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Errors, oil and lies in Venezuela's Bolivarian revolution

By Miguel Octavio | The Devil's Excrement

07.05.05 | So now, it is a campaign against PDVSA, according to the same President who admitted just two days ago, that there were indeed problems at PDVSA. I actually heard him say it two days ago, he acknowledged not only the lower production, but he even said it had been worse, he talked about “problems”, being below OPEC quota and they were studying whether there was some form of sabotage.

But tonight it is a different matter, according to Chavez, it is a campaign against PDVSA from abroad, hey, as far as I know the only person that has spoken on the issue from abroad has been the President of PDVSA Ramirez. The other spokesmen have been: President Chavez, Minister of Defense Garcia Carneiro, General Melvin Lopez (I would hate to be General Melvin too!), Minister (or President you choose) Ramirez, two union leaders, one pro-Chavez -who said that PDVSA people were not doing their job-,one anti Chavez,-who said PDVSA people were not doing their job. And then there was an article in El Universal, but that is a separate story.

The anti-Chavez union leader gave out numbers on Western oil production, they looked bad, but I have no idea where he got them. Today’s El Nacional talks about a “survey” in Western Venezuela and gives equally horrific numbers with things such as drills down 53% from pre-strike levels, active wells down 37%, electricity consumption down 37%. But once again I am not sure how this survey was done.

To clarify for my readers, the big deal about oil production in Western Venezuela is that this area has high quality crudes, almost half the oil production pre-strike of the country (1.4 million barrels a day), but the wells are old, very old. That means you need to invest regularly on maintanance. And yes, the Western area, particularly Zulia state, is the most anti-Chavez area of the whole country.

But hey, anyone reading this blog who is pro-Chavez could say I am lying thru my teeth, El Nacional is lying, the union leaders are lying so let’s us look at two very simple graphs:

Below is the price of oil since Jan. 2003 for WTI as compiled by Bloomberg (Not a CIA source). What is important here is that the average price of oil was roughly US$ 27 in the first quarter of 2003, $30 in the next two quarters, $28 in the last quarter 2003, $33 in 1Q04, $38 in 2Q04, $44 in 3Q04, $48 in 4Q04 and $49 in 1Q05, give or take one dollar. This is not for the Venezuelan oil basket, but that price scales quite well with WTI.>

Plot I. Price in US dollars for WTI per barrel in the last six years.

In the second graph below we show a plot published in today’s El Universal

of OIL GDP in the same quarters as the oil prices discussed before but only since 1Q03. That quarter, oil GDP was down significantly because of the strike. Let’s jump straight to 1Q04 when oil GDP was up 64.7%. Why? Simple, the weird methodology used by the Central Bank compares one quarter in one year to the same quarter the previous year. Obviously, the quarter after the strike oil GDP was low and its growth was huge a year later. This is where things start to get tricky. 2Q04 had to be better than 2Q03, not only was oil production supposedly still recovering in 2Q03, but the price was only $30 per barrel, versus $44 per barrel in 2Q04, an almost 46% increase that should be reflected in oil GDP growing sharply, but oil GDP actually went down 0.6%. The same phenomenon is observed in the next two quarters, oil goes up to $44 per barrel in the third quarter ’04, up from $30, oil GDP shrinks 1.8%. Finally, in the 4Q04, oil jumped up to $48 from $28, but oil GDP drops by 5.9%!

It does not take a rocket scientist to figure out that something is very rotten somewhere. Clearly, production has gone steadily down in those periods. There is simply no way to argue otherwise. Yes, I could show the data for the Venezuelan oil basket, I could calculate better averages than my eyeball figures, but oil GDP in the last three quarters should have gone up significantly, never down as the actual government-provided data shows. And then we come to Chavez’ attack on El Universal today. All El Universal did was to point out that there was a discrepancy of 49% between the dollars that should have been given to the Central Bank by PDVSA and those actually handed out. We are talking about US$ 4.2 billion, yes four point two billion, a one followed by nine zeroes. Chavez actually said that there were “errors”. How many countries do you know with errors of US$ 4.9 billion in one quarter! Maybe Mugabe can have that happen in his fiefdom, but this was a democracy with reasonably transparent numbers and rational leaders only six years ago, even if they were terrible leaders! Chavez says the paper says little about the money spent on housing (lowest hosuing completion in six years) or the missions, or FUS, but the point is, there is a huge amount of money missing and the President calls it an error and dismisses it. For God’s sake, we are living in the XXIst. Century, the era of knowledge, the era of computers and we are supposed to round off US$ 4.2 billion into zero? So how can anyone believe him? How can anyone believe PDVSA production is not down SIGNIFICANTLY. Where is the money? Where are the houses? There is something rotten, very rotten in PDVSA and in this Government and we should refuse to accept it! I challenge any readers to explain away the data.

And poverty? Very well thanks, still going up!

Note added the next day: In today's newspapers Chavez is quoted as saying that the reason that PDVSA does not turn over al foreign currency to the Central Bank is that it is using part of its funds to pay for misiones and social programs. Well, there is someything funny there: How do they get Bolivars for that? If they don't go thru the Central Bank they do it via the black market which is obviously illegal. So, PDVSA people have a lot to explain about where these dollars are. I think it is all BS. But here is criminal evidence for the Prosecutor. Will he do anything?

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