Chavez Halts Sales To Exxon In Meaningless Gesture
by DemocracyRules
Sources: OilWeek, MarketWatch
Chavez has halted oil supplies to Exxon Mobil in an empty effort to be nasty. Previously he seized two Exxon oil projects in Venezuela, so Exxon has had $12 billion in Venezuela's foreign assets frozen.
Chavez then threatened to cut off all oil shipments to the U.S. That’s impractical because it would take him a years to set up smooth sales arrangements with other countries. He may never completely halt Venezuelan oil supplies to the U.S. Venezuela sells most of it's oil to the US, but this amounts to only about 11% of U.S. consumption.
Because Venezuelan oil is heavier grade high-sulfur oil, it requires more refining than other crude, and Chavez will have difficulty selling it. He could sell to China or India, but he will have to pay to ship it around South America at his own expense. Supertankers are too big for the Panama canal. Also, the US is better set up to refine Venezuela’s crude than China and India.
Cutting off oil supplies to Exxon Mobil does nothing except make Chavez into 'un buffon' . Exxon bought about 2.6 million barrels from Venezuela in November, but Exxon buys many types of oil worldwide, and they can buy elsewhere. Exxon will benefit by sourcing their oil from other places. Exxon shares rose 52 cents to $84.90 on Wednesday.
Canada is rapidly ramping up oil supplies to the US. Also notice Bush's recent close attention to Africa. West African countries like Angola have huge offshore oil reserves that are mainly untapped.
Softening oil demand will also hurt Chavez. The International Energy Association just predicted that 2008 world oil demand will increase less than expected. Thus, world oil supplies will increase and prices will soften. When it's cheaper and more plentiful, world oil consumers prefer the best quality cheapest oil from a safe supplier. Chavez is a non-favored supplier because his oil is not very good and he is an unstable untrustworthy rotten person.
Pro Patria
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