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Venezuela: oil crash ahead

By A.M. Mora y Leon

10.05.06 | Today signals the beginning of the end for Venezuelan dictator Hugo Chavez. His oil-fueled pork-barrel project to buy off the Americas and secure absolute power is now showing signs of fraying badly at the seams. It has to tatter, of course, and the reason is simple: Chavez’s Cuban socialism does not work.

Three powerful news items around Hugo Chavez’s personal ATM machine — I mean, Venezuela’s oil production — tell the story, and these stories are starting to arrive fast and thick:

1. All new (corrected, thank you Nick) oil production from 32 operating contracts with foreign firms HAS COMPLETELY SHUT DOWN according to a government document obtained by Dow Jones. The link is here. Nobody is doing any new drilling now. There is a reason.

2. Venezuela’s state oil company says it needs to borrow $20 billion to finance increased output. It claims that banks are falling all over themselves to lend, but did not name a single potential lender. Venezuela’s books are completely intransparent now. I want to know what kind of bank would lend under conditions like that … so I can short their stock.

3. Venezuela’s output, as we wrote here, has collapsed so severely that it must now import oil from Russia to fulfill its contracts.

Oil prices don’t need to fall under a regime like this one. Chavez, through his socialist-collectivist-nationalization lunatic schemes that defy economic reality, is managing to destroy Venezuela’s viability as an oil producer ALL BY HIMSELF. Prices will rise all right, but Venezuela isn’t getting any of the cash. Arab producers, who are no fools, will get it, snickering all the way to the bank. And Canada can start gold-plating its roads if it likes.

Source Publius Pundit

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