Fascinating bit of news here. Many experts believe (T)Hugo Chavez may be in economic difficulty because of his free-spending attempt to buy a seat on the UN Security Council. According to these experts, Chavez desperately needs the price of oil to rise or at least not continue to slide.
OTTAWA — Count Venezuelan President Hugo Chavez among the most aggressive of price hawks when OPEC ministers gather for an emergency meeting tomorrow in an effort to agree on production cuts to stem the slide in crude prices.
More than most members of the Organization of Petroleum Exporting Countries, Mr. Chavez is desperate to the stop the erosion of oil profits, which he has spread widely to support his popularity at home and abroad.
He has used the country's petrodollars to fund social programs that have garnered him tremendous support among the poor in Venezuela, where he faces an increasingly competitive election in seven weeks. He also financed international aid commitments that bolstered his image abroad, including his as-yet unsuccessful attempt this week to win a seat on the United Nations Security Council.
But Chavez-watchers say Latin America's champion of the underdog will have to rein in his ambitions and make some tough choices if crude prices fall much further.
"They're totally stretched," said Riordan Roett, professor of Latin American studies at Johns Hopkins University.
"I think Chavez is about to hit a wall in that his commitments in Venezuela, but also his commitments throughout the region, are based on very high and continuing high oil prices," he said.
"Unless he is able to convince other members of OPEC to have a sharp drop in production — which I think is what he needs to achieve his goal — Venezuela is in trouble."
Now news just came out that the Venezuelan oil minister is saying that OPEC has agreed to a one million barrel per day production cut. But it is only that minister saying it so far and no details have emerged.
"Most important here is that we believe that OPEC have the consensus to cut one million bpd," Ramirez said in English on his arrival in Doha ahead of the cartel's extraordinary meeting Thursday.
"We are going to cut one million bpd," he said, adding that the move would help to stabilise the market.
Asked if the cut would be to quotas or actual production, Ramirez said: "We are going to discuss this matter inside OPEC."
This is very, very interesting indeed. If Chavez does not get the production cut and the price support he needs, he could well find himself in a world of hurt on election day in Venezuela. If he does not get price support and does not get the UNSC seat, it really could mean the end of his plans. One hopes the State Department is making a few calls to the Saudis.