Bush told to plan for Chávez oil shock

Financial Times ^ | July 24 2006 | Andy Webb-Vidal

[jmc1969]

Richard Lugar, chairman of the US Senate foreign relations committee, has urged the Bush administration to adopt specific "contingency plans" for a potential disruption to oil supplies from Venezuela.

In a letter sent to Condoleezza Rice, secretary of state, last Friday, a copy of which has been obtained by the Financial Times, Mr Lugar warned the US that it needed to "abandon" reliance on a "passive approach" to energy diplomacy.

Mr Lugar's warning follows the release last month of an investigation by the Government Accountability Office (GAO) that the US was ill-prepared for an oil embargo by Venezuela, the world's fifth largest ex­porter. President Hugo Chávez, whose government has been emboldened by a torrent of oil revenues, has several times warned that he would "cut off" oil supplies to the US if Washington persisted in allegedly plotting his overthrow.

"Venezuela's leverage over global oil prices and its direct supply lines and refining capacity in the US give Venezuela undue ability to impact US security and our economy," Mr Lugar wrote in his letter to Ms Rice.

[Darnright]

Whatsamatta, Hugo, are the Americans now boycotting Citgo getting to you?

Pat Robertson ain't so crazy, after all.

[bandleader]

I would guess he was"covered"by his DemonRat buddies.In other words,he could vote with other Republicans(REAL ONES),and it didn't matter!!

[varon]

I would have thought that contingency plans would have been drawn up long ago.

They were, at the same time as plans to secure our borders were drawn up.....

If they haven't, then someone hasn't done their job.

Well......................

[Jimnorwellwarren]

"We should be drilling ANWR like a porn star.

Tracy Lords would agree with you, which is why apparently she is a Republican contributor...if you believe opensecrets.org.

[dennisw]

Petroleum is a fungible resource. When one source of supply is diverted to another point, then the other sources that had been selling competitively in the former market, simply step up their deliveries, with scarcely a hiccup in supply. Unless all oil producers acted in concert, it would be impossible to embargo delivery of petroleum to any given customer.

Venezuela produces heavy (tar-like) (sour) crude. This crude can only be refined by specialized refineries. The way I understand it we are the perfect customer for Venezuela because of this. That not selling to USA will impact heavily on Venezuela because of lack of other customers for their heavy crude. Venezuela oil isn't as fungible as the sweet light crude such as Saudi Arabia produces

[livius]

VZ is busy closing its Citgo franchises. They recently announced closings in several Midwestern states (and possibly Connecticut, IIRC).

[rahbert]

>a shorter border to defend

eh? how d'ya figure?

[skr]

Cannot say that I am surprised.

[Mike Darancette]

What a grandstanding putz.

Just keep driving that price up ---- Moron.

[AzSteven]

then we should take over Mexico...We can get their oil, their cheap labor, a shorter border to defend, and force them all to speak English and watch "Deparate Housewives" and survival shows on TV.

I am vehemently opposed to Illegal Immigration, but I see no need to torture the Mexican people...

[Mike Darancette]

Let the drilling commence immediately.

The ChiComs are taking our Florida oil since we don't seem to want it.

[rhombus]

The ChiComs are taking our Florida oil since we don't seem to want it.

Maybe they'll sail up the coast to the Kennedy compound and take the hot air too since we don't want that either. ;-)

[kinghorse]

Furthermore, refineries to process their slop are not laying around everywhere. In fact I believe China has exactly -0- refineries capable of processing their stuff. The USA on the other hand....

And yeah what he said. When supplies are inflexible, who cares where it comes from. Every drop not sold to the USA will open up inventory for whatever it's replacing.

[Ghost of Philip Marlowe]

Typically, this is true. However, the recent increase in oil prices (that is, from an average of 1.80 to an average of 3.00 in a couple of years) is the result of increased demand from India and China. That being the case, evidently the supply side is not able or willing to balance things out to maintain prices. If Ven. cuts back supply to us, we can expect prices to increase, unless we can offset their embargo by increasing our own supply.

This is one of the most critical reasons why we should have drilling and refinery set up in ANWR, the Gulf of Mexico and off the coast of California, even we don't actually use these reserves. Having them on standby, if nothing else, would take this wild card away from hostiles and put it back in our hand.

[VRWCTexan]

The short answer is that even though Chavez may hate the US and attempt some sort of short-term caitiff it cannot be sustained - i.e. in as much as there are very few countries with the types of refineries required to process the heavy - sour crude that Chavez has to sell.

Likewise the added shipping / transport costs to be incurred - if Chavez were to find other potential buyers - would make the price for this crude unacceptable on the world market
And most of all Chavez could not go very long without the oil income - thus he is stuck with the US as his only real market

[scory]

Indeed we are. The envirowhackos and the left will block any and every effort to increase domestic production. Our "leaders" insist on regulation and taxation that drive prices up and up and up and restrict production. Our foreign suppliers can (and eventually will) use oil as a weapon (ala 1973 and 1979). And when prices once again spike to $4 or more per gallon of gas our "leaders" will whine and complain about evil oil companies, OPEC and anything else that will deflect attention from their own stupidity and incompetence.

1. Encourage domestic exploration and drilling.
2. Remove regulatory restrictions on refining.
3. Build nuclear plants.
4. Encourage development of alternative energy sources.

The market will handle consumption habits.

[ZULU]

The border from the Pacific to the Gulf of Mexico is much longer than the Isthmus of Tehauntepec (spelling?) at Mexico's southern tip. Check it out on a map of Mexico.

[rahbert]

The land border is shorter but the seacoast is waayy
longer.

Absorbing Mexico would gain us little more than another
New Mexico with crooked politicos and mostly dirtpoor
ill-educated peasants.

Better to absorb say, Taiwan or Singapore.

[Obadiah]

Whole-heartedly concur, and that is why I am frustrated.

[Lazamataz]

We should be drilling ANWR like a porn star.

Funniest line of the day.