May 16, 2006

The Hugo Chavez Gas Price Hike?

Filed under: Business Moves,Economy,Taxes & Government — Tom @ 11:35 am

Looks like it to me:


What a genius. Chavez can’t keep the oil flowing, and production is down about 45%.

Since oil is an inelastic product (meaning that, for example, a 10% price hike leads to less than a 10% reduction in demand, in oil’s case a lot less than 10%), shortfalls in Venezuelan production have directly contributed to at least a portion of the worldwide runup in oil prices.

Why is this happening? That’s simple and so predictable — Chavez has abandoned capitalism. He had the state-run oil company fire half its workers after a two-month 2003 strike. Yet he expects the oil production infrastructure to run itself after placing less competent cronies in key positions and spending money that should be put into infrastructure investment into “social programs.” It’s not happening (third-last paragraph at link):

Former managers of the company have repeatedly said that the company doesn’t have enough experienced personnel on hand to manage the company’s oil fields, which has resulted in falling output.

US liberals have been bought off by Chavez’s home heating oil political stunt this past winter, so don’t expect a lot of US media coverage of the Venezuelan reality.

There’s an election in Venezuela in December. Chavez has been making noises that he should become a permanent president if opposition parties boycott the elections because of the rigged electoral system there.

Through chronic mismanagement, Chavez is well on his way to taking down his only trump card. If the tight oil markets break and production falls further, the country could be in a dire situation indeed. The Venezuelan people deserve better.

UPDATE: Given the situation, this move by the US government (HT Interested-Participant) would appear to be wise.



  1. Blame Chavez

    BizzyBlog observed that Venezuelan oil production has dropped 45% under the progressive leadership of Hugo Chavez, and noted that this supply decline is probably a significant factor in recent oil price increases: Since oil is an inelastic product…

    Trackback by — May 16, 2006 @ 2:29 pm

  2. Does God put all of the oil under thugs, or does oil make one insane?

    Comment by Steven J. Kelso Sr. — May 16, 2006 @ 5:18 pm

  3. #2, I would surmise that it’s a synergistic relationship. Oil makes you more insane AND, combined with lots of power, is more likely to turn into a thug, or increase existing thuggishness.

    Comment by TBlumer — May 16, 2006 @ 6:03 pm

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