An Agenda for a New Oil Policy

September 25, 2007

With the collapse of oil prices between 1981 and 1983, Venezuela's revenue crisis could not be resolved by demanding a higher share of profits from the oil companies, as in the past. At first, the crisis was called "Ia noche post-petrolera," the post-petroleum night. Today that phrase has been replaced with "Ia noche post-rentista," the post-rentier night. The change reflects the realization that the crisis has not been sparked, as long expected, by the draining of the oil fields themselves, but by changes in the global economy. A new policy will need to balance the nation's inter- est in extracting a rent from foreign capital, with the need to keep the industry competitive with the private transnationals. Oil revenues should be used not so much as a source of capital to "sow" in other branches of the economy, but to make the industry itself a motor of national industrial development. In a world where international bankers extract extraordinary interest pay- ments from Third World debtors, Venezuela has every right to continue collecting a rent for First-World access to its considerable hydrocarbon reserves. A broader strategy, however, is needed. Among the major political forces, Causa R seems to have most clearly grasped the distinction between rent and profit in its approach to oil policy. In its official pro- gram, it argues: Today it is a recognized fact that [oil] income springs from two sources of a distinctive nature: petroleum as a source of rent and petroleum as a productive activity. The first depends on the monopoly that the state exercises over a natural resource in great demand which permits the obtaining of a remuneration for use of it. The second depends upon the capital and work applied to produc- tion.' Causa R's program calls for the state oil company, Petroleos de Venezuela (PDVSA), to develop "strategic complementary associations that are required by finan- cial, technological and market necessities. In this latter respect it is necessary to open possibilities not only for foreign but private national investment." Regarding internal market prices, Causa R asserts, "There is no doubt that these must be in relation to the cost of pro- duction plus a normal profit. In this sense, a modest increase in the prices of combustibles is necessary." These positions contrast notably with the traditional leftist and populist calls for no increases in prices and rejection of any role for private or foreign capital in "basic industries."2 But Causa R's break with the populist past does not mean it embraces neoliberalism. The partylike Presi- dent Rafael Calderaadvocates tying pricing to debt negotiations, and it opposes renouncing state owner- ship of natural resources or returning to a system of concessions. It also rejects the IMF demand to raise domestic gas prices to international levels. "In all cases," it claims, "any rational increase of prices must be to fortify production itself and not to artificially sup- plement fiscal spending." The party also calls for taking "social impact" into account in determining prices.3 C aldera seems to share many of Causa R's views, but he must avoid the populist temptation to resolve the enormous gap between the projected budget for 1994 and anticipated revenues by taxing PDVSA more heavily. He must deal realistically with PDVSA's need to enter into joint operating agreements with foreign companies. No modern multinational corporation state-owned or privatecan operate effectively in the world today without such associations that bring need- ed capital and technology. Most importantly, Venezuela must maintain propri- etary control over the oil in its soil. This can be an effective lever in negotiating favorable operating agreements and joint ventures for PDVSA with foreign and domestic capital. It also assures the country a steady source of income, despite falling prices and higher costs of production.

Tags: Venezuela, oil populism, politics

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