OPEC AND VENEZUELA

An interesting story on the political dynamics of OPEC from today’s (sorry, no specific link, I am reading the print version). At the upcoming meeting in Vienna, OPEC is expected to choose Alvaro Silva, Venezuela’s current energy minister, as secretary general. The current secretary general, Ali Rodriguez, is Venezuelan, and Silva will serve out the remainder of Rodriguez’s term. Hugo Chavez recalled Rodriguez after the failed coup against his regime to head PDVSA, the nationalized Venezuelan oil company.

This move is seen as a gambit to keep Venezuela from increasing its production; as I mentioned in a post last week, Venezuela shares Saudi Arabia’s need for revenue from oil sales, and in the face of lagging demand worldwide, cheating on the production qoutas and increasing production may be the best way to achieve that. OPEC seems to believe that appointing Silva will undermine Venezuela’s incentives to break with the cartel and cheat on its production quota. Silva is infamously anti-market, and opposed opening Venezuela’s oil industry to foreign capital in the 1990s.