February 08, 2006
Addicted to Oil - part deux!
What if Hunter S. Thompson Ran a Country?
“We have to defend our fatherland.”
Who said that recently—Hitler? Stalin? Hunter S. Thompson?
Of course not—they’re all dead. So here’s a hint: the man who said that also said this:
“We still need a higher number of rifles. The 100,000 Russian rifles are not enough, Veneuzuela needs to have one million well-equipped and well-armed men and women.”
That’s right: it was Hugo Chavez, President of Venezuela, the largest oil exporter in the Western Hemisphere.
I’m not making this up. The leader of a country in the Western Hemisphere actually said he needs a million well-armed men and women, to prepare for an invasion by the United States.
But that leader, who just as well might be Hunter S. Thompson, what with all the guns and paranoia flying around, does not lead just any country—he runs Venezuela.
And Venezuela, as I have discussed before (“Instability Adds Up”) supplies 11% of the crude oil imports to which we are “addicted,” as our President, who has heretofore done exactly zero to reduce that addiction, noted in his State of the Union speech recently.
Not only does Venezuela supply crude oil, but years ago that country bought Citgo, the United States-based refining and marketing company which happens to operate four refineries with about a million barrels-a-day capacity.
In other words, Venezuela produced about a gallon of the gasoline currently sloshing around in the average American’s gas tank.
And Chavez has threatened to close down those refineries:
“I could easily order the closing of the refineries that we have in the United States…I could easily sell the oil that we sell to the United States to other countries in the world…”
Meanwhile, on the other side of the world, the leader of another major oil producing country—slightly less daffy and therefore more scary—is moving ahead with plans to develop nuclear weapons. Oh, and he has said, publicly, that Israel should be “wiped out.”
Finally, and being perhaps the Reggie Jackson of this dangerous mix—the “straw that stirs the drink,” as the Yankees ex-slugger once described himself—Muslims are burning embassies over cartoons.
Yet, in the midst of what looks to me like the most combustible mixture of political, social and religious issues since the Shah of Iran fled his palace in 1979, private equity firms are rushing to buy up U.S. companies—not at bargain-basement prices in the midst of depressed operating conditions—but at all-time record prices in the midst of all-time record operating margins.
Jon Huntsman, the cancer-surviving, charity-supporting family man from Utah whose chemical company survived a harrowing brush with bankruptcy during the last down-cycle in that notoriously cyclical business put it well in yesterday’s Wall Street Journal:
“It appears to me that many of the private-equity shops are going to reach into some very marginal businesses with all the available capital,” he said. “Any time you have to reach too far to put your money to work, you’re going to take a higher risk.”
And with the Latin American Hunter S. Thompson running Venezuela and his soon-to-be nuclear-equipped counterpart running Iran, the risks may be higher than anyone thinks.
I Am Not Making This Up