Is Hugo Chavez Hurting Himself By Siding With China?

Energy Outlook seems to think Hugo Chavez is, at least in the short run as well as possibly the longer term, only hurting himself by moving to change alliances to the Chinese.
The largest concentration of refineries configured to run Venezuelan crude is in the US Gulf Coast. In fact, a large portion of the Venezuelan crude sent to this country goes to supply PDVSA’s subsidiary, Citgo, which has one of the largest service station chains in the US. Diverting exports away from the US would cost Venezuela several times: in lower netbacks on crude sales due to higher freight costs to more distant markets, in larger discounts versus competing oil grades, and in reduced profitability at its US subsidiary, which would have to line up other supplies.

Rather than expecting a move by Mr. Chavez to nationalize US investments or cut off crude supplies to us, I continue to believe that the largest element of political risk involved for US investors in Venezuela’s oil industry lies in the prospect that our own government would take action to precipitate a crisis with Venezuela, in response to Mr. Chavez’s growing activism in Latin America. Only companies with broad and deep portfolios should be taking on these risks today.