Palast, Greg, The Progressive
You'd think George Bush would get down on his knees and kiss Hugo Chavez's behind. Not only has Chavez delivered cheap oil to the Bronx and other poor communities in the United States. And not only did he offer to bring aid to the victims of Katrina. In my interview with the president of Venezuela on March 28, he made Bush the following astonishing offer: Chavez would drop the price of oil to $50 a barrel, "not too high, a fair price," he said--a third less than the $75 a barrel for oil recently posted on the spot market. That would bring down the price at the pump by about a buck, from $3 to $2 a gallon.
But our President has basically told Chavez to take his cheaper oil and stick it up his pipeline. Before I explain why Bush has done so, let me explain why Chavez has the power to pull it off and the method in the seeming madness of his "take-my-oil-please!" deal.
Venezuela, Chavez told me, has more oil than Saudi Arabia. A nutty boast? Not by a long shot. In fact, his surprising claim comes from a most surprising source: the U.S. Department of Energy. In an internal report, the DOE estimates that Venezuela has five times the Saudis' reserves.
However, most of Venezuela's mega-horde of crude is in the form of "extra-heavy" oil--liquid asphalt--which is ghastly expensive to pull up and refine, Oil has to sell above $30 a barrel to make the investment in extra-heavy oil worthwhile. A big dip in oil's price--and, after all, oil cost only $18 a barrel six years ago--would bankrupt heavy-oil investors. Hence Chavez's offer: Drop the price to $50--and keep it there. That would guarantee Venezuela's investment in heavy oil.
But the ascendance of Venezuela within OPEC necessarily means the decline of the power of the House of Saud. And the Bush family wouldn't like that one bit. It comes down to "petro-dollars." When George W. ferried then-Crown Prince (now King) Abdullah of Saudi Arabia around the Crawford ranch in a golf cart it wasn't because America needs Arabian oil. The Saudis will always sell us their petroleum. What Bush needs is Saudi petro-dollars. Saudi Arabia has, over the past three decades, kindly recycled the cash sucked from the wallets of American SUV owners and sent much of the loot right back to New York to buy U.S. Treasury bills and other U.S. assets.
The Gulf potentates understand that in return for lending the U.S. Treasury the cash to fund George Bush's $2 trillion rise in the nation's debt, they receive protection in return. They lend us petro-dollars, we lend them the 82nd Airborne.
Chavez would put an end to all that. He'll sell us oil relatively cheaply--but intends to keep the petrodollars in Latin America. Recently, Chavez withdrew $20 billion from the U.S. Federal Reserve and, at the same time, lent or committed a like sum to Argentina, Ecuador, and other Latin American nations.
Chavez, notes The Wall Street Journal, has become a "tropical IMF." And indeed, as the Venezuelan president told me, he wants to abolish the Washington-based International Monetary Fund, with its brutal free-market diktats, and replace it with an "International Humanitarian Fund," an IHF, or more accurately, an International Hugo Fund. In addition, Chavez wants OPEC to officially recognize Venezuela as the cartel's reserve leader, which neither the Saudis nor Bush will take kindly to.
Politically, Venezuela is torn in two. Chavez's "Bolivarian Revolution," a close replica of Franklin Roosevelt's New Deal--a progressive income tax, public works, social security, cheap electricity--makes him wildly popular with the poor. And most Venezuelans are poor. His critics, a four-centuries' old white elite, unused to sharing oil wealth, portray him as a Castro-hugging anti-Christ.
Chavez's government, which used to brush off these critics, has turned aggressive on them. I challenged Chavez several times over charges brought against Sumate, his main opposition group. …