The glut around the corner?

CNN is reporting that other countries are joining Saudi Arabia and raising crude production in light of the prolongued conflict in Libya. The list, as you can fathom, does not include Venezuela.

The money quote is from Michael Wittner, head of oil research at Société Générale: “The oil markets are pricing in an extended Libyan shutdown of crude exports”

So…if the Libyan civil war ends soon and its oil exports rise back to their normal levels, will we be looking at a glut in the oil market? It’s not like the Nigerians and the Kuwaitis are going to shut down their oil wells again all that easily.

And if this materializes and the price of oil plummets, what will happen to Hugo Chávez’s chances of getting re-elected? Is this turmoil good or bad for the opposition?

The consensus seems to be that the events in the Middle East and North Africa are a plus for non-Middle East petro-goons.

I’m not so sure. If years of experience have taught us anything, it’s that volatility breeds discontent.And at this point, who knows what the price of oil is going to be doing. Let’s remember that in 1990, CAP in Venezuela was enjoying the windfall related to the invasion of Kuwait. A year and a half later, when oil prices had come back to earth, he was the most unpopular president ever, battling coups and impeachment.

We’ll have to wait and see how the government – and Venezuelan society – ride this roller coaster.

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