Thursday, June 7, 2001

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.
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!