Posted on 12/11/2002 5:17:27 AM PST by Dog Gone
While everybody's mind is on Iraq, Saudi Arabia and the Middle East, a potentially more serious crisis is brewing much closer to the United States.
An indefinite-duration general national strike protesting the Hugo Chávez regime was launched in Venezuela on Dec. 2. This is the last in a series of one-day general national strikes and a continuous state of protest that marred the entire year.
Chávez, a populist politician in the style of Eva Peron and an admirer of Fidel Castro type anti-Americanism and class-based politics has managed to polarize Venezuela between supporters and opponents in a way few other nations have ever observed. "Either you are with me or against me."
Critical to the outcome of the current protest would have been whether oil workers of the state oil company, PDVSA, would support the next general strike. After all, oil accounts for 80 percent of the nation's exports, 50 percent of the government's revenues and at least 25 percent of the entire national economy. The PDVSA workers went out in a huge way, paralyzing the nation's oil activities with enormous future implication. The impact of this decision on Venezuela and the United States is still unfolding.
It all started when armed forces were sent to the streets in place of the mutinous metropolitan police in Caracas. Troops were also sent to guard oil facilities and many other state-owned organizations, in an effort to pre-empt government opposition actions.
Events unfolded quickly. On Dec. 4, marine terminals throughout the Venezuelan coast stopped almost all crude and gasoline shipments. This affected the entire upstream and downstream supply chain. The El Palito, Jose and Paraguana refinery complexes, totaling 1.2 million barrels per day of refined products, were all shut down.
After a week of strike, virtually all Venezuela's industries have drastically reduced or completely stopped operations.
Chávez has tried to mitigate gasoline and crude oil distribution by replacing oil workers with armed troops or urban guerilla militants. But it would take a lot more than this show of force to operate the oil industry.
The effects of the strike are already cascading, and they are moving our way. Refineries in Curacao and along the U.S. Gulf Coast have not received their usual cargo shipments. Venezuelan oil storage in the Caribbean may ameliorate the shortfall for a few days, but it will take a long time to go back to normal.
An oil disruption of about 2.7 million barrels, of which 1.2 million is refined products, the overwhelming portion of which goes directly to the United States, will bring severe consequences.
No doubt, oil prices will go up and even higher -- even if other countries such as Saudi Arabia attempt to cover the shortfall. the problem is more complex.
Venezuela's crude oil is far heavier than Middle East oils and refineries in the Gulf of Mexico are designed for such feedstocks. The refineries using high conversion capacity (heavy oil cracking) will be negatively affected. Mexico will then monopolize the heavy oil supply in the Gulf Coast.
This will cause the differential price between light and heavy crude oils to narrow, significantly increasing the price of gasoline and other refined products that U.S. consumers will pay. This could be the least of our problems. Shortages could be devastating.
Chávez is a problem. His impact on the U.S. energy security and economy may in fact be more serious than Saddam Hussein's.
Last Sunday, an uncompromising Chávez declared the strike "criminal" and "insurrectional." He also warned that he would order his troops to "crush" political opponents.
This attitude does not bode well for either Venezuela or the United States. Venezuela's economy has imploded in the past year and has scared away almost all foreign investment. For the United States, the Venezuelan situation is quite dangerous, coming at a highly inopportune time -- just as this country may be embarking on a high-stakes war in the Middle East which itself will have unavoidable consequences for energy prices and supplies.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.