The Slayer of Petrostates
If one person deserves the credit for chavismo's implosion, it's George Mitchell, a low-key Texas oil man you've probably never heard of.
Perhaps five years from now, if the MUD is wise and lucky, the dust of the economic crisis and coming adjustments will have settled, and Chavismo will have crawled back to the chiripero it sprang from.
Then, and only then – lest Mario Silva score some points for having us praise a gringo, and a Texan one, to boot– we should erect a memorial to the man who unwittingly, but with more success than anybody else, sowed the seeds of Chavismo’s downfall. I’m talking about the late George Mitchell, the father of hydraulic fracturing.
This Texas tycoon was a bit of a paradox. In Houston, a town brimming with swaggering oilmen, he had a famously humble disposition. Well into his 90’s he could still be seen going, in his wheelchair, to his office in a downtown Houston skyscraper. No one who ran into this amiable, frail old man him in the elevator of the JP Morgan Chase tower would suspect this guy’s tinkering had shattered kingdoms – those of traditional oil behemoths ExxonMobil, Chevron and BP, and literal kingdoms in the Middle East.
In the 1980’s, Mitchell got ahold of a bunch of unwanted land in suburban Fort Worth. The acreage was on top of a shale rock formation that Mitchell thought contained large quantities of natural gas. It wasn’t until the late 1990’s, on the verge of failure, that Mitchell’s company cracked the rock open with powerful jets of water, chemicals and sand, unleashing huge amounts of the natural gas.
In a few years, others followed suit. The technique first reversed a looming shortage of natural gas in the U.S., turning that country into a potential exporter. About five or six years ago, even as Hugo Chavez basked in the admiration of Oliver Stone, gringo wildcatters figured out how to tap these rocks for a surprisingly big amount of high-quality light crude.
The locha about this world-changing bounty dropped in late 2013 amid surging crude inventories and a price war still being led by an unblinking Saudi Arabia, which intends to drive the upstart U.S. wildcatters out of business by happily pumping away. In the grand chessboard opposing wily good old boy oilmen to OPEC’s only relevant member, the fall of Chavismo is just collateral damage.
One could say that no sane Venezuelan should cheer low oil prices. They, after all, create much suffering in a country that single-handedly depends on oil exports.
But I’d counter that most of the windfall from last decade was taxed at very high rates by corruption, waste and economic chaos. Very clearly in the wrong hands, high oil prices enabled not only the establishment of anti-growth policies, they directly led to a budding dictatorship that impinged on every right.
Besides, we’ve seen worse. $31 per barrel is still better than the $8 per barrel that in the late 1990’s helped seat Hugo Chavez in Miraflores. An OPEC optimist would hope that Saudi oil minister Ali Al-Naimi’s bet is right, that it will drive debt-laden American wildcatters into the ground, and that in a few years a democratic Venezuela will be ready to capture the upswing, especially if China returns to galloping growth.
Barring a big change in U.S. regulation that forbids fracking and the transportation of crude via rail, I wouldn’t pin my hopes on that. After watching the U.S. energy revolution first hand for a decade, and looking through the crystal ball of my West Coast neighborhood, where 2 out of 10 cars are plug-ins and half of the rest are hybrids, I fear $31 per barrel will look positively generous 15 years from now. The prophecy of Ahmed Yamani, the Saudi oil minister who famously quipped that the age of stone didn’t end because of a dearth of stones, is slowly becoming true.
That said, hopefully the oil age will still last a while and perhaps prices will rebound a little, helping rebuild a country where power doesn’t just belong to whoever wields the oil spigot. Where, lacking the incentives to go empire-building and saving the humankind, government focuses on putting stop signs and policing the streets. A country with a little bit of an oil tailwind, meaning perhaps better public education and lower taxes, but not a tailwind so strong that it will crush us.
So right in front of the Cuartel de la Montana, I propose erecting a bust of Mitchell. Next to one of OPEC founder Juan Pablo Perez Alfonso, our criollo Cassandra, who during the go-go years of the first oil boom correctly forecast that the country would be in ruins (and like Cassandra, nobody believed him.) Add a life-size marble statue of Johnny Walker’s walking man, and there you have an entire picture of the rise and fall of the Venezuelan petro-state that will be the delight of future generations.
Who will pay for it? Not $31 oil. Perhaps we go knock on the door of Roberto Rincon, a maracucho expatriate who seems to have made a killing from PdVSA shenanigans.
For Rincon is also a beneficiary of Mitchell’s contrarian vision. He has a multimillion dollar Palazzo that would make Scarface proud in the Houston suburb of The Woodlands. And it turns out the Woodlands is the brainchild of Mitchell, who in addition to drilling delved in urban planning, and dreamed of beauty and order in the midst of Houston’s raucous real estate laissez-faire. It would only be fair.
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