January 15, 2003
Blame Hugo for Gas Price "Hump"
by Donald G. Mashburn

You may wonder what strikes in Venezuela have to do with you. You’ll find the answer in the higher gasoline prices we pay because Venezuelans want President Hugo Chavez gone. In spite of fears of war with Iraq, and North Korea’s belligerence, Venezuela’s fuss with Hugo is what’s causing the “hump” in our gas prices.

Venezuela’s problems pushed crude oil prices up from $27 a barrel to a peak of $33.65 in late December. Gasoline prices have increased about 10 percent, and your contributions at the pump do nothing to solve the problem. The situation isn’t likely to ease soon, so fill’er up if you need gas.

The Venezuelan demonstrations are reaching critical mass. Protesters want Hugo Chavez out because they fear the admirer of Fidel Castro will turn Venezuela into a Cuban-style dictatorship. Chavez made matters worse by selling oil to Cuba, and paying a state visit to Saddam Hussein, over the protests of the United States.

The current strike is the third since April 2001, and is the most serious. Chavez has ordered the military to seize food supplies, and has threatened to declare martial law.

His strongest opposition comes from some 35,000 workers of the national oil company, Petroleos de Venezuela, S.A. (PDVSA). They never did get along. Chavez once called PDVSA “a state within a state.” Their differences have often spilled into the political arena since Chavez was reelected to a six-year term July 31, 2000.

The oil workers have now gained the support of bankers, ship captains, and other groups. Together, they have all but shut down Venezuela’s oil exports. Daily production has dropped from 3.1 million barrels to about 140,000, according to strike leaders.

Before the strikes, oil prices crept upward because of Middle East instability and reduced oil production in Iraq. But our fuel supplies were stable because big oil exporters like Russia and Saudi Arabia were happy to make up any loss of Iraqi oil.

Venezuela’s a whole other barrel. The loss of 1.5 million barrels a day – about 14 percent of our total oil imports – was too much for U.S. refiners to replace quickly. Venezuela continued shipments for a while out of stocks, but spreading strikes have effectively cut the supply line to the United States.

Motor fuel is scarce even in Venezuela, with long lines of motorists at service stations heightening tensions between the Chavez government and the public. Oil-rich Venezuela is now in the embarrassing position of having to import gasoline from neighboring Brazil.

Strike leaders want Chavez to step down and call a national referendum for Feb. 2. Chavez, citing the constitutionality of his reelection, wants to delay the referendum till August. How the struggle plays out will affect the stability of oil supplies and the price of gasoline.

This writer spent four years in Venezuela before the oil industry was nationalized, and learned that stability is a relative term there. I also learned firsthand that change is one of the few constants. Historically, neither the Venezuelan status quo nor wannabe dictators like Hugo Chavez last long.

Constant, too, is Venezuela’s need for oil income. Oil accounts for half of its budget revenue, and some 80 percent of exports. So with or without Chavez, oil will flow again from Venezuelan wells, and the “Hugo hump” in gas prices will disappear.

We might then see some stable gas prices – about the time Osama starts wearing Levis, and Saddam Hussein gets invited to the Bush ranch for a barbecue.

Even with higher gas prices, we’re not likely to see many parked cars because of fuel cost. Americans may grumble, but they’ll continue to drive. And why not? Even with our Venezuelan oil supply interrupted, we have the best deal on gasoline anywhere.

And although the gas isn’t free, we are! And most of us can pay for it with money we’ve earned doing what we choose to do.

Can you say, “God Bless America?”