The Oil Drum

A smart reversal by Chavez from his initial threat to cut off all oil sales to the US. Chavez (IMO) would have been cutting his own throat if he did this.

Venezuela still owns CITGO which uniquely processes the heavier mixes Venezuala offers. These, in general, can't be processed in refineries in the rest of the world.

Now, only EXXON (which has enriched itself through exploiting Venezuelan crude, more than any other company), will take the heat. On the other hand, XOM is a big boy and can undoubtedly weather the storm, given the preferential treatment it receives in the US.

Having said that, XOM could now be harvesting millions more BPD by upgrading Venezuela's heavy oil reserves if they had just acted with less avarice and offered Venezuela a better deal for the rights to do this than they did in the late seventies and early eighties. Chavez (IMO) would never have come to power if they had.

Now, having failed to learn the less of Venezuela, XOM is pushing a law in Iraq in which they and their cohorts get the lion's share of the production rights. What would be wrong with a 50/50 offer?

Pity. What goes around, comes around.

The best thing the Bush Administration could do right now is to remain silent. Silence is an important communications tool. Used properly, it is highly effective in that once you have shown your hand to an adversary, he knows what you are thinking. Keep Mr. Chavez guessing.