The Oil Referendum

WOULD YOU BE IN AGREEMENT if the Bolivarian Republic of Venezuela were to sign an oil contract with the United States of America (U.S.A.) under the following conditions?

The U.S.A. and Venezuela agree that starting today and for the next 50 years, the U.S.A. would buy and Venezuela would sell three million barrels of oil per day with Venezuelan characteristics. The Reference Price (RP) would be US $25 per barrel, indexed to the U.S.A. inflation rate, plus or minus an adjustment equivalent to 50% of the difference between the RP and the spot-market price.

As a consideration, Venezuela would also keep an additional 2 million barrels per day at the preferential availability of the U.S.A., which could be bought by the U.S.A. at spot-market prices, provided there were an emergency that made those prices exceed the RP by at least 100%.

In order to guarantee to the U.S.A. that Venezuela would always be in a position to meet its supply obligations, Venezuela would agree that it would not, under any circumstances, contract a new public debt, so as to make sure that the oil revenues to be received over the next 50 years would not be given as guarantees for new fresh loans today, and thereby risk wiping away the value of those reserves in a mere 50 days.

In order to ensure the enthusiastic applause of environmentalists, Venezuela would earmark 3% of oil revenues to planting trees in our country, trees which would capture carbon from oil emissions.

In order to ensure that the Venezuelan citizenry would get its fair share of the revenues (and vote “YES”), 30% of Venezuela’s gross oil revenues would be directly distributed in equal amounts to each Venezuelan. That distribution could be made in cash or in vouchers for health and education services.

If the “YES” vote were to win the hypothetical referendum described above, Venezuela would have macroeconomic stability, enabling it to formulate a true development plan, and the U.S.A. would have a larger, more secure supply of energy.

But so long as the natural market for our oil, the United States of America, remains incapable of gauging its interests beyond the current quarter, and doesn’t care if oil falls to 7 dollars a barrel, and prefers to create costly strategic reserves by burying crude oil or exploiting environmentally delicate areas, then any Venezuelan president trying to defend his or her country and keep the price of oil somewhere above the miserable marginal cost of extraction has no alternative but to strengthen OPEC and seek alternatives elsewhere, if for no other reason than to incite jealousy.

To the best of my understanding, this is what geopolitics is all about; and that’s why it might not be such a bad idea for the United States to study realpolitik—especially when, as happened forty years ago on a Caribbean island, they flunked that subject royally.

Published in El Universal, Caracas, June 7, 2001 (The links to my articles have been erased)

P.S. The above is what I wrote in 2001, but no one in the U.S.A. picked up on the idea or proposed anything similar. That is why today, when oil is up around 60 dollars, I don’t care a lot about some of the crybabies.

P.S. Now, in 2009, after having seen another oil-boom gone to naught in my country I would as a citizen not settle for the 30% mentioned above but request 90%, not in vouchers but in cash!

No, thanks

No, thanks

The following paragraph is extracted verbatim from the UK Energy Report 1999, published by the Department of Trade and Industry of England.

“The retail price of products is largely determined by taxes, especially for fuel. The attached figures ... illustrate the increasing proportion of the price of gasoline attributable to taxes. The incidence of taxes, ...explains around 85 percent of the final price of unleaded gasoline..." Prices are expected to continue growing, given the commitment of the English Government to increase taxes on petroleum by an average of 6 % annual, above inflation.

The report's figures indicate that the price of petrol before tax fell from 15 to 10 pence per liter between 1980 and 1999, a decrease of 33%. However, for the same period in England, the consumer price went from 26 to 68 pence per liter, increasing 162%. The explanation for this phenomenon is found in the various taxes on gasoline, which rose from 11 pence in 1980 to 58 pence per liter in 1999, an increase of 427%.

Taxes, applied in a discriminatory manner to oil, which favor coal, for example, affect both the volume and the sales price of our main export product and therefore directly harm our country. All of Europe applies taxes of the same order and the other consuming economies, except the United States, are evolving in the same direction.

It was only a few months ago that the magnitude of these taxes was understood and the consequences, at least in Europe, were serious protests by consumers. It will be necessary to observe whether in 2001, countries like England and Germany, even when stripped, continue with their pre-programmed increases.

The relative silence of Venezuela and other oil-producing countries, the truly aggrieved ones, is surprising. Sometimes I wonder if such passivity has its origin in the fact that in this globalized world, everyone is still dying for the possibility that one day The Queen will invite them to have tea in her palace.

In November 2000, the president of the European Energy Foundation of the European Union, with great cynicism, announced that in the dialogue between oil consumers and producers, everything could be discussed, except taxes, since these did not significantly affect consumption.

In December 2000, the European Union announced a donation of 55 million euros for the reconstruction of Vargas, to be disbursed over two years.

In a world that preaches free trade, oil taxes are hypocrisy. I, being a Venezuelan of European descent, may react in particular, but I am convinced that we have to place our protest in its correct dimension. In this sense, and even if I had never rejected the help offered by the United States during the tragedy in Vargas, today I would not hesitate to respond to Europe: No thanks, we do not want your donation, that amount is equivalent to what Venezuela would obtain each week if You, on the basis of false environmentalism and real fiscal voracity, do not apply taxes that discriminate against oil. We will not help calm their institutional conscience by accepting some insolent barter with begging mirrors.

(Translated by Google from an Op-Ed published in Venezuela February 1, 2001)