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466 Days

By Tomas Sancio | Venezuelan Politics

09.09.05 | President Chávez has on occasions bragged about his power to sell our oil to whomever he chooses (like if the National Assembly didn't exist). This huffing and puffing has mostly been directed towards the United States, a country towards which he has threatened to cut off oil supplies. This sounds like a threat until you actually do the math.

Let's see: according to recent estimates, Venezuela produces 2.7 to 3MM barrels of oil per day and exports 1.5MM to the USA (approximately 50-55% of its total). According to this article, the USA consumes 21.6MM barrels per day, making its imports from Venezuela approximately 7% of its consumption. Hence, Chávez is threatening to stop selling 50-55% of our country's oil production to affect a country to which this represents 7% of its take.

If the data would only say this, then it would be the equivalent of Chávez playing dominoes and having the double-six, the double-five and many other points in his hand and then trying to cut the game short (in Venezuela, that would be "trancar la partida"). The move would be bold until the people start counting the domino pieces and realizing how dumb the decision was.

However, it gets worse. The linked article also mentions that the United States keep a Strategic Petroleum Reserve and it currently holds 700MM barrels of oil. The SPR has been recently tapped due to the Katrina hurricane. Given that this reserve is for emergencies, the USA may quite well use it in case Chávez decides to keep his promise and commit harakiri. If that were the case, then the Energy Department or whoever is responsible would have a period of 466 days (=700/1.5) to find a new supplier. Some people say that the missing 1.5MM barrels could be found either from a Saudi production increase, in the open market at a higher price or from the buyer that is to accept the liberated capacity from Venezuela. Additionally, unlike countries with oil reserves, as evidenced during the 2002 PDVSA strike, Venezuela does not perceive any income for unsold oil.

The bluff has been called. If Chávez really thinks that he can convince the world that he can wag the dog through oil production, then he has been hanging around with yes-men too long. Make your guess: who suffers more, the country with 466 days to find someone who can supply 7% of its needs or another country who has (zero?) days to find buyers for at least 50% of its exports?

Note: A government supporter may point out (correctly) that the same math can be applied to the 2002-2003 opposition strike. If you are a store owner and you close shop, you affect 100% of your income and the negative effect towards the government is barely a drop in a bucket. People like Juan Fernández, Carlos Fernández and Carlos Ortega famously ignored this and led many to a lose-lose proposition.



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