Venezuelan creditors, what if from now on oil belongs in equal parts to the citizens and not to the government?

I refer to Jonathan Wheatley’s and Robin Wigglesworth’s “Venezuela’s Russian debt tangle heightens risk of default” June 10.

Sir, had Venezuela not have had oil, there would be no so much financing of its plain lousy governments.

Equally, had the oil in Venezuela belonged to Venezuelan private citizens and not to the government of turn, its governments would not have had access to as much credit.

Venezuela’s current constitution states: “Article 12: Mineral and hydrocarbon deposits of any nature that exist within the territory of the nation, beneath the territorial sea bed, within the exclusive economic zone and on the continental shelf, are the property of the Republic, are of public domain, and therefore inalienable and not transferable.”

What if there was a change in the constitution to: “Article 12: Mineral and hydrocarbon deposits of any nature that exist within the territory of the nation, beneath the territorial sea bed, within the exclusive economic zone and on the continental shelf, are the property in equal shares of all Venezuelan born and alive citizens, and therefore inalienable and not transferable.”

Then all the oil revenues would belong to Venezuelan citizens and be distributed to them by means of an oil revenue sharing mechanism.

Then those who current creditors of Venezuela, and who must have been perfectly aware of how lousy its government was by only looking at the risk premiums paid, would have those risk premiums to reflect the reality of the risks of lending to such lousy governments as Venezuela’s

In such circumstance could a tanker that carries oil owned by all the Venezuelan private citizens be embargoed?

Would a judge order that embargo knowing that, as a direct result of it, many Venezuelan citizens, old and young, with real names and faces, would then die because of lack of food and medicines?

http://perkurowski.blogspot.ca/2014/04/creditors-of-venezuela-read-our.html

@PerKurowski

Whether Norway Fund should be free to invest without government intrusion is not really the most important question

Sir, I refer to Richard Milne’s discussion of how imposed investment limitations caused the Sovereign investor to miss out on billions of dollars over past decade, “Ethical stance crimps Norway oil fund” March 22.

The real question is: if Norwegians had been allowed to decide on their own per capita share of the net oil revenues, like for instance spending it now or picking their own investment advisors, would they have been better off or not? Long term, I believe they would.

What now exist are some millions of Norwegian expecting to be recipients of whatever the central managed oil revenues can provide them, without having had to take any responsibilities for it. By allowing a Fund to manage it all, Norwegian have missed a great learning opportunity, and have less idea about where all oil revenue came from, and where all oil revenues went.

If something goes wrong with the Fund, something that can always happen, they will show little understanding. Also, the sole existence of a huge amount of centralized savings is something that can attract the attention of dangerous redistribution profiteers/populists.

I recently sent a similar letter, also commenting on the Norwegian Fund. Seemingly that Fund is a fund that shall not be questioned, too much, at least not by FT.

@PerKurowski

Should not US shale oil producers sit down with Opec to have a little conversation about mutual interest?

Sir, I refer to Roula Khalaf’s “A kingdom fit for an oil price ordeal” December 30. It refers to a battle, supposedly for market shares, between traditional oil and shale oil, in which Saudi Arabia in its own name, and fait accompli in the name of Opec, do no want to lose out one more barrel. We will see what happens.

That said to me it has been clear that even more than some weak Opec members might wish for a reduction in oil supplies that strengthens oil process, in order to help their fiscal accounts, so must most of the shale oil producers with their much higher extraction costs.

The fact is though that shale-oil extractors can probably not sit down and chat over production limits with Opec, because that would perhaps be regarded as a cartel… and we can’t have that with private companies, can we?

But at least Opec and shale oil extractors, as well as other oil sourcing countries, could have an interest to sit down and talk about what to do with all those taxmen who, for instance in Europe, by means of gas consumption taxes, are perceiving much higher revenues per barrel of oil than they are… and are of course helping to put a damper on the demand of oil...creating a demand deficiency. I mean, is not a tax collectors cartel just like any other cartel?

“My deflation is horrible, yours, oil, not so bad”

Sir, inflation seems to be have been identified as the number one tool to smack grandmother Europe back into fertility and force her to vibrate on the dance floor again. And though that must sound quite eerie to the poor of Europe, those who always end up being most taxed by inflation, most of you in FT clearly agree with that approach.

And that is why I was slightly surprised when I now read you categorically stating: “Weaker oil prices are a restorative that the flagging world economy needs”, “Opec members flounder in a flood of cheap oil.” November 28.

I say that because it would seem that lower oil prices are more likely to fuel deflation than inflation. But, I guess the beauty of inflation, like so much other, is also in the eye of the beholder, “my inflation is splendid, your inflation not so good”.

Sir, for the record, let me remind that though some inflation could help to put some kick back into granny again, that can only happen as long as she really wants, dares, and is allowed to do a comeback.

Unfortunately, while Europe insists on credit risk adverse regulations that effectively stop banks from lending to small businesses and entrepreneurs, that does not seem to be what the family wants for her. Currently Granny Europe is kept more into a “let me just die as painlessly as possible” mood.

PS. By the way, Opec should have invited the USA shale oil producers (extractors)

Our bank regulators, if energy regulators, they would subsidize oil, and tax methanol and ethanol

Sir, there are two comments that I want to make in reference to Robert McFarlane’s and George Olah’s “Let the market determine the best energy sources”, March 4.

The first is that since OPEC is cast as a runaway producer cartel that distorts the market, it is again timely to remind the authors that in Europe, by means of taxes on petrol-gasoline consumption, the European taxman gets more income per barrel of oil than the OPEC members who sacrifice this non-renewable resource.

Secondly, because they argue their case so well, I would like to ask for their support on the issue of bank regulations. Currently bank regulators, by allowing banks to hold much less capital when lending to “The Infallible” than when lending to “The Risky” are, in terms of energy, subsidizing oil and taxing methanol and ethanol, and that is of course pure lunacy.

Well over 50 percent of Chavez’ charisma is made purely of oil revenues.

Sir, in “Chavez departs” December 11, you write that “Chavismo will struggle without its charismatic leader”. Indeed, he has charisma, but let us also note that when over 97 percent of all the export revenues of a nation, in this case of oil, lands in the centralized coffers of the State, this provides any leader with quite a bit of that charisma. In Chavez case I would say well over 50 percent. 

And in the same vein let us not forget that the continuation of the Venezuelan citizen’s struggles, against any of their leaders, will be based on that same insane concentration of powers.

http://theoilcurse.blogspot.com/

The resource cursed citizens merit more sympathy and respect

Sir, you have published some quite thoughtful articles on the resource curse lately but, though I tried hard, I could not find one single valid argument why the “Resource wealth need no longer be a curse” in the article by Mats Berdal and Nader Mousavizadeh published on March 25.

The resource curse have millions of people suffering horrors so it is somewhat upsetting to see it being taken as lightly as some acne that could disappear if only instead on private investors it is governments like China or other similar hopefully western states” are to invest in natural resources with long-term commitments dubbed “macro-finance”... resource curse exploiters are just what they usually end up being.

The resource curse is a cancer, for so many... and you just do not go around speaking lightly and self-servingly about easy cures to cancer. Please the resourced cursed citizens merit more sympathy and respect.

Just another oil cursed citizen

Bumpy roads indeed!

Sir Martin Wolf writes that “Big bumps lie ahead on the road to recovery and reform” October 7. Though I sort of agree, on most, for me the biggest real bump for recovery is that of not knowing yet what kind of growth is sustainable, given the two bottlenecks of oil and climate change. Some countries could resume growing as if these constraints do not exist, but that might very well not take us where we want to go. Yes, we want to stimulate the world, but we also want it to take off in the right direction.

Then of course we have the problem with the monetary system, most particularly for the US, the exporter of the currency the world most trusts in lieu of other alternatives, and that therefore has to live with the safe-haven curse. All of us who come from resource cursed nations know there are serious difficulties living with a curse, not the least the fact that those resources are finite, and though we know that one morning investors might wake up finding the safe-haven unsafely overcrowded, there is little to be done until that happens. Just like they could not stop until they had chopped down the last tree on Easter Island.

But where I might disagree completely with Wolf is when he quotes Andrew Smithers arguing to “force banks to raise the needed capital and if they cannot, let government provide it” if with this he implies he believes public bank capital is the same as private bank capital. What we most need in term of reforms is to eliminate any bureaucratic interference with the risk and capital-allocation mechanism of the market, like those of the minimum capital requirements for banks based on perceived risk of default. What is most needed, especially in the “comfy” countries, is for a banking sector willing to take risks on those few willing to take risks.

Is George Soros long on oil from Texas?

Sir George Soros in “The game changer” January 29, instead for advocating for a tax on the gas at the pump so that the gas is used less and other energy sources can compete better, he argues for an outright protectionist duty on oil “to keep the domestic price above, say, $70 per barrel.” Is George Soros long on oil from Texas?

The nuclear bridge

Sir, whether sturdy or weak, safe or dangerous, short or long, no matter how we look at it the nuclear energy is the best and perhaps even the only bridge available to take us from a carbon driven to a clean renewable energy driven world. 

In this respect I do not harbor any of the concerns that Oleg Deripaska expresses about the current drop in oil prices or the financial crisis delaying the development of a nuclear response to the world’s energy, as long as we can convince regulators that it is high time for them to roll up their sleeves and work 24-7-365 to speed up without running of course, whatever due diligence procedures are needed, “A nuclear response to our energy problems” January 22.

If you ask me what would be one of the best stimulus packages we could come up with, dollar for dollar that would be to double or triple the budgets of entities such as the U.S. Nuclear Regulatory Commission… and then crack the whip.

The US tax system needs better working progressivism.

Sir I could not agree more with Martin Wolf when in “How Obama should face his vast economic challenges” November 12, he mentions “taxation of energy”. That should be as they say in the US a “slam dunk” though let us remember that even an Al Gore, a Nobel Prize winner because of is environmental friendliness, does not dare to mention such tax in the land of the cars.

What I do not agree with though is when Wolf recommends a regressive “national value added tax rather than to rely so heavily on the income tax” as I believe that the US has to create some better working progressivism in their tax system since the very hard times fiscal ahead requires massive doses of legitimacy. Do not forget that the US dollars should actually say “In God… and in the American taxpayer we trust”

The managers of the oil extracting nations simply cannot manage more oil revenues.

Sir Martin Wolf in “A year of living dangerously for the world’s economy” July 16, quotes Daniel Gros of the Centre for European Policy studies on that oil producers (more correctly oil extractors) will leave oil in the ground if the rise in real oil prices is expected to be faster than the return on the alternative assets. Nonsense! Any private company would at current prices be selling oil like crazy to make their shareholders happy. The problem is that there are no real shareholders in many of the oil extracting countries and so even if their citizens, their equivalent of the shareholders, would love to see more oil revenues coming into their pockets, their respective governments have enough trouble managing the huge oil revenues as is.

Why should on earth should Venezuela extract more oil… if all what the government can thing of doing with it is giving it away to London?

Humans and animals are still challengers to oil.

Sir although Daniel Yergin is absolutely right reminding about the disastrous effects of the price collapses [of oil] in 1986 and 1989 in "Oil has reached a turning point", May 28, it is much harder to agree that oil “seems to be losing its almost total domination in ground transport”, because of ethanol... since hybrids still run on oil.

In a world where cyclists and animal pulled carts are going over to cars and trucks, in many places, high oil prices, just makes humans and animals real alternatives again. Of course we could get some petrol out of coal, but, when push comes to shove, that is just another sort of oil, though perhaps slightly dirtier, no matter what the clean coal slogan says.

A Nobel prize-winner should not make such a statement

Sir Joseph Stiglitz and Linda Bilmes while defending their book The Three Trillion Dollar War (that I have not yet read) March 5 from some comments made by Tunku Varadarajan on March 3 say with respect to the price of oil “we attribute only $5-$10 to the war” and this is just a plain wrong statement, from a pure economic point of view.

All the terrain between the marginal extraction cost of oil and its market price is complete no mans land and so no one, not even a Nobel prize-winner, could therefore attribute any of it to any specific condition. If there is just one barrel of deficit in the supply, speculation and desperation could lead to any price; just like one barrel of surplus could start a movement towards equating the price of oil to its marginal cost.

That is why less than 9 years ago pundits predicted $5 per barrel of oil with the same ease other predicts $100 or more. That is why there is the extreme volatility in oil that wets the appetite of so many speculators. That is why it is impossible for me to understand why producers and consumers have yet not entered into long term production and take up contracts that could benefit them both.

Any explanation?

Sir Sheila McNulty reports in “Profit at Conoco mask oil industry’s problems” January 24 why even with high oil prices international oil companies find themselves with limited access to resources and an unclear path for investment, and which obviously must impact the availability of oil around the world.

In reference to this may I ask why on earth have not the consumers and the oil producers been able to agree on long term supply/take up contracts based on a reasonable initial price; and slowly adjusted to the real markets by means of a running twenty-year average moving price? The governments could help out, acting as buffers, for instance by charging gasoline taxes also in accordance with the price stabilization scheme.

I truly do not understand why no government from an oil consuming country has not empowered some agents to go out in the market and negotiate on their behalf some decent terms on oil for its constituency; exactly the same way I cannot understand why the government from a producing country has not gone out there to negotiate some of the stability that their economy and constituency need.

Clearly the incentives of having long term contracts at reasonable and stable prices would help the much needed investments in oil exploration to take off.

There are carbon border taxes that do no sound that bad

Sir in the greening of globalization, January 4, you correctly speak out against carbon border taxes since these could be sheltering a new dangerous breed of protectionism. But, given that Europe and the world has to pay so much more for oil and has to see its environment so much more contaminated, just because the US does not want to restrain its consumption of gasoline/petrol perhaps a carbon border tax on US products that considers this would not be such a bad idea after all.

Please give us a New Oil Deal!

Sir less than ten years ago the price of oil was less than ten dollars per barrel, the Economist wrote in "The next shock?" March 1999, that "in today's condition the price would head down towards $5" and Sheikh Yamani was the toast of the town with his cute ''The Stone Age didn't end for lack of stone, and the oil age will end long before the world runs out of oil.'' Of course all that set us up for low investments in oil exploration and as a consequence the current high prices of oil.

It should therefore be quite clear that when now "Opec seeks assurances on oil demand from consumer nations", FT front page November 12, so that they can invest, it behoves the consumers all over the world to come up with some constructive proposals. The world needs urgently a New Oil Deal and the only ones standing in between consumers and producers to reach it are those who just want that deal for themselves.

What we need is not to cap the oil prices but to give them a decent floor

Sir the real oil crisis occurred in 1998 when the price of barrel fell under $10 per barrel and the Economist wrote in "The next shock?" March 1999, that "in today's condition the price would head down towards $5", and this is what primarily explains the current high prices of oil. Had the consumer countries acknowledged the growth in demand that for instance China would bring to the market (IEA did not say a word about it for years) and expressed their willingness to enter into those reasonable long term contracts that would have allowed producing countries to make the massive investments needed we would most probably have faced a completely different energy outlook.

From this perspective Ricardo Hausmann "Biofuels can match oil production" November 7, and that has 95 countries investing billions of billions in cultivating 700m of acres just in order to cap the price setting capacity of OPEC seems to say the least an astonishing proposition. The question to ask Hausmann is what he will do with those 700m acres when oil having been at last given such a real price floor really starts the pumps. Why don't you give OPEC a price floor without having to go into the environmental and economic nightmare of cultivating 700m of acres that will have to be subsidized in the future and that we pray will not include the Amazon?

But the Venezuelans will not get their gasoline.

Sir, in your editorial “Chávez gets his oil” June 28 you mention that with current oil prices “it scarcely matter that the amount of oil produced has declined in Venezuela” and I would suggest you read Najmeh Bozorgmehr’s report in FT the same day on how “Fuel crisis increases pressure on Tehran” where Iran’s fuel rationing crisis is described.

For your information, according to projections based on the current sales of vehicles, Venezuela a country with only 26 million inhabitants and a GNI per capita of less than US$ 5.0000, will in the years of 2006 and 2007 have placed a total of 750.000 new gas guzzlers on its roads, partly thanks to the craziness of a domestic gasoline price of under 3 US cents per liter. Can you imagine what will happen when you have to start to adjust gasoline prices? One of the first symptoms of the existence of a purely populist government is that all planning gets thrown out the window and you live day by day.

Why do you not sit down and talk instead?

Sir, Mr Vito Stagliano argues that “Opec’s threats prove sense of promoting alternatives to oil” June 12. There might be a thousand reasons for developing alternatives to oil but the only thing that the Opec threats really prove, is the need to sit down with them and talk about the whole issue. For instance if in 1998, when the price of a barrel of oil was $11 and according to some pundits like the Economist heading for $5, someone would have offered to buy the barrel of oil in a long term take up contract centred around $30 with some flexibility on the up and downside, then perhaps we would not be going through the current circumstances. Someone must have a vested interest in the oil issues not being solved by talking.