Analysts: "Venezuela needs the price of oil to exceed USD 90 to pay expenses"

[Psephos]

Source: El Universal (Venezuela)

(or, in Spanish) Estiman que Venezuela requiere crudo a $90 para sostener gastos

Both the Deutsche Bank and consulting firm PFC believe that Venezuelan public accounts are highly vulnerable.

According to consulting firm PFC, in 2000 Venezuelan authorities were able to balance the budget with a price of USD 34 per barrel. Amid the fall of crude oil prices, some specialized firms have begun to estimate the impact of the economic crisis on the finances of petroleum exporting countries.

According to studies prepared by PFC Consulting Limited, a Washington-based wholly owned subsidiary of Power Finance Corporation Limited, and German bank Deutsche Bank, Venezuela is the most vulnerable country to the financial crisis. PFC considers that Venezuela needs that the price of oil averages USD 97 to balance its accounts while in 2000, the South American country required that the price of the barrel of petroleum was USD 34.

The results of the study, released by Reuters, show that Nigeria can balance its budget with a price of USD 71 a barrel; Iran (USD 58); Saudi Arabia (USD 62); Kuwait (USD 48); United Arab Emirates (USD 51) and Algeria (USD 35). Deutsche Bank says that next year Venezuela and Iran require that the average price of oil remains at USD 95; Saudi Arabia at USD 55 and Russia at USD 70.


Read more: http://english.eluniversal.com/2008/10/14/en_eco_esp_analysts:-venezuela_14A2068487.shtml

---

Here's the link to the original in Spanish.

http://www.eluniversal.com/2008/10/14/eco_art_estiman-que-venezuel_1091310.shtml

Here's an article on the prospects of various L.A. economies that ran in The Economist two weeks ago, entitled Keeping Their Fingers Crossed.

http://www.economist.com/world/americas/displayStory.cfm?source=hptextfeature&story_id=12341669

[Dr.Phool]

1. Are they assuming that their only income is oil?

And who wants to balance a budget anyway?

[Bacchus39]

17. Oil continues to rule the Venezuelan economy, while dependence on imports climbs

http://english.eluniversal.com/2008/10/15/en_eco_esp_oil-continues-to-rul_15A2071129.shtml



Economy
Although the Venezuelan economy has grown steadily for the last 18 consecutive quarters, official statistics suggest that Venezuela's dependence on petrodollars has worsened, as they are vital to afford skyrocketing imports dedicated to meet demand in stores and supermarkets.

At the end of June, USD 94 out of every USD 100 entering the country came from oil, non-traditional exports declined seven percent compared to the first half of 2007 and trade dependence on Colombia and Brazil continued to swell quickly.

In January-July, Colombian exports to Venezuela totaled USD 3.17 billion, 39.3 percent higher than in the same period in 2007. This amount is above the USD 2.70 billion-worth total imports in 2006.

In contrast, between January and July, Venezuela exported to Colombia a series of items totaling USD 738.7 million, which represents a decline of 14.4 percent over the same period last year, according to data from Colombia's National Administrative Department of Statistics (DANE).

Major Colombian exports to Venezuela include foodstuff, textiles, leather, chemicals, plastics and apparel, among others.

According to Brazil's Ministry of Industry and Trade, at the end of September Brazilian exports to Venezuela totaled USD 3.68 billion, a 12.4 percent increase versus the same period in 2007 and above the USD 3.56 billion recorded in 2006.

Although during the first nine months this year Venezuelan exports to Brazil increased by 74 percent when compared to the same period in 2007, they amount to USD 451 million only.

Encouraging imports

Since Venezuela's official exchange rate remains unchanged as of March 2005 at VEB 2.15 per US dollar, while prices have climbed 60 percent increase, the US dollar, together with gasoline, are the cheapest goods in the domestic market. As a result, the Venezuelan currency is overvalued and there is an apparent imbalance: what can be purchased with VEB 2.15 in Venezuela is by far less than what one can buy with USD 1 abroad. Therefore, there is a growing tendency to import products.

As inflation in Venezuela is the highest in the hemisphere, costs for Venezuelan businessmen increase more rapidly than in the United States, Brazil and Colombia, the country's major trading partners.

According to a study performed by consulting firm Ecoanalítica, Venezuela's exchange rate is 52.1 percent overvalued against the dollar; 22.9 against the peso and 29.8 percent against the Brazilian real.

Until now, Venezuela has enough and cheap US dollars to afford imports. However, the international scenario has begun to take an unexpected turn. Amid the crisis that shakes the developed countries, the price of the Venezuelan basket of oil dropped 35.3 percent in thirteen weeks and has fallen to USD 81.78.

If oil prices continue to plummet, imports could become burdensome.

[ben_meyers]

2. Hugo, here's a quarter

call someone who gives a crap!

Given a choice between Chavez going tits up or the U.S economy recovering, I'll choose us.

[EFerrari]

16. They're not two separate things. For example, people on our East coast

will be happy to hear that the home heating oil program will still go forward this Winter.

[ronnie624]

3. The demand for energy will rapidly increase in the coming years.

That is guaranteed. The current decrease in prices is by no means a long term trend.

The breathless Chavez haters are fooling themselves.

[Psephos]

4. The demand for petroleum will rapidly decrease in the coming years

That is guaranteed. The current level of consumption is by no means a long term trend.

The breathless Peak Oil deniers and those who think the high price of oil isn't relentlessly driving the development of alternative energies are fooling themselves.

[NickB79]

5. You seem to have described a paradox

You state that demand for petroleum is going to decrease in coming years. That would imply that the price of oil will also decrease. As it stands, it is already down to $77 US.

Then you state that the high price of oil will spur alternative energies :shrug:

If the price of oil falls back to $60 or so, many of those alternative energy developments become uneconomical to implement without large government subsidies.

My fear is that the current (temporary) drop in oil prices, combined with the recession and credit crunch, will seriously damage the drive towards fossil fuel replacements by delaying implementation of new infrastructure and thus wasting valuable time. When the economy recovers and demand goes back up, there may not be many new substitutes for oil available.

[Psephos]

8. Supply and price are separate creatures

Price reflects availability of alternatives, not supply. Demand for oil may change radically regardless of supply based on the development of other sources of energy.

The high price of oil HAS spurred A.E. That was true when it was near $50.

Meanwhile, your reasoning implies that $60 isn't a high price for oil. That's only because we've just gone through a short but violent bubble, which reframed our perception of what the qualitative term "high" means. There is plenty of A.E. development incentive at $50 or even $40 per barrel of oil; just two years ago, people were howling about $50 oil as a financial nightmare.

I don't think your fears will be realized. A.E. will create new economic sectors the way the internet and the personal computer did. Oil has so many other drawbacks that price alone isn't that big a deal to visionary entrepreneurs and researchers.

[NickB79]

20. Well, this was a timely article to be published

It seems to back up my fears that the credit crunch will harm A.E. development:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x173940

"Tesla Motors Inc. has hit a big pothole on the road to full production of its high-performance electric roadster. It is running low on cash.

With production at a crawl -- fewer than 50 of the $109,000 cars have been delivered -- Tesla is laying off a number of employees, according to the San Jose Mercury News.

Tesla chief investor Elon Musk is taking over as CEO. He replaces Ze'ev Drori, who will become vice chairman, the newspaper reported."

This is really sad, because Tesla is one of the leading companies in developing next-generation electric vehicles.

On edit: first link didn't work, so I linked to the previous discussion over on DU's E/E board.

[ronnie624]

6. Amusing fantasies.

The United States shows no willingness whatsoever to develop new technologies for energy production. Most Americans seem more concerned with gasoline prices. They desperately pine for the status quo, and the current decline in prices virtually guarantees an increase in consumption. I've seen no government policy changes that would indicate any serious consideration of alternative energy sources either.

The reference to "Peak Oil deniers" is rather perplexing.

Believe me, I desire few things more than a rapid, single minded transition from burning hydrocarbons as a primary source of energy, and that includes those derived from agriculture. I believe the long term survival of our species depends on it, but I don't see it happening anytime soon

[Psephos]

7. In the domain of opinions, facts are not only useless, they are impediments

Alternative energy development is the next internet or biotech. Both of those booms were started by entrepreneurs backed by venture capital and encouraged by pro-development government. More or less.

As we speak, the A.E. boom is already underway in a thousand garages and labs.

Rather like this one:

http://www.landsnail.com/apple/local/garage/apple.html

Or this one:

http://www.hp.com/hpinfo/abouthp/histnfacts/garage/

By people like this guy:

http://en.oreilly.com/et2008/public/schedule/detail/1622

I don't know your background, but if you don't understand how scientific/business revolutions rise from the bottom up, I suggest reading a bit beyond the ideological view, and into the historical one.

[ronnie624]

9. I don't know your background either,

but you may rest assured your links will be studied.

Thanks.

[eilen]

10. I don't know who you mean

when you say "Americans"-- do you mean the American government, American corporations or American people?

I am what I consider an average American. My family's annual income is in the mid $40's. I would like alternatives than just oil. I don't drive a hybrid mostly because my vehicle is paid for and hybrids are very expensive (Prius costs $38,000). I live in the Northeast. We currently have a natural gas furnace that is 95% efficiency and we are putting in efficient windows. We also have a solar collector on the side of our house we use to heat our basement which then rises to help heat the house that works well on sunny days in the winter. It was installed on our home back in the 1970's and was on when we purchased it. It is not cutting edge technology but I have not seen any builders featuring this in any model homes. I'd like to have solar cells on the house but currently that is also extremely expensive and we do have a credit crunch. My family, perhaps unlike other Americans is credit averse--we do not like to borrow any money and keep ourselves out of debt besides our mortgage. When I do have extra, I like to pay on my house or improve it. I just don't have enough extra for the higher ticket (over $20,000) investment. My goal is to be totally debt free as debt is the path to slavery.

I work on my own and do not have a traditional commute. My dh is an electrician and often travels to jobs around the country as work dries up here quckly. He drives a 1996 Saturn with almost 200,000 miles on it and it is pretty good on gas mileage. We use an electric company that uses all its energy from alternative means (not coal fired) and it costs a little more than the traditional energy supply companies. We also use our fireplace in the winter to use less natural gas.

We do live in the suburbs but don't have any kind of traditional commute into the city. Also we have grocery stores within 3 miles so don't burn a lot to run our errands of daily living. Actually, the city neighborhoods have no convenient markets and they must drive out to the suburbs to shop or drive to the Farmer's Market which is held twice a week during most of the year. Many do this from everywhere and the parking is very difficult. When the weather is good, and I have only one bag's worth to pick up I will ride my bike. I also encourage my son to take a bus into the village to see his friends in winter, in good weather, he takes his bike. I would like better alternatives but like most Americans, I need cost effective solutions. I would like a rail that can take us into the city for museum visits and entertainment as the buses run less on weekends and evenings. This year I was not able to join the CSA as I had a cash flow interruption when they were signing up. We did start a vegetable garden this year but the results were not impressive-- I attribute that to the lateness we were able to put it in.

I suppose we could do better and that there is a lot of room for improvement. Big changes happen slowly in any arena.

[WriteDown]

12. You seem to have missed....

the push toward nuclear energy. Many politicians are realizing that it would be wise to copy the French model.

[ronnie624]

15. I did indeed miss that.

Here is some interesting information on French nuclear power:

French officials are proud of their country's place as the world's leading nuclear energy state. Kouchner maintains, "Thirty years ago, France made the choice of nuclear . It was the price its independence, its prosperity, its freedom. . . .Today, we have a degree of energy autonomy that profits every French . The cost of our electricity is the lowest in the world and our economy is one of the cleanest in terms of carbon emissions."

*****

But is he correct? For starters, he makes a convenient mistake--mixing up the words "electricity" and "energy." In 2007, nuclear energy provided 78 percent of France's electricity, which corresponded to 39 percent of its commercial primary energy but only 18 percent of its final energy. Primary energy is the energy contained in the fuel when it enters the system, while final energy is what is left over for the consumer after processing, transformation, and distribution. In the case of large nuclear or coal-fired power plants, only about one-quarter of the primary energy reaches the consumer's home, office, or factory. In France, more than 70 percent of final energy is provided by oil, gas, and coal, of which one-half is oil alone, just as in many other countries. This year, the country will face an all-time record energy bill of more than $80 billion.

If the goal was independence from oil, then the target should have been the transportation sector. Already the largest consumer of oil in the early 1970s, oil consumption has increased by 70 percent, far outstripping the oil savings from nuclear energy's growth in the electricity sector. Today, transportation is responsible for more than one-half of French oil consumption and one-third of the country's greenhouse gas emissions. With all of the country's uranium now imported as well--the last French uranium mine closed in May 2001, even though nuclear power is curiously still considered an entirely domestic energy source--it's difficult to see how the nuclear program could even come close to ensuring the country's energy independence.

*****

So all of this talk about France leading the world toward a renaissance in nuclear power, is exactly that--talk. Besides, nuclear power plays a limited role in the international energy market, providing roughly 2 percent of the final energy available to the consumer--a number that will actually decline in the future as growth rates of nuclear power's main competitors such as decentralized cogeneration and renewable energy technologies increase. In fact, nuclear building projects will most likely be unable to replace the number of currently operating units that will reach the end of their operational life within the next couple of decades.

<http://www.thebulletin.org/web-edition/features/the-reality-of-frances-aggressive-nuclear-power-push>

[Dave From Canada]

23. If demand for petroleum declines, it will only make it cheaper, and thus, more attractive as an

energy source.

[Bandit]

11. I supect it is fact a twenty one day trend

I won't be the slightest bit surprised if immediately after the election oil prices begin their climb once more. Oil is behind the Republicans of that there is no doubt and they will stoop to anything to try anjd get Republicans elected. Hopefully this time it won't work and once a Democrat is in Command Windfall Profits taxation can be applied to Exxon and the others. Who knows they may have to settle for only making fifty million dollars a day NET PROFIT instead of Over a hundred million a day. Do you think any company could survive making only fifty million dollars a DAY... NET PROFIT?

[WriteDown]

13. Huh?

So why is OPEC meeting on reducing supply? I highly doubt that the Repukes are working in collusion with OPEC. As proven many times over, OPEC is in it for themselves and their gold plated private jets.

[robcon]

14. The price of oil was not sustainable.

Built on speculation, the oil price rise was a bubble that has burst.

[ohio2007]

18. I hope oil falls to $45 bbl so all OPEC countries feel the pinch

Think of the "new deal" tax revenue that can be raised if gas were @$2/gal with a 25 cent/gal road rebuild infrastructure tax added to every gallon consumed.
Spreading the wealth means spreading the consumption tax

Not to mention the economic growth if gas was half of what it use to be in August '08 by summer '09.

[ronnie624]

19. "Spreading the wealth" and "economic growth"

equals status quo capitalism and the fevered pursuit of consumption, the bane of human civilization.

Better wake up.

Fuck capitalism.

[ohio2007]

21. Oil Falls Near $70 a Barrel, 16-Month Low, Alarming OPEC

Oil prices plummeted on Thursday, falling below $70 a barrel for the first time in 16 months, and prompting the OPEC cartel to call for an emergency meeting next week.

The rapid decline in prices had alarmed petroleum executives and oil producers who are becoming increasingly nervous that it is undermining the stability of energy markets.

Oil prices have dropped sharply in recent weeks
snip

http://www.nytimes.com/2008/10/17/business/worldbusiness/17oil.html?_r=1&em&oref=slogin

POP

Gas here; $2.55/gal.

Let the market crash !
I want to see $1.99 before congress decides to vote on an increase of tax revenue.

[ronnie624]

22. Very interesting. Thanks for the link.

While consumers may have reason to cheer the falling oil prices after such a sharp run-up, the wild roller coaster of volatility is a nightmare for oil producers and petroleum executives who say they need more stability to plan long-term projects to develop new sources of oil.

If they cannot be confident that they will get a stable return on their investment, they may hold back. That in turn could set the stage for possible shortages of oil and higher prices when global demand picks up again.

The sharp drop-off has forced OPEC’s hand. The cartel said just last week that it would meet in mid-November, after the United States elections. But on Thursday, it rescheduled its emergency session for next Friday, Oct. 24.

The cartel’s producers, which control 40 percent of global exports, could curb their output by about a million barrels a day to try to stem the drop in prices, according to analysts.