Chavez' Threats Would Hurt Venezuela, Expert Says (2/17/2008)

Threats by Venezuelan President Hugo Chavez to cut off his country's oil exports to the United States would be a foolish move on his part and would do far more harm to his country than to America, says a Texas A&M University economics professor who has studied world energy and oil prices for 30 years.

Prof. John Moroney believes the threats - typical of Chavez - would hurt the people of Venezuela more than damage the U.S. economy.

"He's a strong talker and always has been," Moroney, whose book on oil, Power Struggle: World Energy in the 21st Century, is scheduled for release later this year, says of Chavez.

"But his threats to stop exports to the United States would severely damage his country's economy. Venezuela ships about 1.3 million barrels of oil a day to the United States. It is 'heavy' oil that is expensive to refine, and we are their biggest customer, by far.

"We import about 13 million barrels a day, so his supplies would account for about 10 percent of that total. We could easily make up the difference with our strategic petroleum reserves, which total about 700 million barrels and can be released immediately.

"So the bottom line is, he'd be shooting himself in the foot."

Chavez' threats have made the price of oil rise in the past week.

Oil has gone up about $6 a barrel this week and is creeping to the $90-a-barrel range. Exxon Mobil, Venezuela's prime U.S. contractor for oil, has challenged several moves by Chavez in international courts recently, which has also made prices rise.

"If Chavez stopped his flow of oil to the U.S., it would be only mildly disruptive to our economy," Moroney adds.

"But it would no doubt hurt his country more. Almost all of Venezuela's social programs are funded by their sale of oil, and since we are his biggest buyer, it makes no sense for him to do such a move.

"But he has a history of talking big and making threats. No one seems to know what he will do next."

Note: This story has been adapted from a news release issued by Texas A&M University

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