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New oil order
(Kaieteur News) – Can the US-Venezuelan oil deal last? Second, if it holds, for how long can that be? A massive oil deal for 25% of Venezuela’s vast reserves executed in secret, what enduring power does it have? And, since it is celebrated as this best oil deal ever, there is no reason to conceal its terms and conditions. Why does it have to be kept a secret? What about it has to be kept hidden from approximately 28 million Venezuelans?
From the point of view of Guyana, a relatively new oil producer, this historic and supposedly matchless US-Venezuela oil deal represent mixed news. It will take some time before Venezuela can ramp up its daily production, and make its impact felt on world oil markets. Nevertheless, the supply side of the oil equation just changed, and not minimally. Its relationship to oil prices can be biting and lasting. The oil is heavy, will require some adjustments to process efficiently and economically. Then, the arithmetic is curious, to say the least. The US-Venezuela oil deal covers six times Guyana’s reserves. Though its quality is a consideration, the sheer volume of oil involved has the potential to reorder the entire oil equation.
The US Strategic Petroleum Reserve would have the comfort of a large spare tank close at hand. The Strait of Hormuz chokepoint just lost some of its teeth, its psychological edge. OPEC itself could move from OPEC+ to less than OPEC alone, even without any actual defection on Venezuela’s part. That power over world oil prices, through the delicate balancing act of calibrating supply to accommodate demand, at preconceived price levels and ranges, has just been dealt what amounts to a hard body blow. Lower oil prices, as engineered by the US, and an oil market that gives every impression of coming US domination, are sure to be felt in Guyana. More daily production would have to fall in place to maintain the level of deposits in Guyana’s Natural Resource Fund. There is, though, the increase in Guyana’s profit share from its own oil deal, heavily titled in ExxonMobil’s favor, which could be a cushion and dull negative price developments.
More daily oil production means a faster rate of depletion of an asset that does not renew itself, in the manner of forests. Since ExxonMobil, having been bitten sharply in Venezuela, has been hesitant to invest in the new and open Venezuela, its new project lineup for Guyana would have to be advanced. To keep its Guyana reserves steady, and to keep its now risk-free investment and guaranteed profits flowing. Four developments of extraordinary potential are set to be unlocked, with ExxonMobil, an American oil major, in the driver’s seat. After years of uncertainty and what amounted to a not so well-disguised hostage situation, the center of the oil world may have just shifted. From the angry and volatile Middle East region to this region.
The good news for Guyana is that it is positioned where expansive oil developments are slowly coming into focus. The concern that the leaders of this country should have is what consequences, could potentially cheaper oil have for the local economy and citizens. What should not elude the attention of citizens here is the manner in which rich national patrimony can be commandeered. No Guyanese should bury their head in the sand, in ostrich like fashion, so that they can pretend not to notice how the arms of national leaders can be twisted. Twisted so aggressively and so relentlessly, that they throw in the towel. This was what just occurred in Venezuela, which is right next door, and not in some distant, unfamiliar country. Regardless of the rich spins put on the US-Venezuela secret oil deal, the power of coercion was very much obvious.
Not only oil supply and oil markets have been interfered with politically, but national boundaries seemingly have no meaning anymore. Depending on the ambitions and whims of a more powerful world leader, new rules are implemented. There is dismissal of the sacred rights of citizens who used to be owners and controllers of their wealth. The US-Venezuela oil deal and reordering of the oil world reek of all that is obscene, even illegal.
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