Towards the end of 1980, oil of optimum grade such as Arabian Light was being sold at US$ 36 per barrel. By the end of 1998, its price had fallen to US$ 12.20. The latter is equivalent to US$ 6.50 in 1980 US dollar terms, and represents only 18% of its value in 1980. This would seem to imply that whatever the strategy was that OPEC used to defend its oil was simply dead wrong.
This situation was so disastrous that at the end of 1998 the only alternatives that were ventilated publicly were either to violently increase production capacity or to simply sell or privatize the entire industry.
To limit oneself to the simple increase in production capacity would be to repeat the same errors that were committed with the other raw materials and natural non-renewable resources. It would mean to resign oneself to receiving the marginal contribution that results from being the sector’s low cost producer. It is sad that a country that has been so blessed with a valuable resource such as oil has to adopt a model that, at the end of the day, would let it to sell it at the variable cost of production. Something like receiving a valuable family inheritance and then turning around and selling it for what it costs to wrap it and ship it to the buyer.
In the same vein, the outright privatization of the oil sector would eliminate all possibility of geopolitic negotiation and the only thing we would receive as a going away present would be the resources to solve the existential problems of an entire generation of Venezuelans that have, for the last 20 years, not been able to decide if they were coming or going and that lived in a sort of Limbo State in the duty free zone of our international airport.
Today, when OPEC, for well know reasons (albeit not well recognized reasons) has received a new lease on life, it would be naughty not to wish it success in taking advantage of this second wind to build itself into a solid organization capable of facing the new challenges. If it fails, this will surely be its last breath. This is why I wish to share with you what I would consider the OPEC I want.
The OPEC I want would be able to win the confidence of all of its members in order to consolidate in one single block all the resources necessary to really defend it oil. These resources go far and beyond the simple turning of the tap.
The OPEC I want would be one that, upon observing how consumer nations have usurped the value of oil by increasing taxes (the UK, for example, increased taxes from 85% in 1980 to 456% ad valorem in 1998), would humbly accept the fact that they have lost the battle to an able opponent, but is now regrouping in order to win the war.
The OPEC I want would train the world’s100 best environmentalists in order to insure that, even though it shares the conviction and responsibility of taking care of our fragile world, the costs of defending the latter would not be laid squarely and unjustly on oil’s shoulders and that the environmentalist’s arguments will not be used for other hypocritical ends.
The OPEC I want would train the world’s 100 best experts in international commerce who would help avoid measures like direct subsidies for carbon as well as taxes that are aimed directly at oil and not at other sources of energy and that are evidently discriminatory and therefore not permitted under the norms established by the World Trade Organization.
The OPEC I want would train the world’s 1000 best scientists who would work in the world’s best laboratories and study, research and develop new uses for oil in order to minimize pollution or maximize added value as well as alternate sources of energy that could be used in the future.
The OPEC I want would not recognize the rights to intellectual property, brands and patents that, like a rabbit pulled out of a hat, generate income for the countries that own these rights which are definitely renewable, while the income obtained from the sale of a non-renewable natural resource such as oil is simultaneously being treated in a discriminatory fashion.
The OPEC I want simply would not allow a company to abscond with a hefty portion of the value of oil because it has formulated an additive that (supposedly) permits gasoline to be less polluting and based on a process that has dubiously been patented.
The OPEC I want would train the best image and marketing advisors in order to insure that the world’s public opinion does not continuously receive distorted information about OPEC and its members.
The OPEC I want would be staffed with the best team of diplomats and negotiators that would insure adequate representation at all international forums.
The OPEC I want would not allow gas and other sources of energy who’s values are not set under the OPEC umbrella to be introduced into the market like Trojan horses in order to compete with oil.
The OPEC I want knows that it counts with other resources other than oil to defend itself. The mere addition of all its international purchasing power would allow it to receive better treatment by imposing uniform special duties on all those who discriminate against oil.
The OPEC I want would not be formed by managers that think that their only objective is to perform comfortable bureaucratic tasks, but rather by soldiers that know and accept that they are on a mission aimed at improving the lot of their nations and that borders on being sacred.
The OPEC I want knows that it is not totally unimportant and is able to rally the solid support of its members and above all, of the population of its member countries.
The citizens of countries belonging to the OPEC I want know that even though their happiness and well being does not depend only on oil, it does depend on being able to defend what is theirs.
In the OPEC I want everyone prays to his respective God to give them strength to take full advantage of the meeting in Caracas.
In the Daily Journal, Caracas,Venezuela, October 3, 2000
This situation was so disastrous that at the end of 1998 the only alternatives that were ventilated publicly were either to violently increase production capacity or to simply sell or privatize the entire industry.
To limit oneself to the simple increase in production capacity would be to repeat the same errors that were committed with the other raw materials and natural non-renewable resources. It would mean to resign oneself to receiving the marginal contribution that results from being the sector’s low cost producer. It is sad that a country that has been so blessed with a valuable resource such as oil has to adopt a model that, at the end of the day, would let it to sell it at the variable cost of production. Something like receiving a valuable family inheritance and then turning around and selling it for what it costs to wrap it and ship it to the buyer.
In the same vein, the outright privatization of the oil sector would eliminate all possibility of geopolitic negotiation and the only thing we would receive as a going away present would be the resources to solve the existential problems of an entire generation of Venezuelans that have, for the last 20 years, not been able to decide if they were coming or going and that lived in a sort of Limbo State in the duty free zone of our international airport.
Today, when OPEC, for well know reasons (albeit not well recognized reasons) has received a new lease on life, it would be naughty not to wish it success in taking advantage of this second wind to build itself into a solid organization capable of facing the new challenges. If it fails, this will surely be its last breath. This is why I wish to share with you what I would consider the OPEC I want.
The OPEC I want would be able to win the confidence of all of its members in order to consolidate in one single block all the resources necessary to really defend it oil. These resources go far and beyond the simple turning of the tap.
The OPEC I want would be one that, upon observing how consumer nations have usurped the value of oil by increasing taxes (the UK, for example, increased taxes from 85% in 1980 to 456% ad valorem in 1998), would humbly accept the fact that they have lost the battle to an able opponent, but is now regrouping in order to win the war.
The OPEC I want would train the world’s100 best environmentalists in order to insure that, even though it shares the conviction and responsibility of taking care of our fragile world, the costs of defending the latter would not be laid squarely and unjustly on oil’s shoulders and that the environmentalist’s arguments will not be used for other hypocritical ends.
The OPEC I want would train the world’s 100 best experts in international commerce who would help avoid measures like direct subsidies for carbon as well as taxes that are aimed directly at oil and not at other sources of energy and that are evidently discriminatory and therefore not permitted under the norms established by the World Trade Organization.
The OPEC I want would train the world’s 1000 best scientists who would work in the world’s best laboratories and study, research and develop new uses for oil in order to minimize pollution or maximize added value as well as alternate sources of energy that could be used in the future.
The OPEC I want would not recognize the rights to intellectual property, brands and patents that, like a rabbit pulled out of a hat, generate income for the countries that own these rights which are definitely renewable, while the income obtained from the sale of a non-renewable natural resource such as oil is simultaneously being treated in a discriminatory fashion.
The OPEC I want simply would not allow a company to abscond with a hefty portion of the value of oil because it has formulated an additive that (supposedly) permits gasoline to be less polluting and based on a process that has dubiously been patented.
The OPEC I want would train the best image and marketing advisors in order to insure that the world’s public opinion does not continuously receive distorted information about OPEC and its members.
The OPEC I want would be staffed with the best team of diplomats and negotiators that would insure adequate representation at all international forums.
The OPEC I want would not allow gas and other sources of energy who’s values are not set under the OPEC umbrella to be introduced into the market like Trojan horses in order to compete with oil.
The OPEC I want knows that it counts with other resources other than oil to defend itself. The mere addition of all its international purchasing power would allow it to receive better treatment by imposing uniform special duties on all those who discriminate against oil.
The OPEC I want would not be formed by managers that think that their only objective is to perform comfortable bureaucratic tasks, but rather by soldiers that know and accept that they are on a mission aimed at improving the lot of their nations and that borders on being sacred.
The OPEC I want knows that it is not totally unimportant and is able to rally the solid support of its members and above all, of the population of its member countries.
The citizens of countries belonging to the OPEC I want know that even though their happiness and well being does not depend only on oil, it does depend on being able to defend what is theirs.
In the OPEC I want everyone prays to his respective God to give them strength to take full advantage of the meeting in Caracas.
In the Daily Journal, Caracas,Venezuela, October 3, 2000
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