So Hugo Chavez is dead. The oil trade is going to be interesting to watch in all this. I'm certainly curious as to how this is going to work out in terms of the impact on oil supply.
For those of you not in the know, Chavez periodically nationalized the oil infrastructure in Venezuela- taking equipment they wanted from the foreigners who owned equipment working in Venezuela, such as ships, supply vessels, equipment yards, etc. Several larger oil majors and distributors got seriously screwed- Chevron, Seacor and ExxonMobil come to mind almost immediately. Essentially, after being invited to bid on oilfield and service contracts in refineries, exploration and field support, Chavez' regime would periodically just take everyone's equipment and expel the workers who were, you know, working. This had a predictable effect on investment, of which there is little, being limited to only what foreign interests can afford to write off in a single year.
Now couple that issue with this: Chavez also set price controls on fuel sales inside his own country- this could be done by eliminating maintenance on equipment (refineries and supply chain assets require massive amounts of maintenance, being insanely capital-intensive) and rolling those funds into fuel subsidies for his people. The end result? Cheap gas and a popular regime.
Now, in my home state of Massachusetts, one of the last generation of the Kennedy family, Young Joe, who was famous for never killing his girlfriends unlike Teddy and JFK jr, partnered up with Chavez to provide discounted heating oil for the lower and lower middle class Americans who were in the know. Citizen's energy essentially took some of the cheap subsidized oil away from those greedy, indulgent idle rich Venezuelans and used it to ensure that our less-advantaged citizens could devote more income to having the latest version Iphone, expensive sneakers and other important critical items like spinning rims.
So with Chavez and his radical leftist regime dead, what will happen to the cheap cheap oil? If you're a Massachusetts resident working with a limited budget and have experienced this year's many snowfalls and cold weather, this leaves a great deal of anxiety- how the hell will you afford an iPhone 6 AND a new Michael Kors purse if you have to pay your own heating bill too? Those fucking bags are like $400.
No, seriously, it's nice that some folks had cheap oil. It's not so nice that they got it because a couple of million poor pricks 5,000 miles to the south live in shacks with mud floors in order to pay for your oil. Any argument to the contrary assumes that it's OK to redistribute wealth from people living in abject poverty to those living without fear of cholera and other fun things that kill you via making you shit yourself to death.
What else can I do but joke about something so shameful?
In the meanwhile, Joe Kennedy must be missing the familiar feeling of having Chavez elbow-deep having a giggle, but we're going to see legacy problems in Venezuela now. No one has invested in their refineries, everyone's going to be afraid to lease or charter equipment, or God forbid, engage in service contracts in the oilfields there... it's going to be business as usual on some fronts, but there will be a need for rapid contraction of Venezuela's production in order to ensure longevity of their only cash cow, which spells even more trouble for Jose Publico
In the meanwhile, Joe Kennedy may have to go find a new pimp daddy.
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