Bill,

Read the forwarded article.

I know it will all collapse in tears in a few years, but in the interim
there could be a sharp increase in oil prices. What could this mean?

There should be a slashing of forecast corporate profits due to higher
energy costs, do I hear stockmarket bubbles bursting? Also the European
continent and Japan are likely to buckle if this new-OPEC scam gets
serious. And as far as inflation goes, perhaps all this extra money that's
sloshing around will leave the stock exchange and housing market to pay for
this newly expensive oil, and suddenly governments will find that they have
not actually defeated inflation. May even fuel a few extra wars here and
there.

On a more parochial level, it's going to poleaxe manufacturing (just what
it does not need at the moment). It's should make the Scots more
confident, seeing as most of them don't realise that half of the North Sea
Oil is actually in English waters, and we'll again hear the rubbish about
the Scots actually being net contributers to the Union. Motorists may
finally realise the enormous amount of tax they're really paying, and not
just truck drivers who compare costs with continental rivals. This noted
election war chest may suddenly find itself being used for more urgent
purposes than the up-keep of St Tony's smirk.

Considering how our masters think that they've licked all known economic
problems, and they appear to labour under the impression that it is all
down to them, they may be in for a nasty shock. So much for this New
Economic Paradigm.

Well the last but one oil shock at least had the salutary effect of busting
Keynesianism and rising people such as Thatcher and Reagan. So its not all
lost.

But then again I may be completely wrong, OPEC only controls a third of the
market after all, and many of the states in OPEC aren't entirely
transparent in their dealings.

Keep Cheerful,

James

---------------------- Forwarded by James Spencer/Solution6 on 15/09/99
11:22 ---------------------------


"James Spencer" <endofblair@...> on 11/09/99 08:40:04

To: james.spencer@...
cc:

Subject: Fwd: Venezuela





>From: "alert@..." <alert@...>
>To: redalert@...
>Subject: Venezuela
>Date: Mon, 30 Aug 1999 22:45:46 -0500 (CDT)
>
>
>___________________________________________
>
>What's going on in your world? Find Out.
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>http://www.stratfor.com/world/default.htm
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>
>OTHER FEATURES ON STRATFOR.COM
>
>China Attempts Social Control With Economic Tools
>http://www.stratfor.com/asia/specialreports/special62.htm
>
>Moscow Shifts Toward Belarus
>http://www.stratfor.com/CIS/commentary/c9908310040.htm
>
>Timing of U.S. Congressional Staffer Visit Interesting
>http://www.stratfor.com/MEAF/commentary/m9908302258.htm
>__________________________________
>
>
>STRATFOR.COM
>Global Intelligence Update
>Weekly GIU August 31, 1999
>
>Venezuela's Chavez Takes the Lead In OPEC
>
>Summary:
>
>Venezuela's nationalist president, Hugo Chavez, has not just taken
>on the Congress and judiciary, but also the state-owned oil
>company, the world's second largest. The nationalist president is
>also trying to grab a lead role in OPEC. If he succeeds on both
>fronts, he may restore the feeble cartel to some of its previous
>glory, when it could dictate much of the world's oil production and
>price.
>
>Analysis:
>
>Roberto Mandini resigned August 30 from his position as head of
>Venezuela's state-owned oil company, Petroleos de Venezuela, SA
>(PDVSA). Mandini reportedly said he stepped down so as not to
>interfere with the Venezuelan government's oil policy, but the El
>Observador newspaper cited unofficial sources that claimed the
>Chavez administration asked for Mandini's resignation on August 29.
>
>But an apparent conflict was brewing between the company and the
>government. Last week, Mandini spoke out against the government's
>use of PDVSA to finance infrastructure and development projects.
>PDVSA has already committed 12 billion barrels to financing more
>than half of the 216 projects included in the president's Plan
>Bolivar 2000 social agenda, according to Venezuela Online News.
>Mandini's likely replacement is the vice president of strategic
>planning, Hector Ciavaldini, reportedly a close friend of Chavez,
>according to El Universal.
>
>PDVSA's cash flow into state treasury is critical to the
>president's populist agenda and he is leaving no doubt as to who is
>in charge. Chavez ran for office on promises to cleanse the
>government of the gross corruption that squandered the country's
>oil wealth. He promised to rewrite the constitution, reform the
>judiciary and purge the Congress. He is dramatically carrying out
>those promises. The constituent assembly he convened to rewrite the
>constitution is stripping the Congress and judiciary of most of
>their powers, recently sparking clashes in the streets between
>legislators, Chavez loyalists and the national guard.
>
>Chavez is also taking firm and very public -- control of oil
>policy. The days when PDVSA told the state what it would and would
>not do are over. Venezuelan state oil policy will be the state oil
>policy and the state oil company will be the state oil company.
>Chavez is not waging street battles with government officials who
>enriched themselves on oil revenues just so PDVSA executives can
>spend them as they see fit. The president fully intends to
>redirect the resources to fund his social platform.
>
>But if free market economics suffer under routine graft and
>corruption, they will last much less under full-scale, populist
>state intervention. Chavez not only needs to have firm control
>over PDVSA and Venezuela's oil policy; he needs to have a degree of
>control over the larger oil market.
>
>For that, he needs OPEC, and he has set out to prove to his cartel
>members that he is not merely a team player -- he is the team
>leader. At the conclusion of a recent meeting in Caracas, the
>Venezuelan, Mexican, and Saudi oil ministers affirmed their
>commitment to maintaining existing production cuts through March,
>2000.
>
>In a joint statement on August 29, the three ministers noted that
>if they are strictly observed, cuts in production can boost prices.
>OPEC has cut production by 1.7 million barrels per day (bpd).
>Accompanied by a 400,000 bpd cut by non-OPEC Mexico, Russia, Oman,
>and Norway, the initiative has more than doubled crude oil prices.
>The ministers also insisted that it is too early to lift production
>ceilings, with stockpiles not yet at normal levels and demand still
>down because of sluggish economies in Asia.
>
>Largely unnoticed, Chavez has been instrumental in drawing
>Venezuela, Mexico and Saudi Arabia into closer cooperation in
>keeping production down. Early in the year, all three competed
>aggressively for U.S. market share and cheated, producing more oil
>than they pledged. But on March 1, the new Venezuelan oil
>minister, Ali Rodriguez, announced that his country would no longer
>compete for the U.S. market share it had lost to Saudi Arabia in
>1998 [ http://www.stratfor.com/services/giu/030499.asp ]. With that
>announcement, and an upturn in Asian demand, prices began to
>recover. Crude oil was priced between US$18 and slightly more than
>US$21 on world markets August 30.
>
>Venezuela is quickly trying to seize a leading role in OPEC. At
>the weekend meeting, Venezuela proposed that production quotas be
>guided by a price band. If oil prices drop below a lower limit,
>the cartel would automatically scale back production. If prices
>rise above an upper limit, encouraging non-OPEC members to boost
>production, cartel members would raise their output. This plan and
>others aimed at maintaining oil prices will reportedly be discussed
>at the upcoming OPEC meeting, scheduled for September 22.
>
>Venezuela is urging another item for the September meeting: Iraq.
>Iraq is rapidly nearing its UN-mandated production cap of 3 million
>barrels per day and could drive prices down. Rodriguez told El
>Universal that the organization should address Iraq's increasing
>oil production.
>
>Chavez is also planning to host a summit in March, 2000, for the
>heads of state of oil-producing countries, including all OPEC
>members and producers such as Mexico, Russia and Oman. The
>Financial Times cited Ali Rodriguez as reporting that all the heads
>of state have agreed to attend. The only previous full summit of
>OPEC leaders occurred in Algeria in 1975 and the participation of
>non-OPEC leaders is unprecedented.
>
>OPEC is not what it used to be, controlling only about 35 percent
>of world production, and the participation of non-OPEC nations is
>vital to controlling production and price. Chavez and other OPEC
>members are seeking to strengthen and perhaps formalize cooperation
>with these countries to make cartelism work.
>
>His international strategy is closely tied to his nationalist
>domestic strategy. He needs increased oil revenues to pay for his
>domestic agenda; for that he must firmly control state oil policy
>and the state oil company. But none of this is of any value unless
>OPEC and other producing nations can enforce greater discipline on
>production and on price.
>
>Chavez must act quickly, though. Oil prices are leading off of
>expectations of renewed growth in Asia. But there are indications
>that growth in that region is just a temporary uptick, not a
>prolonged upswing. And Iraq is poised to increase supply.
>
>
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