Venezuela Goes to the Dogs

Coming just a week or so after Rep. Maurice Hinchey (D-NY) publicly said the U.S. government should nationalize the nation's oil refineries, echoing a similar earlier threat by Rep. Maxine Waters (D-CA) to nationalize the entire industry; it is instructive to see what has happened in Venezuela where a Communist wannabe dictator, Hugo Chavez, nationalized that nation's oil industry.

One would think it was bad enough that Sen. Barack Obama and the Democrats want to enact a windfall profits tax grab on U.S. oil industry, the same action that in 1980 effectively has reduced exploration and production in the U.S. by nearly sixty percent, but Venezuela's takeover of its oil industry is a case history example of why so many of the world's national oil companies are badly managed and under-performing.

Venezuela has a long history of problems with its various governments dating back to the 1800s when Simon Bolivar fought for its independence from Spain. What followed "was characterized by coups, civil wars, and battle after battle," says Kyle D. Guerrero, an academic who has lived in both Venezuela and the United States.

The June issue of Energy Tribune is devoted to Venezuela because, as its editor Michael J. Economides points out, it has the Western hemisphere's largest oil reserves. Don't bother looking for Newsweek or Time to provide the real story because they are still telling Americans that global warming is real and "fossil fuels" are bad, bad, bad.

Consider instead that, aside from its oil, Venezuela with a population of twenty-six million, most of whom reside in its cities, could comfortably fit its 352,145 square miles into the State of Alaska's 663,267 square miles. Despite the billions president Chavez is spending on arms for its army of 120,000 soldiers, claiming that the U.S. intends to invade, the truth is that the U.S. is wisely waiting for the inevitable ouster of this jackass.

Economides says that "Hugo Chavez is in free-fall" and warns that "the uncertain transition that will follow him bodes ill for the stability of the country." This is worrisome for the United States because by 2006 our Venezuelan crude oil imports amounted to about eleven percent of our needs. They represent 60 percent of Venezuela's total exports. This mutual dependency stands in vast contrast to the diplomatic relationship between our two nations.

"Chavez," says Economides, "would be a comical character were it not for the $100-plus oil prices which have papered over his shortcomings and prolong the eventual day of reckoning." It is astonishing to see the way he has devastated the industry that permits him stay in power. In 2003 he fired more than 18,000 highly trained oil workers who went on strike against him. This set in motion a huge brain-drain as ten thousand of them have left the country. An estimated two-thirds of the rest of the population wants to leave as well.

Proving once again that Communism is the worst possible political and economic system known to man, Chavez's only friends these days are people like Cuba's Fidel Castro, and thugs like Iran's Mamoud Amadinejad, Zimbabwe's Robert Mugabe, and the FARC guerillas in neighboring Colombia. The one thing they have in common is the way they have destroyed their nation's economies and spread misery among their captive citizens.

In 1992 Chavez led a military coup against the government of Carlos Andres Perez. In 1994 he was pardoned and, in 1998, he was elected president of Venezuela. If that sounds improbable, one has to consider the long history of coups and other difficulties endemic to the governments and economies of South American nations. The Chavez platform was one of "change" that would redistribute the wealth of the nation based on a variety of "free" programs of medical care, price controls, and other giveaways. It this sounds a lot like a certain Democrat candidate, it is not a coincidence.

The result has been the highest rate of inflation in Latin America, 23 percent last year and still increasing. The breakdown of society is reflected in the way Venezuela in 1988 had 4,500 murders and, during the Chavez regime from 1999 to 2007, this has increased to over 105,000. There is virtually no foreign investment and domestic businesses have suffered. Its health system reflects his "reforms" as childbirth mortality rates rise and cases of malaria have doubled.

Poverty is the only growth industry in Venezuela. Aside from oil, its position as a place for illegal drug transit keeps the money flowing, but only for those in charge.

This is a nation that chose Communism at a time when the Soviet Union had already collapsed, whose citizens preferred a typical Latin American "strongman" over democratic reform, and who will suffer far more as the price of a barrel of oil inevitably and eventually returns to a more realistic level.

The real question will be what kind of transition will follow the fall of Hugo Chavez and his followers and the odds are the answer will be very ugly.