By: Jimmy the Dhimmi
URL: http://www.warning1938alert.ytmnd.com
jpm100,

Much of the fuel for nuclear power plants come from fairly unstable regions as well. Anyway, the use of oil has little to do with nuclear power at the moment, since the West uses it in only marginal ways for electrical power generation. For the U.S. this means a couple of % of electricity generation comes via oil.

...

There were a lot of reasons why it fizzled; part of it simply had to do with the fact that a lot of the projected power needs simply didn’t surface. The panic of the 1970s morphed into the relatively energy rich 1980s. Plus, a cheaper alternative* was found for oil as an electricity generator - namely natural gas. Strangely enough natural gas was predicted in the 1960s and 1970s to be of no consequence in energy future of the U.S.; but then deregulation of the natural gas market came about and its use took off.
That’s funny that you believe Australia to be unstable.

Also according to the DOE, oil accounts for 40% of our energy use.
http://www.doe.gov/energysources/oil.htm

The price spike I’m talking about outstrips all the increases in all the years prior to 1979 (the year of TMI).

However, Natural Gas does fit in the description of an alternative which is another reason why OPEC doesn’t want to raise the price and is in fact likely upset the price is higher than they claim they would like.
 
Written By: jpm100
URL: http://
"Much of the fuel for nuclear power plants come from fairly unstable regions as well."

Australia, and Canada, too.
 
Written By: Harun
URL: http://
"Add an ANWR or three and a couple more in the Thunder Horse and Atlantis category and we might see some real progress toward the goal."
Drilling off Santa Barbara?

Hush, already. I’m kidding. I know better than that, although I do dream about piles of oil-soaked greenies piling up dead on the beach.
"More than likely this would all go to the US as it is shipped, by pipeline, from the platforms to US refineries."
At that point, I have a question: what do they do with it at the refineries? Store it in queue? I’m having real trouble imaginating a 6.4% increase in crude production fitting into our present refining capacity.
 
Written By: Billy Beck
URL: http://www.two—four.net/weblog.php
At that point, I have a question: what do they do with it at the refineries? Store it in queue? I’m having real trouble imaginating a 6.4% increase in crude production fitting into our present refining capacity.
Well per the article it would bring us back toward a previous high in oil production which apparently we were able to refine. And, as I understand it, refinery capacity has been expanded over the years within the US at existing refineries.
 
Written By: McQ
URL: http://www.qando.net/blog
From what I understood the reason for the price increases in gas often, especially during events like Katrina, was that refinery capacity was stretched to its limits.
 
Written By: jpm100
URL: http://
jpm100,

That’s funny that you believe Australia to be unstable.

Actually, I don’t think that. Anyway, U.S. nuclear power operators would be competing on a world market for uranium.

Also according to the DOE, oil accounts for 40% of our energy use.

Which basically says nothing about its use to create electricity, the primary (only?) use of nuclear power I must add. There aren’t any nuclear powered cars out there to my knowledge.

The price spike I’m talking about outstrips all the increases in all the years prior to 1979 (the year of TMI).

TMI was at best one of several factors. One of the most important being that predictions of energy usage in the early 1970s did not pan out toward the end of the decade and certainly did not do so in the 1980s. It was simply uneconomical to build a large number of new facilities with such a shortfall in use and with the development of natural gas fired electricity generation. Indeed, the shortfall explains part the problem with the WPPSS nuclear power plants.

Harun,

Kazahkstan has the world’s second largest portion of known currently recoverable reserves. Of course what we know of who has what will likely change in the near future as until quite recently exploration for uranium was at a rather low level.
 
Written By: Syloson of Samos
URL: http://ingenuus.blogspot.com/
Actually that energy usage is in production of heat. Something that can be done with electricity from a nuclear plant.

Electricity from powerplants will also start showing up as an energy source for autos as well. The higher the price of gas goes, the more that will be an inevitability.
 
Written By: jpm100
URL: http://
Well, look, gang... Something like 85% of our known oil reserves are off limits because of federal "environmental’ policy. I posted a map that shows this in some detail a few weeks ago, if I can find it...Oh, here it is..
It’s about time we started drilling our own oil, and making better refining arrangements.

The weird part is, all that really needs done is to get the government out of the way.


 
Written By: Bithead
URL: http://bitsblog.florack.us
Nah better to use up everyone else’s first, don’t you think ?
 
Written By: Blewyn
URL: http://
All things being equal, perhaps.
But bringing our capacity online would lower the prices, too.
Let’s remember that a good deal of the price increases now have more to do with speculation as much as anything. What would bring the price in that segement down faster than a massive increase in available supply?

 
Written By: Bithead
URL: http://bitsblog.florack.us
Hush, already. I’m kidding. I know better than that, although I do dream about piles of oil-soaked greenies piling up dead on the beach.
Well, I’m not kidding.... I figure we need to be drilling wherever the stuff is. See, I guess it depends, Billy, on why you(editorial you) are allowing drilling in some areas and not the majority of areas where we know oil to be. We both know the standard arguments againt drilling in a given area.... whatever that area under discussion happens to be. ANWR for example.

The logic aplied against drilling seems to be almost exactly the same, (and thereby equally specious) regardelss of where the proposal to drill happens to be. ANWR, Santa Monica, wherever. One wonders how we’ve managed to get a drill down ANYwhere... anywhere at all.

Regardless how you slice it, the greenie mentality is why we’re energy starved today.




 
Written By: Bithead
URL: http://bitsblog.florack.us

 
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