Posted on 01/03/2003 10:00:08 AM PST by Dog Gone
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WASHINGTON - President Hugo Chávez pledged Thursday to return oil production to normal within 45 days in strike-crippled Venezuela, but U.S. analysts dismissed his claim and fretted over a sharp decline in U.S. crude imports.
The Energy Department said a sudden drop in U.S. oil imports ``left no doubt that the impact from strikes in Venezuela had hit U.S. shores.''
U.S. imports fell by 1.5 million barrels each day last week, putting oil inventories near 26-year lows, the Energy Information Administration said. Prices for gasoline, diesel, heating fuel and propane had all leapt.
Speaking in Brazil's capital of Brasilia, where he was visiting, Chávez said foreign workers would help restore operations at Petróleos de Venezuela S.A., the state company that is at a near-standstill amid a national strike. Opponents of Chávez, a leftist, want him to call new elections or step down.
''We have asked several countries, including Brazil, for help. Mexico and Ecuador have already sent people,'' Chávez told reporters, according to Bloomberg News. ``Venezuela has many technicians, including retirees who are coming back to work. Still, we need more to replace those whom we have fired.''
NORMAL EXPORTS
Venezuela, the world's fifth-largest oil exporter, normally exports 1.4 million barrels of crude and derivatives to the United States per day, providing about one in seven barrels of imported U.S. oil.
Many U.S. experts gave little credence to Chávez's promise to normalize exports.
''We kind of dismiss what he is saying,'' said Phil J. Flynn, an energy analyst with Alaron Trading in Chicago. ``He's in a power play for his life.''
Another analyst concurred. ''He says stuff like this all the time. He's either lying through his teeth or he's nuts,'' said Bill O'Grady, an oil industry analyst at the AG Edwards brokerage firm in St. Louis.
Borrowing highly skilled foreign oil workers is not easy at a time when crude prices are soaring to nearly $32 a barrel and oil-producing countries want to pump more, added John Felmy, chief economist at the American Petroleum Institute, an energy trade association and advocacy group.
''Where are all of these unemployed workers?'' Felmy asked.
Even if Chávez does obtain foreign oil workers to break the strike, they may not be able to replace Venezuelan workers.
''The wells are different. The fields are different. The production techniques are different. Venezuela . . . has very heavy crudes,'' Felmy said.
Venezuela is reeling from the strike, which began Dec. 2. The state oil company has suffered $2 billion in losses, Energy and Mining Minister Rafael Ramírez said this week, and lost oil revenue has cost the government as much as $700 million. As the strike drags on, analysts said problems would mount in attempting to resume production.
''When wells sit idle, they have sediment problems. They require two to three months to get refurbished. Sometimes you have to re-drill parts of them,'' O'Grady said. ``It's not like turning on a water faucet.''
Perhaps more serious, he said, is that long-term foreign investment in Venezuela's oil fields may diminish even if Chávez resolves the strike.
U.S. DECISIONS
Meanwhile, the Bush administration faces decisions over how to deal with falling crude imports and rising gasoline prices. Gas prices have risen an average of seven cents a gallon since mid-November, primarily because of the Venezuela strike.
The White House has balked at drawing oil from the Strategic Petroleum Reserve, the four, deep-underground salt caverns along the Texas and Louisiana Gulf Coast that hold emergency supplies of crude. The caverns hold 592 million barrels, but administration officials suggest they won't tap supplies unless a possible U.S. bombing campaign against Iraq disrupts Persian Gulf production.
That policy may bring increasing price swings in the days ahead, Flynn said.
''Every day they don't do it, it becomes more critical to our energy supplies,'' Flynn said. ``The potential for price hikes and shortages becomes very, very real.''
The very under-reported dirty little secret associated with this jerk's (Chaves) problems.
The sooner he's gone, the better off the world. Not to mention Argentinians.
OPEC's crude basket has now been above the $22-28/bbl targetted range for twelve consecutive trading days. If it remains above $28/bbl for a further eight days, OPEC may release additional crude onto the market without the need for a meeting, delegates said Friday.
An OPEC source said Thursday he believed OPEC could release as much as 1-mil b/d of extra crude if the price band mechanism were to be triggered in mid-January. Under the mechanism's provisions, ministers can raise output by 500,000 b/d without meeting. "In terms of what the market needs, 500,000 b/d will not be sufficient," the source said. "We might need to do an extra 500,000 b/d. The least we can do is a million."
Earlier this week, a senior OPEC delegate said ministers could decide to release more than 500,000 b/d if they thought this was necessary, but he gave no figures
And this will take awhile to get to market. With US reserve supplies down, crude looks to stay $30 plus for a while. Natural gas is $5.00 plus and looks to go higher. As good as that is for our industry, I'd rather not see the economy take the resulting hit that is coming.
Resolution in Iraq will mean lower long term prices for the industry, but that will soon be offset by the resulting surge in the economy, imho.
You mean Venezuelans?
I'll gladly pay an extra $1.05 per fillup if it forces another socialist dictator out of office.
I hope the people of Venezuela keep up the strike until Chavez is gone and the U.S. should stay out of it altogether. We hear so many people expressing the sentiment that the U.S. is not the world's policeman. This is a perfect incident to prove it. Let Venezuela deal with it themselves and let the results be what they may.
This is going to put a squeeze on Gulf Coast refineries, but there is enough excess capacity in the Persian Gulf to cover for the shortage of Venezuelan crude. It's going to cause some temporary problems because the sailing time from the Gulf to Texas and Louisiana is lengthy, but it's not like the country is going to suffer dramatically.
It certainly is affecting Venezuela, though, and that's the plan.
No kidding. No one is going to sink money into Cuba II, well Gadaffi has. I know China and Russia want to do business with Chavez. Yes, it's turning into a lovely place. Not.
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