Monday, August 16, 2004
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Hugo Chavez wins -- what now?
Hugo Chavez is declaring victory in the Venezuelan recall referendum with 58% of the vote. His opponents are declaring a "gigantic fraud."
Daniel Davies has a nice summary of Chavez's post-referendum conundrum over at Crooked Timber:
Davies' analysis leads to an interesting corrollary affecting the U.S. presidential election. Gas prices are one of the few economic indicators that voters care about deeply. If the Chavez result causes gas prices to fall, one has to assume it would benefit Bush and hurt Kerry.
Hugo Chavez providing a political boost to George W. Bush? We certainly do live in interesting times.
UPDATE: The Organization of American States and the Carter Center announced that, "their results agree with the preliminary results announced by the 'Electoral National Council' on the presidential recall referendum."posted by Dan on 08.16.04 at 11:44 AM
Don't be surprised if Putin supplies a boost to Bush as well. Putin can, if he wishes, eliminate tomorrow a lot of uncertainty surrounding the Yukos production subsidiary (sell it to Rosneft, most likely) that controls something like 1.4% of world oil output. This would slash the oil price by perhaps a few dollars/bbl.
Why would Putin do so? In contemporary as in soviet times, the Russian leadership tends to favor Republicans because they're much more comfortable in assessing what they view as Republican realpolitik than Democratic human-rights policies. Add to this the fact that Putin has a special hatred toward military dissenters (note how he treated the naval officer who blew the whistle on the navy's nuclear waste dumping-- the guy's still in prison after all these years)-- and I think it likely that Putin will do what he can to keep a (in his view) flaky, ambivalent US military dissenter called Kerry out of the White House.
Watch for the Yukos affair to be resolved in early September.posted by: lex on 08.16.04 at 11:44 AM [permalink]
Chavez would undoubtedly feel far more comfortable with a reelected Bush than with Kerry. Current White House tunes are an ideal background to the talk of the Bolivarian 'revolution'. The way Bush comes across in Latin America fits well with Chavez's rhetorical quest for greater 'autonomy', 'independence' and true Latin American integration. This is not exclusive of Chavez of course. Ask Brazil's Lula and Argentina's Kirchner who they'd like to see next year in DC.posted by: Matt on 08.16.04 at 11:44 AM [permalink]
i think that this is dissapointing, considering how chavez operates 8% over a majority isn't an unfeasable task by any stretch. i hope the fraud seriously gets looked into, though i'm not holding my breath.posted by: jason on 08.16.04 at 11:44 AM [permalink]
The Carter centre and the OAS just signed off on the referendum, so you should probably get rid of that prominent "Massive Fraud" headline.posted by: dsquared on 08.16.04 at 11:44 AM [permalink]
Putin is not likely to help Bush at a cost to his own position. I'm still a little confused by all the Yukos machinations, but its unlikely that Putin would change tacks just to oblige Bush if its costs him domestically.posted by: erg on 08.16.04 at 11:44 AM [permalink]
Oil prices are not going to come down due to a Chavez win because Venuzuela has had little influence on the price.posted by: Robert McClelland on 08.16.04 at 11:44 AM [permalink]
Massive fraud? Hard to argue. Jimmy Carter on the day before the referendum stated that he believed the voting procedures "will be much more satisfactory than those of 2000 in Florida."
I think you're missing the point: prices have been high in part because traders have been worried about potential future supply crunches, one of which could have been caused by turmoil in the wake of a Chavez loss.
Chavez's victory removes one area of uncertainty about near-term supply, which will ease prices.
Furthermore, in a market which appears to have almost no short-term excess production capacity, a producer as large as Venezuela certainly does have the power to affect prices.
bpposted by: Barry P. on 08.16.04 at 11:44 AM [permalink]
You guys are fools. The five year spot price for oil lsc pb was recently at $39 pb and the 10 year price at $35. Unlike some people, the market doesn't lie or fool itself. I don't think that the ten year price of oil is $35 even with increased investment because of Hugo Chavez or anything to do with him.
The price of oil may fall, but look for a bottom at about $40 or $41 dollars. If the market falls beneath that it will be because of long term changes in supply, demand, or expectations of market risks over the next decade in the middle-east.
Something like Iraq stabilizing into a stable democracy could affect that, but as for Chavez he can only bump up the price of oil from that trendline and not do much to sink it down. Likewise there's not much between here and November that Putin can do to drop the price of oil beneath $40, anything he can do pretty much increases it.
The market is reacting to long term demand, supply, and risk questions to put together the current pricing structure. We're seeing a long term shift in the pricing of the oil market here. I think people are still stuck on wondering when it's going to come down because of their experience in the late 90's when oil became ridiculously cheap. Well guess what, get over it. You're not likely to see that again in your lifetimes.posted by: oldman on 08.16.04 at 11:44 AM [permalink]
“UPDATE: The Organization of American States and the Carter Center announced that, "their results agree with the preliminary results announced by the 'Electoral National Council' on the presidential recall referendum."”
Hugo Chavez probably won fair and square. I have yet to see any serious evidence to indicate otherwise. But why should this surprise anyone? Juan (and Evita) Peron, Huey Long, and countless other left wing ideologues have persuaded voters to opt for populist nonsense. Many people lack the economic sophistication to understand that these politicians are bribing them with short term goodies which will severely damage their own economic situation in the long run. The democratic process does not guarantee that voters will not make foolish choices.posted by: David Thomson on 08.16.04 at 11:44 AM [permalink]
Many people lack the economic sophistication to understand that these politicians are bribing them with short term goodies which will severely damage their own economic situation in the long run. The democratic process does not guarantee that voters will not make foolish choices."
posted by: Carl on 08.16.04 at 11:44 AM [permalink]
"Reagan proved deficits don't matter." -- Dick Cheney
Dick Cheney should have more cautiously said that “Reagan proved that modest deficits don’t matter.”
Human beings run deficits all the time. Ask anyone who purchases a home on credit. Heck, our economic system is premised upon deficit spending of one sort or another. The real question is whether the deficits are manageable. Is there enough money being generated to cover the deficits? The Reagan revolution did wonderful things for our national economy---so he definitely earns our gratitude.posted by: David Thomson on 08.16.04 at 11:44 AM [permalink]
Putin is not likely to help Bush at a cost to his own position. I'm still a little confused by all the Yukos machinations, but its unlikely that Putin would change tacks just to oblige Bush if its costs him domestically.
In Putin's Russia, such costs are trivial. There is no longer any effective opposition.
Neither is there any prospect of such in the next few years. The liberals are as always deeply divided and spend more time squabbling with each other than they do speaking to the non-yuppie 93% of the population that lives outside of Moscow and that cares for little more than receiving pension payments each month.
The only conceivable opposition to Putin would come from the red-brown, or communist-nationalist-zenophobic crowd, who of course would be delighted to see Yukos chopped up and sold off to state-owned Rosneft.
As to oldman's points, I agree that we could be seeing a longer-term change in the oil price curve, but this has to do with a lack of investment in global production facilities during the last 10-15 years. It would of course take some time to remedy but there's no shortage of capital available to the oil majors for such investment, and if-- touch wood-- Russia finally gets some intelligent PSA legislation that would facilitate such investment we may soon see the $30B or so backlog of western oil investment projects in Russia (finally) start to go live. That could substantially increase production 5-15 years out.
Oldman, out of curiosity, have you bought oil futures? Put any of your own money on the line?
David Thomson wrote: "The democratic process does not guarantee that voters will not make foolish choices."
Kind of reminds me of 1970 when Henry Kissinger once said: "The issues are much too important for the Chilean voters to be left to decide for themselves."posted by: zzi on 08.16.04 at 11:44 AM [permalink]
"The democratic process does not guarantee that voters will not make foolish choices."
But --- but -- but -- we were told that democracy in Iraq was guaranteed to not bring Shia theocrats to power ..
Certainly, however the Chavez bit turned out, it would have been a benefit. Either way that fell out, prices would have been dropping.
The only question was, would it be in time to help Bush's re-election. Chavez remaming in power seems of the two, the shorter curve to price stability.
Something all this shows us though is how stupid we're being about domestic drilling.
EIA/DOE reports that Venezuela is only responsible for around 14% of our oil imports. Look at the unarguable effect that 14% being questionable, is having on our economy.
Given that factor, are we still going to hear arguments from the usual suspects that ANWR,(Which wuld reduce our imports by around 25%) which as well as other locations, was such a bad idea?posted by: Bithead on 08.16.04 at 11:44 AM [permalink]
Seems like the opposition's accepting the results. Perhaps they should spend a bit more time figuring out why a solid majority of that vast majority of Venezuelans who are piss-poor are willing to vote for an incompetent leftist moron....
If the opposition does get around to thinking and co-opting, instead of marching and screaming, then short-term, oil prices will continue to fall, and Chavez's re-election will end up ensuring Bush's re-election. Isn't politics funny?
oil prices are not dropping.
Crude futures up $.70 today. We will see $50 oil very, very soon.posted by: mickslam on 08.16.04 at 11:44 AM [permalink]
Chavez would undoubtedly feel far more comfortable with a reelected Bush than with Kerry. ...The way Bush comes across in Latin America fits well with Chavez's rhetorical quest .... This is not exclusive of Chavez of course. Ask Brazil's Lula and Argentina's Kirchner who they'd like to see next year in DC.Posted by Matt
Mike, you are right about the Bush administration's (hardly concealed and pretty incompetent) role in the coup and in backing the opposition. However that does not necessarily invalidate Matt's earlier point.
You all have a problem with how Chavez operates when his political opponents try to overthrow a democratically elected government. You people need some serious, serious therapy.posted by: Soul on 08.16.04 at 11:44 AM [permalink]
Oil is still going up.
Nice call bitheadposted by: mickslam on 08.16.04 at 11:44 AM [permalink]
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