Iran, Venezuela and Oil: One Good Thing About the Economic "Crisis"

Our enemies are worried. Iran and Venezuela both are concerned as oil continues to fall. Iran had a special meeting. Here is the skinny:

Iranian leadership, however, view the decline in the price of oil with great concern. Speaking at the Second International Gas Conference in Tehran, a gathering that includes leading oil and gas producers, Iranian Oil Minister Gholam Hossein Nozari called on OPEC members to stabilize prices at over $100 a barrel. “A price of US$100 and below is not suitable for anybody, neither oil producers nor oil consumers… OPEC members need to respect their output quota to avoid a worsening of the oversupply.”

At this point, Iran stands alone in its concern over the current price level for oil. But what is there motive? Is it simple greed - the higher the price of oil, the greater the revenues? To an extent, greed does play a role. However, there seems to be real fiscal concerns at hand for the Islamic Republic. Mohsin Khan, Director of Middle East and Central Asia at the International Monetary Fund, argues,

Iran’s break-even price is $90 a barrel, and that is a big issue in Iran right now. … If prices dip below $90 a barrel, and we have seen it touch $89 earlier this week, then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there – the public would not be content.
For other oil producing nations, Khan believes break-even threshold is much lower. “The UAE will have a fiscal balance at an oil price of $23, if it goes below they would run a deficit. For Qatar, the break-even price is $24 a barrel.” Saudi Arabia’s standard of $49 a barrel is the highest amongst the Gulf Cooperation Council countries on account of its high spending “on a lot of projects right now, and oil money is used to fund these projects.”

Iran’s struggling economy might not be able to sustain a prolonged period of low oil prices. The economy is the primary issue in the upcoming presidential elections and the political factions are fractured over how to fix it. Seeing the strain that subsidies have put on his inflated budget, President Ahmadinejad is considering abolishing many of them - a move that could cause inflation to spike if not done slowly and cautiously (the official inflation number is already at 26%).

So, maybe one good thing that could happen is the people finally rise up against the mullahs and join civilization. Notice how the mullahs keep the people happy with subsidies? Sound familiar? Sounds like the Obama economic plan...Interesting, don't you think?

Hugo and Venezuela are getting worried, also:

The Mideast worries and talks about reducing output, but the one with the most reason to worry is Hugo Chavez. No one, and I mean not one single petty tyrant in all the oil-financed tyrannies in the world, is as dependent on oil revenues to maintain himself in power. Venezuela relies on oil income for more than 40 percent of its budget and Chavez squanders every day millions of dollars of oil revenues while oil production has fallen by a quarter since he won power.

The official rate of inflation is 22.5 - the highest in Latin America. However, inflation in some sectors, such as food, is 50%. The Venezuelan economy is in tatters now and will get a lot worse.

And even Putin is feeling the pinch.

There is always a bright side, and this may be our bright side to these troubling economic times.

Thursday Energy

The focus on energy issues continues today... Item #1: Here is an AP News Alert that came in last night/early this morning:

LAGOS, Nigeria (AP) Royal Dutch Shell shuts down production at 200K barrel-per-day oil field after militant attack.

Another reduction in supply... Worry not, though, because Democrats have a plan...well, sorta... Maybe I should Rep. Maurice Hinchey (D-NY) explain himself:

“Should the people of the United States own refineries? Maybe so. Frankly, I think that’s a good idea. Then we could control the amount of refined product much more capably that gets out on the market…”

“So if there’s any seriousness about what some of our Republican colleagues are saying here in the House and elsewhere about improving the number of refineries, then maybe they’d be willing to have these refineries owned publicly, owned by the people of the United States, so that the people of the United States can determine how much of the product is refined and put out on the market.”

“To me, that sounds like a very good idea.”

This was at a press conference so there were plenty of witnesses and cameras around. Once again, the Democrats solution isn't about increasing the supply, but rather expanding their own power. Not to mention it won't work...

I'll also point out that Hinchley isn't the first Democrat to suggest this route. Here is Rep. Maxine Waters (D-CA) from two weeks ago:

“This liberal will be all about socializing, uh, uh . . . would be about . . . basically taking over and the government running all of your companies.”

So, we the American people are left with a few questions...

What other House Democratic leaders support Washington bureaucrats taking over our nation’s oil refineries?

Does Speaker Pelosi (D-CA) support it?

Does Majority Leader Hoyer (D-MD)?

Does Democratic Caucus Chairman Emanuel?

When will Democrats begin to take real steps to bring down the cost of gasoline by working with Republicans to increase the supply of oil instead of playing games?

Item #2: In response to calls from Democrats for Rep. Jean Schmidt to apologize for claiming that China is drilling for oil in Cuba, chief of staff Barry Bennett says this:

"We think it's stunning that the Communists in Cuba know more about the laws of supply and demand than the Democrat party," Bennett said. "China is indeed drilling for oil in Cuba -- on land, not at sea - and seven other country's companies are now in the water drilling exploratory for oil, while the Democrat party ties our hands and prevents us from doing the same."

Emphasis added.

This is the first time that I have heard this line... Preliminary investigation reveals this AP story which seems to confirm the assertion.

In May, with much fanfare, Rep. Jeff Flake, R-Ariz., and Sen. Larry Craig, R-Idaho, introduced twin bills to the House and Senate that would exempt Big Oil from the embargo.

Before introducing his legislation, Craig told a reporter that “prohibition on trade with Cuba has accomplished just about zero.” Ominously, he added: “China, as we speak, has a drilling rig off the coast of Cuba.” (The senator failed to mention that the Chinese are working in shallow water near Cuba’s shore, and possess neither the technology nor the expertise to tap Cuba’s promising deep-water reserves.)

Emphasis added...and no, I'm not paying $2.50 a word... I'm not digging any deeper than this because when you add "China" to the search on Cuba and oil you get the usual suspects decrying Republicans and no real information...if somebody can prove or disprove the assertion that China is or is not actually drilling for oil on land or near the shores of Cuba, feel free to drop a comment or send in an email.

Item #3: AP News Alert:

BEIJING (AP) State media says China will raise prices for refined oil products and electricity.

Subsidies by countries like China is another factor in the demand for oil...

Item #4: Republican Leader, my Congressman and a Great American -- John Boehner -- has a question (updating Item #1):

“With House Democrats calling for a Hugo Chavez-style takeover of American energy production, the American people deserve to know: does Barack Obama support a government takeover of American energy companies?

“Families and small businesses are being pummeled by gas prices that have soared past $4 per gallon -- who really believes they’d be any lower if Washington bureaucrats were calling the shots?

“This out-of-touch proposal was announced at a press conference yesterday where House Democrats said it would be a ‘very good idea’ for politicians – the same politicians who just voted for the largest tax hike in history – to ‘control’ American energy production. These are the same Congressmen who proposed raising the gas tax by 50-cents per gallon. The same beltway insiders who keep billions of barrels of oil under lock and key. Is this Speaker Pelosi's 'commonsense plan' to lower gas prices?

“High fuel costs are the result of failed policies long advocated by Democrats and their allies on the Left, and exacerbated by their love of red tape and repeated calls for higher taxes. House Republicans have a real energy reform plan that would increase our energy supply while investing in the development of alternative fuels. If Obama wants to prove he’s a different kind of Democrat, he’ll denounce his colleagues’ socialist scheme and support House Republicans’ plan to help lower fuel costs and liberate America from its dependence on foreign oil.”

If there was a signle objective journalist left in the 527 media, Barack Obama would get this question...assuming of course, that Team Obama allows the media anywhere near him anytime soon.

Item #4A: In the comments, blogger Mark McNally asks a good question:

Does Zach Space agree with Hinchey? Freds people should be asking already.

I might get a press release on that in mid-October...unless there is a cowboy story in it.

Item #5: There are two paragraphs out of a long post by Larry Kudlow over at The Corner that I want to highlight:

One reason for all this is economic growth and jobs. A Wharton Econometrics study (hat tip to Mark Perry at Carpe Diem) shows that total employment at full production in ANWR would come to 735,000 new jobs created across the country, not just in Alaska. So not only would offshore drilling and ANWR and other domestic sources of energy reduce prices, they would also be huge job creators to spur the economy. This is something McCain should push.

Finally, President Bush made a very strong statement today to lift the moratorium on domestic and offshore production. In his statement he emphasized the oil-shale fields in the Green River Basin of Colorado, Utah, and Wyoming. There is the equivalent of 800 billion barrels of recoverable oil in this area, more than three-times larger than the proven oil reserves of Saudi Arabia.

Emphasis added... 735,000 jobs just for opening ANWR...how many jobs would be created by doing all of the offshore drilling and the oil-shale too?

Item #5A: More Kudlow from that same piece:

That oil shale could create another million jobs, bringing oil prices back down to about $75 a barrel and pushing gas pump prices way down as well.

Detractors can feel free to take on Kudlow by emailing him (and please copy me) at lkudlow - at -kudlow.com.

Item #6: CQ Politics has an article about upcoming legislation (read "timewasters") that the Demcorats want to put up this week:

Pelosi, D-Calif., estimated that enactment of one of the bills — aimed at closing the so-called Enron loophole passed eight years ago that effectively deregulated oversight of sophisticated energy investments — could cut the price of oil by one-third by removing much of the "speculation premium." Aides said several proposals have been floated on changing the law and no decision has been made on the legislation’s final form.

A second bill will embody Democrats’ proposal that companies who already have leases on 68 million acres of federal land "use it or lose it." Pelosi said that before any thought is given to opening offshore areas to drilling, current leases should be exploited. And she blasted oil companies for not drilling on land they have already leased.

A third bill would provide federal funds to help pay for transit fares and the fourth would comprise anti-price gouging legislation that the House has already passed, she said.

Democrats are just not serious about this issue...

Item 6A: This (from the same CQ Politics piece) is just dumb!

Pelosi reiterated her position that Republican calls for more offshore drilling represent another chapter in a failed policy that has left the United States more reliant on energy imports.

The Democrat playbook needs to be updated... "Fill-in-the-blank is a failed policy" is just standard boilerplate and in this case it is total nonsense.

Item #7: A million signatures for Drill Here, Drill Now, Pay Less...

Item #8: AP News Alert:

CARACAS, Venezuela (AP) Venezuela's Chavez threatens not to sell oil to EU nations that adopt new immigration rules.

Well now, isn't that interesting...

DEVELOPING...

Venezuela's Oil

On the radio show last weekend (still playing in re-runs on TIB Radio -- click the graphic and give us a listen), Tom Blumer and I got into a discussion of gas prices, oil, Venezuela and Hugo Chavez. On BizzyBlog, Tom says this:

Elsewhere, if you’re looking for a reason why oil prices have skyrocketed, look no further than Venezuela, where production continues to fall — about 25% in the past 10 years, and, based on eyeballing the graph at the link, at least 10% in the past two. Some think it’s due to incompetent management (that’s my vote), others think it’s by design to maximize revenues.

On the show, I took the role that this drop is by design. I've been giving this some thought and I think it is probably a little closer to Deion Sanders...BOTH!

It is no secret that Hugo Chavez is in bed with Mad Mullahs of Iran and he clearly has a thing for anti-American politics and rhetoric. He is skilled enough to make the most of useful idiots like Jesse Jackson and Cindy Sheehan, not to mention the plethora of New England Democrats who fawn over this dictator because he has "given" their consitituents "free" heating oil.

I think that there is a real possibility that Chavez is taking orders from Imadegenerate and his OPEC pals. I don't think it is a stretch to suggest that if the price of oil goes up, OPEC benefits from it. Do I think Hugo is smart enough to come up with this plan on his own? Nope...but that doesn't mean it isn't happening.

But I also think there is a strong case for mismanagement being the cause of the shortage from Venezuela. And Tom makes that case pretty well on the radio show...hopefully, he'll drop by and leave a note or two on that subject as well.

Boehner Releases Testimony of Venezuelan President Hugo Chavez for Dems' Hearing on Oil Industry

This just in...

WASHINGTON, D.C. – On this April Fool’s Day, House Republican Leader John Boehner (R-OH) today released written testimony of Venezuelan President Hugo Chavez, who was not invited to today’s Select Committee for Energy Independence and Global Warming hearing on the oil industry. Chavez, whose state-owned CITGO is the world’s sixth largest oil supplier, would enjoy significant tax breaks under energy legislation recently passed by the Democrat-led House, in spite of the socialist dictator’s threats to cut off energy supplies to the United States and ongoing anti-American rhetoric and policies. President Chavez’s testimony follows:

Testimony of Hugo Chavez, President of Venezuela
Select Committee for Energy Independence and Global Warming
Hearing on “Drilling for Answers: Oil Company Profits,
Runaway Prices and the Pursuit of Alternatives”

April 1, 2008

Chairman Markey, though I was unable to attend today’s hearing in person, I hope you will accept this written testimony. More importantly, I hope you will accept my sincere ‘thank you’ for the tax breaks the new Democratic Majority provided to my state-owned oil giant, CITGO, in recent ‘energy’ legislation passed by the House of Representatives.

It is especially relieving to know that while CITGO receives these tax breaks, five other major oil companies – including American-owned companies employing thousands of working Americans – will be forced to pay higher taxes, raising energy costs on consumers in your country and endangering scores of jobs as well. Please extend my gratitude to Speaker Pelosi, Majority Leader Hoyer, Whip Clyburn, Chairman Emanuel, and everyone who played a role in scheduling this legislation for a vote in the House of Representatives.

Being a socialist dictator is a difficult – and often lonely – burden these days. As more nations move toward democracy, the number of socialist dictators in our world is declining, and we can use all the help we can get. As I seek to keep our socialist movement afloat in South America, it is comforting to know that I have such strong allies in the House Democratic Majority.

Though the American economy is struggling and families in your country are feeling the strain from rising costs for everything from food to fuel, I’m pleased the House Majority did not allow these realities to stand in the way of your admirable efforts to raise taxes on them in order to pay for more government spending and, more importantly, my own tax breaks.

Moreover, I am so grateful that you have overlooked my repeated threats to cut off Venezuelan energy supplies to your nation and my consistently cozy relationship with the Castro regime in Cuba – regardless of which Castro is in charge. To know that I will receive tax breaks not provided to my global competitors, even in spite of my radical Left-wing, authoritarian ideology, gives me great confidence in my future relationship with this Congress.

Before I conclude, I hope you will permit me to make two additional pitches for policy actions out of this Congress. First, Chairman Markey, I want to applaud the ongoing support that has reportedly been provided by at least one of your House Democratic colleagues for my Marxist brothers in the Colombian FARC – a terrorist organization I have been working closely with to expand my influence in that nation. News reports recently detailed a trip one senior House Democrat made to Colombia to force Colombian President Alvaro Uribe – an American ally – to position me as a mediator between Colombia and the FARC. As you might expect, I wholeheartedly supported that effort and strongly encourage similar meetings in the future as well.

Likewise, Mr. Chairman, I strongly encourage you to impress upon your Democratic colleagues how vital it is to my influence in South America that the Majority continues bottling up the so-called U.S.-Colombia free trade agreement. As you might expect, free trade between your nation and my neighbors in Colombia would be a sharp blow to my efforts to expand my reach throughout South America, and any assistance you can provide me in derailing the agreement would be most appreciated.

In conclusion, Mr. Chairman, though I understand not being invited to today’s politically-motivated, made-for-TV hearing on the oil industry, please know that I am ready and willing to provide whatever assistance I can to advance the House Majority’s policy goals, on energy and otherwise. I hope you will relay that message to your Democratic leadership team, and I appreciate the opportunity to thank you for your ongoing assistance to my socialist regime.

Republican Leader, my Congressman and a Great American -- John Boehner -- appreciates April Fool's Day.

Venezuela Update

A story that almost brought me out of my self-imposed vacation from blogging over the extended weekend was the news out of Chavezland. You can get the recap and the latest news from this story by the BBC. The Reader's Digest version: not being content with shutting down the most popular television station in Venezuela, Chavez has eyes on a second and has even made comments about CNN coverage as well.

What I want to point out is this... According to lefties like Michael Moore and Cindy Sheehan, Chavez is the best thing on the planet for his people. But note that the most popular television channel in Venezuela was critical of the socialist dictator.

Think about what that means for a minute...

SIDEBAR: BizzyBlog has a pretty good synopsis of the story as well.

UPDATE: Rush Limbaugh has an interesting view on this:

Hugo Chavez shuts down opposition media voices in the Venezuelan version of "The Fairness Doctrine."

That's about right...

UPDATE 2: From today's State Department brifing's opening statement:

The United States joins the expressions of concern made by the international community about the May 27th closure of RCTV, Venezuela's only independent television network with nationwide broadcast coverage. We join with many other organizations from the European Union to the Inter-American Commission on Human Rights to private NGOs in speaking on this subject. Freedom of expression is a fundamental human right and it's an essential element of democracy anywhere in the world. And we'd certainly call on the Government of Venezuela to abide by its commitments under the Universal Declaration of Human Rights and the Inter-American Democratic Charter and to reverse these policies that they're pursuing to limit freedom of expression.

You know, they said that if Bush was re-elected voices would be silenced...and they were.