The Oil Numbers and the A Priori Trap


You should read this.

Honestly, you should.


Because, in Venezuela, few numbers are either as important or as opaque as PDVSA’s total production and exports. It’s a technical topic, not for the faint of heart, and one shrouded in so many layers of obfuscation, propaganda and plain old lying that even people who get paid a full-time salary to keep track of the evidence tend to shrug their shoulders and qualify their conclusions heavily.

In opposition circles, there’s a certain tendency – and I wave a white flag from the start here cuz I know I’ve done it – to assume that PDVSA is definitely, by definition, exporting far, far less oil than they say, and the number is always dropping. Fast.

It’s a kind of a priori trap: a tendency to assume that whatever Ramírez says must necessarily be wildly overstated, prior to and independent of any evidence on the matter. The fact that PDVSA’s export figures are independently audited simply falls out of the picture.

Setty does not, alas, have the definitive answer to this inscrutable puzzle. What he does bring to the table, though, is a keen sense of the a priori trap, and a determination not to fall into it. It’s the kind of skeptical stance that allows you to see that, against all odds, OPEC’s widely-considered-brutal-to-Venezuela production figures have actually been trending up, while it’s PDVSA’s self-reported exports that are trending down. Crazy stuff.

So yes, read it.

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  1. I hate to participate in this debate. When there are far more knowledgeable people than me opining, and they can’t in, good faith, reach a consensus, I know I’m out of my depth.

    So I approach this simply from the perspective of a citizen who wants to be informed. Like if I was a two-year old. A very curious two-year old.

    So before I fall for the good people at Inspectorate, here’s a question for them: how do we know that the figure for lading of oil at Venezuelan ports is not including the domestic market?

    Case in point: A tanker is loaded in Maracaibo, it counts as an export. The crude there is taken to Curacao, or to Hovensa, and made into gasoline. The gasoline comes back to Venezuela to satisfy the internal market. Is it then subtracted? Or is that counted as an export?

    • Yup, this is the kind of debate where angels fear to tread.

      One thing I liked about Setty’s write-up is precisely that it gives you a good sense of the complexities involved, and gives grounds for humility on grand pronouncements.

      Whenever you hear someone grandly proclaim that “PDVSA says they export X barrels a day but everybody knows the real number is Y…” you can be pretty certain you’re talking to a charlatan.

      That said, it would be great if somebody would look through this re-importation racket in detail…

  2. First, thanks very much for the link, Quico.

    JC: The monthly reports are supposed to show everything that enters or leaves the country. So if oil goes to Curacao and gasoline comes back, that should count as a crude export and product import. As I said in my post, it’s possible that the oil ministry doesn’t give report all the imports to Inspectorate. But this is the one hole I see in the system. And it’s hard to believe that just one hole would be big enough to account for the difference between the OPEC number and the Inspectorate number — hundreds of thousands of barrels a day.

    Does that make sense?

    • Makes perfect sense. However, it seems as though you think the Inspectorate numbers are reliable, and yet you stop short of endorsing them fully. I don’t understand why – or perhaps that’s not a correct appraisal of your position on the topic.

  3. I’m on the ignoramus side on this one, since I can’t tell a pint of petrol from a pint of marmite (Hmm… Maaarmite…). Notwithstanding, I’m of the ignoramus kind that doesn’t go around looking at his cristal balls and predicting we export 1,8 million barrels a day or what have you. The only measurement I vouch for is the other part of my anatomy, over my cristal balls. So I’ll let the other pundits take over the pissing contest on this one.
    My question is -and feel free not to answer it if it’s completely ludicrous-, isn’t it important to take into account how many of those barrels a day are being given away, erm, sorry, traded, for “Cuban technology” (oximoron’s on me) or Ecuadorean ___ (*whatever it is they’re giving us; and please, oh please, don’t tell me they gave us singer “Delfin” as part of the deal… Call him off, and we’ll TRIPLE our offer!*).
    I mean, Setty’s stats roughly ballpark production betwix 2 and 2,6 mill, right?
    And my crystal balls tell me we give away… What? A mill?
    Ain’t that important or am I barking up the wrong tree?

    • It’s not the wrong tree at all: this is what Asdrubal Oliveros de Ecoanalítica keeps going on and on about.

      It’s the barrels you actually get paid for that count.

      With at least *some* of the barrels going to China supposedly going for $5 a pop – or with exotic financing terms that mean they’re effectively swapped for Chinese imports rather than cash – the fiscal impact of any given oil barrel pumped out of the ground is highly uncertain.

      • So what are the chances of a different government shaking off previous agreements? Does this mean that anybody elected in 2012 has his hands tied and *must* keep on giving away barrel after barrel for almost free?
        What are the chances of faulting payment?
        Can we, like some countries who tell the IMF to piss off, simply state any debt contracted by Chávez, implying we have to give away barrels till 2020, is waived?
        I mean: Com’mon, China, you signed a deal with a madman. If African dictators’ debt is often waived after they’re ousted, I’d like to know what are the probabilities of us being able to sell 100% of those barrels at full market price in the post-Chávez era.

        • It’s an intriguing question. I have to assume that if you default on a long-term supply agreement with China, China pretty much has to fuck you for the same reason that Tony Soprano doesn’t really have a choice but to break your legs if you don’t pay your protection money: “pour encourager les autres…”

        • Not really understanding your point. What, explain to the chinese that Chávez violated souvernity?
          “Artículo 25.
          Todo acto dictado en ejercicio del Poder Público que viole o menoscabe los deberes garantizados por esta Constitución y la ley es nulo, y los funcionarios públicos y funcionarias públicas que lo ordenen o ejecuten incurren en responsabilidad penal, civil y administrativa, según los casos, sin que les sirva de excusa órdenes superiores”.
          My exemple is -though it’s kind of foggy and I haven’t time to look it up- wasn’t there an African dictator who’s huge external debt was waived my the IMF because it wasn’t fair for the people to pay for the guy’s wasting of national resources?
          Apart from that and arguing Chávez blew it all on an arms race or what have you, I really don’t see how we could weasel out of a confrontation with China. And remember: they all know karate, over there…

        • What I meant to say is, that future administrations will be well within their rights to not recognise deals done by Chavez, for the simple reason that said deals were not made according to regulations in our legislation, but rather were whimsical, unilateral decisions made by the caudillo.

  4. I have a question: How unusual is it for such critical information to be the subject of such uncertainty? What’s with all the opacity and intrigue?

    • Most OPEC countries exaggerate their reserves to some degree, as that gives them a higher output quota under the group’s agreements. Production data is not usually controversial. However, Iran and Venezuela are unusual. They are major oil producers that see themselves as being outside U.S. hegemony, or indeed in a struggle against it. Some of the outside estimators talk to, for example, ex-PDVSA managers who may not give the most unbiased information. Some of the outside estimators have excellent oilfield sources. Some rely on shipping data. It’s a mess of guesswork, and nobody can see the whole elephant. It’s quite irritating, especially in a country with constitutional guarantees of free information.

  5. Let me clarify: I’ve always assumed that the confusion was deliberate, to cover up a mismatch between reality and the revolution’s PR needs. Are there other possible explanations?

    • The other possible explanation is that heady cocktail of paranoia and incompetence that runs so deep through the veins of the revolution, Lucia…

  6. a more pressing problem that i would like to see discussed here is how to stop the government from issuing more IOU’s or bonds!

    today PDVSA put some 3 billion (millardos?) in notes… can we stop the government from bankrupting the next president in 2012?

    how much in bonos has this government floated and who owns them? here is a graphic that many venezuelans find shockingonce they know these things actually exist.

  7. Are we talking about a coverup to hide an ugly economic reality that would upset the public and implicate government ineptitude? Or are we talking about a coverup to hide government corruption? Or something else?

  8. The saddest part, is the damage, most times irreparable caused to the oil fields.

    The last 10 years of La NUEVA PDVSA are going to come down on history as the worst period of destruction of the nation.

    We wasted the income somehow realized, we failed to realize huge additional revenues due to falling production levels and poor commercial strategy based in political goals and saqueo, we are allowing hard-to-calculate underground asset destruction-and incurred a horrible waste of Human Capital post 2002.

    Well done, así es que se gobierna!!!

    …And the opposition fighting small battles on the Asamblea nacional and sharpening their knives to fight among themselves for a Presidential nomination in two years. Really! Que bolas.

    y entonces, donde estan los reales? MCM dixit (Quoting almost forgoten LHC)


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