Venezuelan president accuse the US of causing oil prices to fall, starting an ‘oil war’

Oil tankers are loaded with crude in Corpus Christi, Texas, in December. The area has prospered in recent years due to the energy boom in the Eagle Ford shale formation, but falling prices could test that. EDDIE SEAL FOR THE WALL STREET JOURNAL

“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” said Venezuelan President Nicolas Maduro in a live television speech last week. “It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse. It’s the United States that has started the war,” Maduro said, and its strategy was to flood the market with shale oil and collapse the price.

Russia’s President Vladimir Putin agrees. “We all see the lowering of oil prices,” he said recently. “There’s lots of talk about what’s causing it. Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela? It could.” The evil Americans are at it again. They’re fiendishly clever, you know.

We are hearing this kind of talk a lot these days, especially from countries that have been hit hard by the crash in the price of oil. Last Thursday, Brent crude hit $55 per barrel, precisely half the price it was selling for last June. The Obama administration’s announcement last week that it is preparing to allow the export of some U.S. oil to foreign markets may send it even lower (U.S. crude oil exports have been banned since 1973).

Countries that depend very heavily on oil exports to make ends meet are obviously going to get hurt when the oil price collapses. President Putin, who has let Russia get itself into a position where more than half its budget revenue comes from oil and gas sales (some estimates go as high as 80 percent) is in deep trouble; the value of the ruble has halved, and the economy has already slipped into recession.

Venezuela, where government spending is certainly more than 50 percent dependent on oil exports, is in even deeper trouble and, like Putin in Russia, President Maduro of Venezuela sees this as the result of an American plot. Various commentators in the West have taken up the chorus, and the conspiracy theory is taking root all over the developing world…

This is absurd to any person with two brain cells to rub together: the fall oil prices is hurting the US (and Canada) too.  The high cost of extracting oil from shale and from the oil sands cannot compete with the low cost of the Gulf States.

Headline from this morning at The Wall Street Journal: Plunging Oil Prices Test Texas’ Economic Boom — Downturn Has Many Wondering How Lone Star State Will Weather a Bust: “Now that oil prices have plunged nearly 51% from their June peak to $52.69 a barrel, some Texans sobered by memories of past energy busts are bracing for a fall. The argument among economists and business leaders isn’t whether the state will be hurt, but how badly.”

Meanwhile, prices continue to fall, below the $50 mark:“The oil glut is likely to increase, said Morgan Stanley , as new production will also continue to ramp up at a number of fields in West Africa, Brazil, the U.S. and Canada. Many of these projects were well under way before prices fell.”

  • What a bunch of fools. And these clowns are in charge of countries.

    Sorry fools. The law of supply and demand is the culprit. You can try to manipulate this law. And that manipulation may work for a while. But at some point the law wins out.

    OPEC’s manipulation (reduction of production to raise prices) of the worlds market only worked as long as world oil supply was not sufficient to meet demand. As the US and others figured out how to frack, non-OPEC supplies filled the demand “vacuum”. And the “law of supply and demand” lowered world pricing.

    The collectivist, Marxist, socialist governments are collectively just a bunch of economic baboons. Sorry guys. At some point you have to compete. If you don’t want to sell your oil at $50 a barrel too bad. Keep it. If you are lucky maybe the demand will rise enough to make it more valuable. In the mean time get by on less.

    Oh, and by the way. If you wait long enough the free market may just find a less expensive alternative than oil. Then you will be left with a bunch of even less valuable oil.

    Sorry. At some level, even you collectivist, Marxist, socialist fools have to compete.

  • Norman_In_New_York

    My heart bleeds for these a-holes. The law of supply and demand is described in every economics textbook, including the high school variety.

  • Xavier

    Could it be an agreement between the U.S. and Saudi Arabia to punish Iran and affect the economies of Russia and Venezuela?

    Why could anyone think the administration would want to punish Iran or Venezuela? Why would anyone think the administration understands global economics?

    • Frau Katze

      I think such a “plot” is way beyond Kerry or Obama.

      • Exile1981

        It’s more likely that Obama asked the Saudis to increase production to hurt the US than it is that he would want to hurt Iran or Veni.

  • Jay Currie

    I fondly hope that the Americans are bright enough to team up with the Saudis to destroy the economies of Russia, Iran and incidentally, Venezula – nasty bunch at the best of times. But I am afraid I don’t think that Obama and Kerry are anywhere close to that bright.

    Yup, it’s Mr. Market doing what he does best – clearing.

    • Frau Katze

      Latest theories are saying simple oversupply.

      • Exile1981

        My personal theory is all the Opec nations are cheating. they all agreed as a group to decrease production to push up prices then each turned around and started dumping oil because they need the cash badly.

        • David Murrell

          Yes, what will happened is, after 6 months or so, all of the high-cost oil will have to shut down, causing oil prices to slowly rise again. Things may be a tad dicey in Venezuela. President Maduro — who I do not think has two brain cells — may have some difficulty keeping his country together. I will be losing no sleep worrying about this track-suited fruitcake.

          • Jay Currie

            The thing about Venezuela is that it has very heavy oil. There is the distinct possibility that if they stop pumping they will not be able to restart without huge, up front, costs. So they may well keep pumping at a loss. It is really their only source of cash. (Yes, I know, losing $30 a barrel is hardly a long range strategy; but they are socialists so that is unlikely to occur to them.)

    • minuteman

      I’d rather they team up with Russia and Destroy Saudi Arabia (assuming the need to team up with anybody. Putin may be an enemy now, but that could change. Saudi Arabia is an existential threat. It is Saudi money that is bankrolling the construction of mosques and Islamic schools all over the western world which are training the people who will cut our throats in our streets.

    • Pete_Brewster

      The House of Saud finally noticed that their clients in the US and EU would have trouble staying in power if their economies didn’t improve—which was not going to happen at oil prices reflecting cost of ethical drilling. That and Riyadh’s enemies from Mosul to Moscow were making out like bandits. So they’ve been pumping like mad.

      Maduro is collateral damage. Nobody who counts for much gives a damn what becomes of him.

  • It’s a usual dictatorship tactic. One needs a bogey-man when one’s own policies fail.

    • Exile1981

      Obama does the same sort of thing.

      • It’s his go-to guy.

        (SEE: Bush, Canada, Israel, anti-Mohammad videos no one has seen, Cthulhu)

    • Conservative American Voter

      0bola has Kim Jung Un…

      • And Bush.

        And Canada.

        And Israel.

        And maybe the Chupacabra.

        • Conservative American Voter

          especially Chupacabra…

          • Damn the chupacabra!

          • Conservative American Voter

            …and all his foul offspring…they remind me of chihuahuas…vicious, evil chihuahuas…that sell bad tacos….

          • Why would anyone make bad tacos?

            It’s just not right.

          • Conservative American Voter

            taco profiteers rings a bell…

          • What people will do for money….

  • Hard Little Machine

    Die screaming Maduro you piece of shit and that stupid fucking 80’s tracksuit you wear.

  • Mickey Oberman

    Such wel deserved agony is enjoyable to observe.