Soccer Dad: The fly in the oil drum

February 17, 2009

The fly in the oil drum

While Boss Hugo's victory in Venezuela's referendum Sunday, bodes ill for the country, he may not be so popular in the near future. Gordon Chang writes:

The one thing Chavez cannot do is control the price of oil, which makes up 94 percent of his country's exports and produces about half of the national government's revenue. His current budget assumes oil will average $60 a barrel, but it is now about $37. Global energy markets have figured out that we're in a severe and long downturn, so oil prices will stay low. Even if producers can force prices up, they will be able to do so only with drastic production cuts, which will end up reducing proceeds to governments like Venezuela's. The problem is even worse than that for Chavez because his "21st-century socialism" has led to results that 20th century socialists would find familiar. For instance, his state oil company, PDVSA, is laying off workers and cannot meet its payroll or pay bills.

Posted by SoccerDad at February 17, 2009 5:20 AM

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