Chaos Spells Danger For Two Big Oil Economies

February 22, 2014 by  
Filed under Wind Energy Tips

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Violent clashes against an unpopular government, accusations of overseas provocateurs, barricades and bodies side by side in the street. No, this isn’t Kiev, this is Caracas.

Objects placed by opposition protesters block a road in Caracas, Venezuela, Thursday.
Associated Press

Protests against Venezuelan President Nicolás Maduro’s government have escalated, provoked by soaring inflation, rampant crime and a serious shortage of basic goods. Opposition leader Leopoldo Lopez is facing charges that could lead to 10 years in prison.

The country’s economy, hamstrung by a 56% inflation rate and weighed down by foreign debt, may slip into recession this year.

With the populist Hugo Chávez gone (but immortalized in oil), the country is treading an uncertain, unstable path. The cash-strapped government is struggling to pay what it owes to the private companies that service its lifeblood, the oil industry.

The country’s central bank is engaged in what some describe as “devaluation by stealth.” This reduces the amount of overseas revenue Caracas gets from exporting its heavy oil. Venezuela is one of the five biggest suppliers of oil to the U.S., so this accumulated disruption could agitate global markets.

All of which should be good news for Nigeria, traditionally one of the U.S.’s other biggest suppliers…


..but it too is something of a mess.

The governor of the central bank has been ousted just weeks after he said the country’s oil revenues have been vanishing at a mind-blowing rate.

Lamido Sanusi said that the state oil company had failed to remit as much as $20 billion to federal coffers (a charge the company denies) and that Nigeria’s oil savings had withered to almost nothing from $11.5 billion at the start of 2013.

Now he is gone amid accusations of “financial recklessness and misconduct.” The markets reacted as markets do—the Nigerian naira fell to a record low against the U.S. dollar and yields on government bonds increased.

With a brutal sectarian war ravaging the country’s north, and the Petroleum Industry Bill still delayed after all these years, Nigeria is heading into an election campaign on its uppers.

Although Nigerian light crude and Venezuelan heavy oil aren’t directly interchangeable, they do represent two of the U.S.’s biggest overseas options. And the U.S. is still importing a lot of oil.


A deathless acronym for organized resistance to unwelcome development, NIMBY can also be used as an accusation that carries undertones of Luddism.

It can also be a term of mockery, as is in the case of the Bartonville, Tx., water tower.

The local utility says it is required by law to build enough capacity to serve growing demand. Within a mile of the proposed tower there are nine shale wells. Fracking, of course, is a thirsty business.

But no matter how it is justified, a 15-storey tower is a 15-storey tower and some locals are so unimpressed they have filed suit to block construction. Among them is Rex W. Tillerson. He owns an 83-acre horse ranch next door.

He is also chief executive of Exxon Mobil Corp.


Crude oil prices in Europe and the U.S. on Friday retreated from the highs seen earlier in the week, with economic data taking the wind out of the market’s sails. You can read the Journal’s latest oil-markets report here.

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