Tag Archives: oil prices

Socialism– Hugo Chavez Style — Will It Work?

President Hugo Chavez of Venezuela has been using large amounts of money generated by the huge surge in oil prices to fund both internal developments in his nation as well as to support other Latin American nations he seeks to bring into his coalition. However, Chavez announced over the weekend that oil prices were dropping almost one third and there was now need for the people of Venezuela to take on the burden of paying for his promises. On one hand, he has been subsidizing state run enterprises, many of which are losing money, on the other hand he needs the continued existence of private enterprise if the nation’s economy is to avoid a collapse. He advocates an economic model in which the government owns business enterprises, there is private enterprise and people at the local level are responsible for shared ownership in some business enterprises.

Chavez shouts to the world: “the new economic model should be based on social ownership of the land, on social ownership of industries, on social ownership of the means of production.” If Chavez follows this model, Venezuela will have an economic collapse, he needs the intelligence and drive of private enterprise, but his rhetoric is frightening them and many will leave along with their skills.

At this point in time, he is creating an economic model centered on oil even as nations of the world are working to curtail their reliance on oil. What happens if they succeed? Where then will be the people of Venezuela?

Iranian President Sends Greetings To Obama

Iranian relations with the United States literally does not exist due to Bush hostility and verbal extremism from President Ahmadinejad. The election of Barack Obama has elicited unusual warm greetings from the Iranian leader. “I congratulate you on being able to attract the majority of vote of the participants of the elections. I hope you make the most of the chance of service and leave a good name by preferring people’s real interests and justice to the insatiable demands of a selfish and indecent minority.” There is scant doubt Iranian leaders would like to tone down the current hostility with the United States.

Iran is currently facing an economic crisis due to the drop in the price of oil which has left Ahmadinejad in a precarious position since he has been using oil money to subsidize food and other prices for the Iranian population. Less money means less support for those who need it. Iran would benefit by establishing trade relations with the US and Western nations since it might attract billions of dollars in an investment program that would stimulate the Iranian economy.

Fortunately, Obama has expressed his willingness to discuss issues with Iran without preconditions.

Bush Seeks Oil Help From Saudi Arabia

Once again, President Bush attempted to persuade the King of Arabia to pump out more oil in order to lower prices and once again nothing happened except an exchange of pleasantries. Bush tried to sweeten the request by including promises to help Saudi Arabia develop civilian nuclear power and to protect those facilities from attack. The main Saudi response to Bush’s request is that no nation is complaining they lack access to oil. “Saudi Arabia does not have customers that are making requests for oil that they will not be able to satisfy.” According to Saudi oil minister, Ali Namimi, “supply and demand are in baqlance today. How much does Saudi Arabia need to do to satisfy people who are questioning our oil practices and policies?”

Many econmists believe oil is being impacted by rising demand much more than the desire of OPEC to control oil and prices. Bush came, he talked, and once again, his requests for lower oil prices and more oil production were rebuffed by his good friends in Saudi Arabia.

There is no doubt Bush had wonderful meals from pleasant hosts. Unfortunately, the American people are the ones who ar paying for those lavish feasts.

Euro Soars In Value-Dollar Goes Down!

OPEC’s Secretary-General, Abdullah al-Badri, told the Middle East Economic Digest, there is a strong possibility the price of oil will switch from being pegged with dollars to the euro being the hallmark of how oil prices are determined. “Maybe we can price the oil in the euro. It can be done, but it will take time.” He admitted OPEC was under great pressure from nations like Venezuela to make the switch since the decline of the dollar is impacting their wealth. “In oil exchanges in New York, Singapore or Dubai, you can see the currency is the euro or the yen,” he said.

It took two world wars and about fifty years to enshrine the dollar as the method of pricing the price of oil. The value of the dollar has declined 44% against the euro within a decade, and this concerns oil producers. They hesitate at this point to make switch due to fear a drop in the price of the dollar would impact their trillions invested in the United States.

George Bush ran his campaigns claiming Republicans were the party fo fiscal responsibility. It is during his watch that the dollar has declined so precipitously. So much for another Bush claim to fame.