Venezuela and Peak Oil
President Hugo Chavez's policy of keeping a tight control on food retail prices while doubling the price of raw coffee beans back in December may have backfired. For at least a week, there has been no roasted coffee available on the shelves of Venezuelan supermarkets as wholesalers and coffee producers have been withholding their coffee from sale.
Reuters is reporting booming car sales in Venezuela on the back of a combination of the lowest fuel prices in the world and record revenues due to high world oil prices.
CARACAS, Venezuela, Jan 10 (Reuters) - Sales of new cars in Venezuela soared 70 percent in 2005 from a year earlier as the economy expanded 9.4 percent and consumer spending grew, the Venezuelan Automobile Chamber said on Tuesday. ... Venezuela, the world's No. 5 oil exporter, is enjoying strong economic growth as it benefits from high world oil prices. Venezuela's state-subsidized domestic fuel prices are among the lowest in the world
Chavez is also providing charity to poor Americans. keepMEcurrent.com reports:
Money available to help low-income residents pay their heating bills this winter now exceeds last year’s total – thanks to a special $5 million appropriation by the Legislature last week – and more help is on the way from the president of Venezuela. ... And, the governor’s office confirmed on Tuesday that a deal will be penned this week with Venezuelan President Hugo Chavez to provide Maine with $5.5 million, which is the cash equivalent to discounting 8 million gallons of oil by 40 percent. The deal is being offered through the now Venezuelan-owned Citgo Petroleum Corporation. While some have criticized Chavez’s offer, which he already has extended to Massachusetts and New York City, as an attempt to embarrass Pres. George Bush for not taking care of his own, that won’t stop Maine from accepting the gift.
The apparently Left-wing Red Independence, quoting Al Jazeera says:
But Chavez's supporters defend the heating oil programme as an example of generosity by a president leading a socialist revolution for the poor. Sappier, the Penobscot tribal chief, said snow was falling in Maine and praised Chavez for his help. "We appreciate him very much as a leader," he said. "It's been said he's one of us. His thinking is like ours."
These can be taken as indicators of the superiority of the socialist system of economics over dog-eat-dog capitalism. Or they can be seen as an economic disaster waiting to overwhelm Venezuela the moment current oil prices begin to decline. But according to leftish Alternet, 2006 may mark the year that world oil supplies begin their irreversible march upward, according to the Peak Oil scenario (also here), in which case Hugo Chavez can keep up his weird economics indefinitely on the back of steadily rising oil prices. But when prices rise sufficiently other sources besides the conventional become profitable to develop. CBC predicts that with prices rising, oil sands will be the energy source of the future.
Alberta's oil sands will become the most important source of new oil in the world by 2010 as conventional crude dries up, CIBC World Markets says in its latest monthly report. ... Jeff Rubin, chief economist at CIBC World Markets, the bank's wholesale banking arm ... added that conventional oil production around the world apparently peaked in 2004. Rubin found that total oil supplies around the world grew by less than one million barrels a day last year. None of that growth came from outside the OPEC sphere. ...
Rubin looked at 164 upcoming oil fields in his study and found that new oil is, in fact, being discovered and it is coming on stream. But more than half simply balances declining production from existing fields in the North Sea and Kuwait's Burgan region. ... Energy companies are finding new oil, but most of it will come from non-conventional sources. Ocean oil rigs are the primary source of new oil today, with Alberta's oil sands tomorrow, with expansion projects rivaling those of Saudi Arabia.
One of the biggest factors used in calculating the quantity of world oil reserves is price. By changing price levels the world map of oil reserves changes drastically. For example, according to Wikipedia, "Canada's proven oil reserves have been raised from around 5 billion barrels to the much larger figure of around 180 billion barrels to include tar sands, because these deposits are now considered recoverable", and the effect is dramatic. At one price level North America has little more than half the reserves of Central and South America. At a higher price level it has double the amount available in Central and South America.
|Country/Region||Lowest estimate||Highest estimate|
|Central & South America||76||101.1|
|Eastern Europe & Former USSR||79.2||121.9|
|Asia & Oceania||36.2||41.1|
As the price of petroleum changes it also alters the geography of economic power and this remains true wherever on the "Peak Oil" curve one happens to be. The system's boundaries dynamically change with shifts in production, price, distribution and markets. Nowhere is this better illustrated than the recent attempts by Russia to bring the Ukraine into line over natural gas. Although not a single oil well changed hands, Russia used it pipelines to shape distribution and twist the topology of the system so that it could make more money from oil, whereas for Japan, China, Europe and the United States oil is merely a necessary incidental; the important thing being to continue to earn from economies powered by oil, with commerce in the commodity itself being of relative unimportance.