Tuesday, October 30, 2007

Venezula's Magic Number

Heard it on NPR.

Venezula's "magic number" is $55 a barrel.

The magic number being moment that the price of oil drops to a point where Hugo Chavez starts bleeding deficits. Or a better way of describing is as the figure upon which an oil producing nation places its budget upon a house of cards.

Being that ten years ago $12 a barrel was the expected real price you'd see a barrel of oil at consistently Venezula has lost no time ratcheting up their budgets with oil revenues. I've been wrong for a long time but the longer oil stays above $40 a barrel the more likely new technologies are going to take hold that push it back below $40 a barrel (all biofuels technologies aside).

I suppose Chavez is gambling on petroleum lasting another hundred years as the dominant motor fuel. For some reason I don't feel bad at all betting against Chavez.

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