”Venezuela Moves to Nationalize its Oil Industry”

Latin America’s shift from the Western sphere of influence and toward an independent path is a major current of the recent years. Venezuela, the world’s fifth largest oil producer, has spearheaded this change by exploiting soaring global oil prices in order to pursue a “Bolivarian” economic model detached from the Washington Consensus.

Venezuelan President Hugo Chavez’s power and vision for a united South America depends on oil, which accounts for half of state revenues and about one-third of G.D.P. Caracas, however, has attempted to balance any potential liability by shrewdly positioning itself as a pivotal player in the global energy market. Increasing revenues have translated into political influence that allows Chavez to undermine decades of Western-mandated neoliberal reforms and begin to effectively nationalize the Venezuelan oil industry.

Big Oil’s reaction to this turn toward nationalization is a mixture of caution and optimism. Royal Dutch Shell C.E.O. Jeroen van der Veer labeled actions such as Chavez’s as a “new reality” and stated, “The higher the oil and gas price is, the more national thinking you get. In the end, governments are always the boss.” Speaking about the situation in Venezuela, Total C.E.O. Thierry Desmarest summed up the hopes of his counterparts in the industry by saying, “the rules of the game have been changed several times and in quite a brutal manner. Let’s hope reason will triumph.”

Nevertheless, the decision to nationalize the energy sector made by Chavez and Bolivian President Evo Morales with his country’s gas industry is not without risk. As Caracas imposes its will on foreign companies, its newfound political power and economic autonomy is contingent on global oil prices remaining high. While the political and material realities of the 21st century make a return to the days of cheap oil highly unlikely, if not impossible, Chavez would be wise not to burn every bridge to the West.

A thorough analysis at Power and Interest News Report