This New York Times article — entitled The Troubled Oil Company — reviews the Venezuelan dictator Hugo Chavez’s mismanagement of Houston-based oil company Citgo, which is owned by Petroleos de Venezuela, the Venezuelan national oil company. Over the past two years, virtually every high-ranking Citgo executive has resigned, including the refining chief, the chief financial officer, the head auditor, and the marketing director. Here is a previous post on Mr. Chavez’s mismanagement of Citgo.
Although the Times article about Citgo and Mr. Chavez is interesting, it’s always funny how the Times analyzes a government’s mismanagement of a big oil business. As late as 1999, Venezuela was the U.S.’s largest foreign supplier of oil, but then Mr. Chavez took over, began establishing close friendships with anti-business types such as Fidel Castro, and generally started mismanaging the Venezuelan economy. By 2003, Mr. Chavez had cut its exports to the U.S. by 22% and was threatening to cut off oil exports to the U.S. entirely if the U.S. government doesn’t stop meddling in Venezuelan affairs.
Now, if the foregoing were occurring in Saudi Arabia, then the Times would be handling it as a major foreign policy story of impending doom. However, when a crackpot socialist and Castro admirer mismanages oil exports, the Times treats it as a typical business story.
Which is exactly the way the story should be handled. Mr. Chavez’s management of the Venezuelan economy has been horrific, albeit aided by high oil prices. But U.S. oil imports as a percentage of GDP are relatively small, about $132 billion in 2004 compared with a about a $11 trillion GDP. That’s about 1%, folks. Thus, if Mr. Chavez chooses to sell us less oil, hopefully the U.S. government shrugs, we replace Venezuelan oil with oil from the numerous other markets, market prices adjust, and we get on with getting to work.
Besides, if the U.S. government is going to take a hard line with an oil exporter, don’t you think that the government should take that stance with the country from which we import the most oil? Oh, and what country is that?
Answer: Canada.
Hat tip to Bryan Caplan for info on the Venezuelan oil imports.