On Jan 16, 2009, at 1:59 PM, dredmond at efn.org wrote:
> They may be right. The trillion euro bailouts are flying fast and
> furious,
> and interest rates are going from zip to ZIRP ("zero interest rate
> policy"). And of course it's a no-brainer to invest in the Chinese,
> Vietnamese, Russian or Venezuelan developmental states. What Fels
> doesn't
> say, of course, is that the next liquidity cycle will be driven
> primarily
> by the governments of the new metropoles and rising semi-
> peripheries, not
> the US consumer.
Not the U.S. consumer, no. That one's gonna be hibernating for a while. But Dennis, the U.S. Treasury is, so far, doing a lot better at selling its bonds than the Europeans are. There's a reasonable possibility that at least one country will leave the euro - and if that happens, there's no telling where that could go. The U.S. is just not doing all that much worse than the rest of the world right now. Yeah that could change, but there's really no evidence that this crisis is weakening U.S. hegemony.
Speaking of Venezuela, this is from today's Lex column in the FT.
Doug
----
Contrite in Caracas
Oilmen are extraordinarily quick to forgive and forget given the fickle nature of petro-states, but even their memories are not this short. Just two years ago Venezuela's president Hugo Chávez informed some of the world's largest producers that their multibillion dollar investments in the promising but technically daunting Orinoco Belt would become state property. With crude $110 a barrel lower than it was in July, his position has understandably softened, but so has the risk appetite of the oil majors.
Indeed, the shoe is suddenly on the other foot for Mr Chávez, who is learning that agreements made in good times may be reinterpreted in bad ones. Knowing that national oil firm Petróleos de Venezuela lacked capital, various memoranda were signed with friendly state energy companies in Russia, Iran and China in 2007 and 2008.
Now things have changed and he is reportedly seeking private partners. But neither state-owned nor private producers would commit to a capital-intensive heavy oil project at current prices, whether in reliable Canada or less-reliable Venezuela. This is a problem as heavy social spending on the "Bolivarian Revolution" has sapped PDVSA's resources and crimped output. Venezuela needs its crude basket to average about $60 to balance its budget this year but it fetches about half that today.
Further development of Orinoco will have to wait for wounds to heal, too. Companies such as ConocoPhillips and ExxonMobil that took a risk there when oil prices crashed a decade ago are still seeking compensation for expropriated fields. Smaller companies may tackle less-challenging projects but these will do little to bolster Venezuela's oil revenue, which made up 93 per cent of exports last year. Venezuela's reserve potential is so massive that the majors will surely swallow their pride and return one day. But that will likely be too late to avert tough choices in Caracas.