Kicking out foreign oil companies from Venezuela made so much more sense when the price of crude was over $100, and the inefficiencies of a state-run firm could be washed over in sea of cash. Now with oil in the mid-$30s, the rocky river bottom has been exposed and Hugo Chavez is begging for help once again.
NYT: Until recently, Mr. Chávez had pushed foreign oil companies here into a corner by nationalizing their oil fields, raiding their offices with tax authorities and imposing a series of royalties increases.
But faced with the plunge in prices and a decline in domestic production, senior officials have begun soliciting bids from some of the largest Western oil companies in recent weeks — including Chevron, Royal Dutch/Shell and Total of France — promising them access to some of the world’s largest petroleum reserves, according to energy executives and industry consultants here.
Their willingness to even consider investing in Venezuela reflects the scarcity of projects open to foreign companies in other top oil nations, particularly in the Middle East.
What’s interesting is that the idea of re-inviting Western firms was actually floated prior to the collapse in oil prices, upon the realisation that local producers weren’t up to the task.
Expect this to play out around the world. State-run firms badly underperform their private peers, and governments desperate for revenue won’t have the luxury of squandering their resources when they’re this cheap.
In the end — just like our own failing efforts to prop up zombie banks — ideology and pride can’t fight the forces of the market, which are more powerful than government. The question is how long dictators like Chavez and his peers around the world stay in power. It’s hard to pass of all your woes as being the result of evil Western capitalists when you’re actively soliciting their return.