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Thread: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

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    Default Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    http://www.bloomberg.com/apps/news?p...=latin_america

    Venezuela is usually one of the top four suppliers of crude oil and fuel to the U.S., according to Energy Department figures. In some months the country sends more to the U.S. than Saudi Arabia. The top four suppliers include Mexico and Canada, and the order of the rankings change month by month.

    The U.S. ``depends on us, not we on them,'' Chavez said in a May 16 interview with the U.K.'s Channel 4. Chavez warned that oil prices would soar to $100 a barrel if Venezuela chose to send its oil to China, Europe and other countries instead of the U.S.

    Some say that this will have an impact on gas prices. Others say it wont that the market will take care of itself by other suppliers selling more.

    I wonder if this is the beginning of an econmic war against the USA?

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    actually, this is part of a larger picture ...



    obviously, these 'changes' in South American energy policy will wind up increasing prices for gasoline / oil / natgas to some degree, if for no other reason than the South American politicians will be keeping more oil / gas money for themselves.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    which is part of an even larger picture ...

    "ul 14, 2006
    AsiaTimes


    THE ROVING EYE
    Russia and Iran lead the new energy game
    By Pepe Escobar

    Whatever the West may have thought about it, Russian President Vladimir Putin has already spectacularly preempted this weekend's Group of Eight (G summit in St Petersburg with his own bit of Pipelineistan news. Putin announced in Shanghai on June 15 that "Gazprom is ready to support the construction of a gas pipeline from Iran to Pakistan and India with financial resources and technology".

    He was referring to a fabled US$7 billion, 2,775-kilometer, 10-year old project - an Iranian idea - which should now be finished by 2009, developed by Gazexport, a Gazprom subsidiary. As a result, by 2015 both India and Pakistan should be receiving at least 70 million cubic meters of natural gas a year.

    Thus the two top global gas producers - Russia and Iran - reached a strategic partnership abiding not only by their own interests but the interests of India, Pakistan, China and part of Central Asia, something that spells nothing less than an auspicious economic future for a great deal of Asia - independent from any American interference. Washington was not amused.

    Not surprisingly, everyone else in the region begged to differ. For Iran this represents the coveted Pipelineistan way to the east. India will save at least $300 million a year. Pakistan will receive as much as $600 million a year in transit fees. The pipeline will inevitably be extended to Yunnan province in China. No wonder the announcement was made at the annual meeting of the Chinese-inspired Shanghai Cooperation Organization (SCO).

    The Russian masterstroke is to divert the bulk of upcoming Iranian gas exports to Asia - while Russia is still negotiating a very complex and very lucrative deal with Brussels to supply the European Union. Tehran and Moscow have reached a remarkable agreement. Putin and Iranian President Mahmud Ahmadinejad will be working in tandem. In Shanghai they all but decided to consult on all matters regarding gas prices and the new routes of Pipelineistan. Control of prices plus transportation routes obviously spell out a gas OPEC (Organization of Petroleum Exporting Countries) just around the corner (Putin though was careful to dub it just "a joint venture", not a cartel).

    In practical terms Gazprom (See The Gazprom nation Asia Times Online, May 26) Now, a decade and a half after the end of the Cold War, the US and Russia's lines of friction are startlingly similar: Eastern Europe, the Black Sea basin, Ukraine, Moldavia, Georgia and Iran. Sixty years ago, the Soviet Union offered Iran an energy partnership. Now Moscow is offering not only a nuclear partnership - building the nuclear reactor in Bushehr - but still an energy partnership, in the manner of selling its own gas wealth the most profitable way for both sides.

    Putin is an accomplished chess player. Accusations of heavy-handedness - on civil liberties and on energy policy - aside, the Kremlin does not need a confrontation with the "colonialist" West (the qualification is Putin's). What it needs is to find the best use for the massive financial flows that are pouring over Russia. The Russian weekly Vlast identifies "a new Russophobia in the West, hypocrite and erroneous". The Russian response is to challenge the West to accommodate to its own terms. The Kremlin calls its own internal experiment "sovereign democracy". As the Kommersant daily put it, "the West must answer to a series of ultimatums posed by Russia, including its refusal of European rules on the energy market, it particular position regarding Iran and the assurance of non-intervention on Russian internal affairs".

    Putin's message to the G8 is loud and clear: we're back. And this Gazprom nation, also reveling on oil at $75 a barrel, and rising, is doing things its own way - like exterminating, with perfect timing, public enemy number one, Chechen rebel leader Shamil Basayev, or banishing homeless people, street vendors, intellectuals and opposition voices from St Petersburg ahead of the G8 summit. There's virtually nothing the West can do about it. Russia is not struggling to be part of "the West" anymore; it has evolved its own system, and not unlike the Middle Kingdom, at the center of the system lies the Kremlin.

    Preemption is the (Russian) name of the game. Russia's strategic partnership with China has been solidified via the SCO. On the ultra-sensitive Iranian nuclear dossier, Moscow's game is extremely flexible, and all about nuance, as are Russia's relations with the Islamic world. It is charging market prices to both Ukraine and Georgia for its gas. And sooner - rather than much later - the gas OPEC with Iran and Central Asia may be a done deal."

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    On the other hand, one of the more interesting aspects of the recently concluded election in Mexico was the debate between the candidates over opening up the Mexican oil industry (i.e., Pemex) to allow it to seek assistance in overhauling some of its declining fields and/or in developing some of its more promising prospects. To make a long story short, the candidate in favor of allowing Pemex to seek outside assistance won and, assuming he follows through, we should begin to see marked increases in Mexican production within a matter of just a few short years.

    As for Chavez, well... he keeps pushing it like he has been and it won't exactly come as any great surprise when he either gets ousted in a coup or is otherwise suddenly removed from power.
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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Well, Mexico really needs to decide whether it wants to become part of North America or part of South America, economically speaking.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Citgo, which is controlled by the state Venuzela govrnment owned oil company, announced this week that Citgo stations in 13 states thoughout the midwest were being cut off from Citgo oil supplies. This was in the Wall Street Journal the week of July 10, 2006.

    This means that all those Citgo dealers will have to change flags (suppliers and supplier outlet signs) , except that there aren't that many non major oil suppliers out there.

    Might be a huge opportunity for the few independents out there like Quik Trip, but some stations are just going to close. The six to 10 pump (hose) stations are probably marginal and outdated and they are probably just going to close down. The mega refueling center
    with 20 to fifty pumps is the wave of the futre in gas retailing.

    I'd be interested if some of the oil traders on this board agree that many of the small Citgo stations will be out of business in about a year. (Citgo gave them a year before it cuts off their oil.)

    In the midwest, Citgo seems to have many of the older fewer pump stations, and many in poorer under served markets so this is going to hurt some small cities and neighborhoods.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    ^^^ actually, this is more like a huge opportunity for Valero, now America's largest refiner, to expand its vertical integration. In the northeast Citgo is usually tied in with particular regional chains of convenience marts, with high volume locations, such that they'll have no problem hooking up with somebody like Valero who doesn't have a very big presence in the region already. Obviously, the oil majors who DO have a significant presence in the northeast i.e. Mobil, Sunoco, Hess etc. would only wind up competing with themselves if they were to pick up former Citgo facilities. You're also correct that regional 'independent' gasoline wholesalers probably won't be in a position to pick up Citgo locations even if they wanted to, based on their lack of a guaranteed future wholesale gasoline supply for the independent retail stations they already are tied into (a fact which reared its ugly head last fall, when reduced supplies of refined gasoline were kept by the oil majors to meet their own distribution needs thus leaving the independents high and dry). With the existing bottleneck in US refining capacity being the major supply constraint, this is all the more reason to believe that selling out to Valero or another refiner who does have a guaranteed wholesale gasoline supply is the only practical alternative for current Citgo station owners who are going to be left high and dry.

    Also, as you say, many of the small Citgo stations will probably disappear altogether based on poor economies of scale - which is only logical when US law will soon require that there be an idiot behind the counter being paid $7+ per hour to watch over a half dozen gas pumps, versus a similar idiot behind a similar counter being paid a similar $7+ an hour to watch over 20-50 gas pumps instead, plus beer coolers, lottery ticket machines, pizza ovens etc.. You're also correct that the loss of small Citgo stations in various small towns and neighborhoods (and/or the loss of other small gas stations with different allegiances) is going to force residents of those small towns and neighborhoods to drive farther in order to fill up at a larger, higher volume, more centrally located gas station / convenience mart.

    Of course, in the short term at least, Citgo won't have any problem whatsoever selling all of the crude oil it wants to China and other non-democratic south American countries.
    ~
    Last edited by Melonie; 07-15-2006 at 06:48 AM.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    There is no money in gas for many small stations - hence the reason the bubble gum racks showing up. I saw a news story not to long ago where even before all this, small gas station owners were turning them into vehicle service centers or the like - simply because selling gas wasn't worth it.

    There maybe a secondary market showing up - where basically Brazil buys the oil (or Mexico) and then it shows up here with their markup.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    ^^^ crude oil supplies aren't the problem, really - crude oil can always be imported from somewhere for the 'right' price. The real problem is refined gasoline supply, and particularly refined gasoline blended to the appropriate 'Heinz 57' additive blend as required under various state environmental laws. It remains to be seen what Citgo will wind up doing with the North American refinery capacity they own.

    If their refinery capacity winds up being 'tied up' producing gasoline and diesel for export to China, then North America's future gasoline and diesel supply will be in for a world of hurt. On the other hand, if Citgo sells off or keeps operating its refineries, then ultimate North American supplies of gasoline and diesel will be relatively unaffected - with Venezuelan crude sent to China simply being replaced with imported crude from another (albeit probably more expensive) source.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Melonie, do you, like, spend all your spare time reading FT, Foreign Affairs, Barrons the WSJ and Lord knows what else? I don't think an economic issue has come up where you don't have something good to say.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Quote Originally Posted by Melonie
    ... It remains to be seen what Citgo will wind up doing with the North American refinery capacity they own.

    If their refinery capacity winds up being 'tied up' producing gasoline and diesel for export to China...,
    While Chavez/Citgo can ostensibly do as they please with both their crude and their non-U.S. refined products (well, at least for however so long it winds up being before Chavez has finally taken enough rope to hang himself), under no circumstances will Citgo/Chavez be allowed to EXPORT refined gasoline from their U.S. refineries to foreign markets. No way, no how... as in 'NOT TODAY MF!!!' In addition to Congress' power to effectively 'force' Citgo to divest itself of all U.S. refinery/petrochemical-plant assets, the government's powers of expropriation are far more extensive and well-developed re this particular industry/aspect of the economy than all others, save one - the defense industry. And, given Chavez' continual taunting of Bush over the past 2 years, I tend to suspect Bush wouldn't so much as hesitate to give the go-ahead for such action should Chavez actually make the mistake of trying something so patently unacceptable to the U.S. Also, bear in mind that most of the statutes authorizing governmental expropriations provide that title passes to the government upon filing, with all else to be settled up later in Court. While Chavez may be an idiot, I assure you Citgo's U.S. counsel is not, and I an't imagine they won't be able to explain the fairly simple concept of "try it, and you'll find yourself divested of all U.S. refining/production assets faster than you can say 'Pinche Gringo Punatero' ... comprende, El Jefe???"

    PS - this clown is a walking f****** billboard for why we need to un-ass the so-called "Church Amendment!"
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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    I was wondering how the emergency gas rationing program would work if all the pumps are automatic. Melanie, you have given me a clue. With an attendant required the old odd even license plate rationing system of 1973-1974 or 1980-1982 could still work.

    I would imagine from a philosphy standpoint, Mr. Bush and the neo cons will be unable to bring themselves to declare emergency gas rationing, prefering the "market" to do its work.

    However at $4 or $5 per gal the "market" will create huge dis equillibrium of supply and transport without gas rationing, thereby falling into Al Queda (and whoevers) plan.

    Just looking ahead a bit (as I normally do) into situations

    The present situation has a vague 1973 war feel to it. Gas prices doubled in 1973-1975
    and created the first "oil shock." You can almost suspect that Venzuela, Iran, Al Queda,
    attacks in Nigeria all happening at the same time to disrupt supllies is a plan opr a conspiracy... but again I digress. (Gosh I bet Rumsfeld is wishing he had the old US Army combat engineer batalions of armed engineers that might have reubuil the oil supplies in Iraq and fought if they had to.) Looks like Cheeny and Halburton (the private sector) have once again failed the American People when we needed them. And they over charged us for the privillege of failing.

    Well time to go out and buy a Prius while you still can.

    Stay tuned to the weather channel and the huuicane season to deliver the uncontroled and unplanned for final economic event in late August or September.

    Melanie you will need to bring back the gas supply and cost thread soon.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Melonie, do you, like, spend all your spare time reading FT, Foreign Affairs, Barrons the WSJ and Lord knows what else? I don't think an economic issue has come up where you don't have something good to say.
    Since retiring from 'live' dancing, my primary 'job' is now managing my investment nest-egg. If I want to turn a decent profit, I need to look beyond 'BooYah Cramer' and old school mutual funds ! And while I usually do have something to say, not everyone who frequents this BBS considers that 'good' LOL.


    PS - this clown is a walking f****** billboard for why we need to un-ass the so-called "Church Amendment!"
    it may be that Osama and Chavez aren't the only ones with a 'grand plan' ready in regard to energy supplies. I would dare to say that if by next winter gasoline prices are $5 per gallon, heating oil is $4 per gallon, utility bills are 20 cents/kWh etc., leading to 50% of Americans having to decide whether to make their mortgage payment versus continuing to drive to work, heat their home, and keep the lights on, that the true 'cost' of some past energy policy votes will start coming to the forefront (i.e. your Church Amendment, ANWR, Offshore drilling etc.).

    However, even if these past policies are finally changed, it will still take a few years to bring the new production to market. Thus the Church Amendment would be one of the very few possibilities which could immediately alter the US supply demand situation.

    As to price controls / rationing, this isn't the 40's or the 70's. Besides, the environmental lobby is all in favor of gasoline rising to $10 a gallon !
    ~
    Last edited by Melonie; 07-16-2006 at 06:04 PM.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    Hey now... don't be bad mouthing the Cramer! LOL! The guy is like the Rush Limbaugh of financial advice.

    Talk about entertainment TV these days.

    Suze Ormond is pretty impressive - she at least works the numbers in front of your face.

    Yes - two different types of advice - but her format is more soothing to my frontal lobes.

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    Default Re: Venezuela's Oil Sales to U.S. Drop as Chavez Sends More to Asia

    I said earlier that the Mideast situation and oil feels very much like the 1973 situation to me.
    The war is not over, and Wall Street is fooling itself that things are toning down. There is no cease fire money wizards. There is probably a secret deal with the US and Britian to enable them to get their citizens out before the invasion. I note the British are moving very quickly. The US has certainly done better than the lack of urgency effort in New Orleans,
    but has been somewhat slow (as is usual for the Bush administration) in mobilizing US government resources to get our people out.

    Jeb Bush does really well in Florida in disaster management. Maybe George could hire his little brother. The Kennedys did it.

    My point is that the mideast war i s not toning down, and the invasion is coming... probably before we get all our people out. I hope the Marines and embassy people are working all night tonight to get them out.

    Oil price rises are not over, Wall Street is fooling itself (or trying to keep prices low for the election), and therefore, interest rate rises and inflation are not over either.

    Events are just moving very slowly compared to the 1973 war situation. But they are moving none the less, and moving in the wrong direction.

    I picture the chief oil trader of Goldman Sachs in a bowler hat and english suit costume
    proclaiming... "Peace is not on our time schedule!"

    This mimic's the great appeaser Neville Chamberlain stating, "Peace in our time."

    Should be a very interesting two week period ahead.

    Meanwhile the new federal reserve chairman is stating the very novel (and I think new and very wrong, ground breaking concept that no Fed Chairman in modern times has stated), that inflation would be allowed to run its course and be extinguished by a declining economy.

    The only thing I know will happen is that the US dollar will sink in value further as a currency
    with a policy like this.

    Attention Karl Rove. Even the Real Estate Brokers have given up trying to argue housing isn't going down. There is no reason to try to prop it up by keeping interest rates low.

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