Editorial: The Ethics of Oil

As Joe Kennedy’s Citizen’s Energy Corporation provides discount heating oil to low-income Americans, the drumbeat of criticism is mounting against the practice of accepting help from the most unlikely of sources: Venezuela’s leftist President, Hugo Chavez. Kennedy has been roundly chided as being “Un-American” for providing the vehicle from which Chavez can tout the merits of his government, while continuing to be a painful thorn in the side of the Bush Administration.

The low-cost heating oil is being distributed through CITGO Petroleum Corporation, the wholly owned subsidiary of the national oil company of Venezuela, PDVSA (Petróleos de Venezuela, S.A.). An ongoing television advertising campaign shows testimonials by Americans in various cities who are thankful for the help and are complimentary of CITGO and Chavez. Not everyone feels the same way, though.

Firing back at his detractors, Kennedy rightfully points out the hypocrisy of criticizing solely CITGO and its Venezuelan parent. The most recent U.S. government statistics outlining the origin of U.S. oil imports show that the top five exporters to the United States include such places as Nigeria, Mexico, Saudi Arabia and Venezuela. Rounding out the top ten are our other close friends: Angola, Algeria and of course, Russia. With the exception of Canada, which (thankfully) remains as the top source of foreign crude oil for America, it can be argued that none of these regimes can boast better track records than Venezuela for human rights, democratic standards or any other yardstick of what Americans hold near and dear.

The situation is far more complicated than the indignant politicians would have us believe. Beyond its position as America’s fourth most important source for crude oil imports, Venezuela continues to divert a significant portion of its production elsewhere - primarily to the Far East - and has recently moved to begin nationalizing its oil fields. Massive, long-term investments for major oil players are in danger of being lost forever as Chavez continues to consolidate power. And, while Chavez is in no position to cut off the United States just yet, that day could be coming soon.

Instead of griping about where the oil comes from, Americans would be better served by determining how we can get our hydrocarbon resources from a more palatable source. Right here at home is a good place to start. In Alaska, a treasure trove of stranded gas awaits liberation which can only come from a focused effort to build a simple pipeline. Proven crude oil reserves which will likely exceed anything already discovered on Alaska’s North Slope lay just under the surface in the Arctic National Wildlife Refuge (ANWR). But any hope for drilling in ANWR, at least for the time being, remains dead, thanks to an unsympathetic 110th Congress. In the Gulf of Mexico, foreign exploration companies are in the process of helping Cuba ramp up their own oil production while American oil firms can only watch from the sidelines, still paralyzed by Congressional indifference and backbiting.

It is important to note that no one else in the OPEC fold has volunteered to step up and provide the same type of relief that CITGO has committed to bring. The program could eventually provide as much as 7.5 million gallons of deeply discounted heating oil to as many as 37,000 low-income households in Maryland, Virginia and the District. The assistance has been described as just a “publicity stunt by Chavez,” who infuriated the Bush administration last September when he used the United Nations venue to call Bush “evil.” Furthermore, Kennedy reminds his critics that the oil represents less than one-half of 1 percent of Venezuela’s total exports to the United States in a given year. “Let’s keep things in perspective,” he says.

Discounted heating oil from Venezuela is the least of our problems. More worrisome should be the rapid and ongoing effort in the South American country to nationalize its oil assets. Since they haven’t yet shown the technical competence to do for themselves what they’ve depended on the oil majors to do for generations, the move probably does not bode well for their ability to continue producing oil at today’s levels. But, it probably doesn’t matter, one way or another.

Perhaps if Chavez had any worries that the United States might reciprocate his nationalization effort by seizing his CITGO-based assets here in the United States, he might reconsider the (partial or wholesale) ouster of foreign oil interests from Venezuelan oil fields. But, that’s not how we operate and, at the end of the day, he’s already begun the process of divestiture of his assets from the American markets anyway. Venezuela’s oil is probably going away, and soon, if Chavez remains in power. Let’s keep our eye on the ball. The game should be here at home, but nobody seems to want to play.

Managing Editor Joseph Keefe can be reached at jkeefe@maritime-executive.com