What Would Chavez Drive?

June 12, 2009

After GM filed for bankruptcy and the US government took a 60 percent ownership position of the troubled company, Venezuelan President Hugo Chavez quipped, “Hey, Obama has just nationalized nothing more and nothing less than General Motors. Comrade Obama! Fidel, careful or we are going to end up to his right.”

Chavez’s provocative statement wasn’t the first time that critics have accused the Obama Administration of playing a heavy hand with the auto industry. Iowahawk, a web humorist and auto industry observer, had a YouTube hit with a video about the “The 2012 Pelosi GTxi SS/RT Sport Edition,” a tiny alternative car mandated by “Congressional Motors.”

Evidence of Washington’s inability to live up to its promise to take a “hands off” approach with GM is already beginning to emerge. According to the Wall Street Journal, Rep. Barney Frank—whose committee controls the distribution of government funds to GM—took issue with the planned closure of a distribution center in his district. Frank placed one phone call to CEO Fritz Henderson, and suddenly, a decision was made to keep the center open for at least another 14 months.

One wonders how aggressive President Obama will be in forcing GM and Chrysler toward higher fuel efficiency. Last month, the administration guided a diverse group of stakeholders to agree to a significant bump in fuel efficiency standards—a rise from 27.5 mpg today to 35.5 mpg by 2016. Will Obama force Detroit to produce the vehicles to meet those standards, regardless of what auto executives or consumers may prefer?

Ironically, it’s perhaps not Obama’s policies, but Chavez’s nationalization of Venezuela’s economic sectors that may more effectively push automakers in a greener direction. Why is that? Because Chavez’s nationalization of oil has hamstrung his country’s oil production—the world’s fifth-largest crude exporter.

In 2007, Venezuela’s state oil company took a 60 percent stake in four projects which process crude oil into 600,000 barrels of synthetic oil a day in the country’s eastern Orinoco River basin. The companies affected by the decree are Exxon Mobil, Chevron, ConocoPhillips from the US, Total SA from France, British Petroleum and Norway’s Statoil ASA. Overall, Chavez’s government has seized the assets of 60 foreign and domestic oil service companies. “The privatization of oil is over,” Chavez said. “This is the last space that was left for us to recuperate. Petroleum now belongs to all Venezuelans.”

Chavez’s alienation of oil service companies has reduced Venezuela’s oil production below 1997 levels. Venezuela’s national oil company has slashed investment in new energy projects by $10 billion.

Venezuela’s actions are part of a larger trend. More than 75 percent of the world’s oil reserves are controlled by national oil companies today. Of the world’s top 20 oil-producing firms, 14 are state-run. Lack of new investment continues to reduce production. Meanwhile global demand—which has been temporarily slowed by economic recessions—is expected to steadily rise in the next year or two. Analysts predict yet another in an ongoing series of oil price spikes—sending the price at the pump through the roof and US consumers racing toward hybrids and other fuel-efficient cars. In this way, Chavez’s nationalization efforts could have a bigger impact on the cars we drive than Obama’s so-called “nationalization” of GM ever could.


Posted in Carmakers, Incentives and Laws, News, Oil Dependence
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  • Jeddy

    Who cares what Chavez would drive? This was a stupid post. It makes me want to dump my RSS feed.

    Get a clue and follow developing technologies more closely …

    Fluff reporting …

  • Samie

    This article is great in pointing out the other side, that is when there is too much government intervention or takeover of certain business sectors. Politics corruption and lazyness takeover and there is no motivation to compete when you own the whole market. Nationalizing oil is dumb and if Chavez wanted funds to go towards education or infrastructure he could easily do that with tax funds from private entrepreneurs. Overtime like Saudi Arabia a few political insiders and their friends make huge amounts of money while most of the population suffers when little distribution of resources is being allocated to promote the welfare of all.

    You could argue if the economy was good the government should have taken a different path in saving GM & Chrysler but under the uncertainty that we are in the Obama Administration made the right choice. As for Barney Frank he is trying to protect workers from his district which any good politician would do. That is why an independent council or a “Czar” should handle distribution of monies and other affairs not politicians.

    It would be very alarming if the Obama administration let GM skip out on tougher CAFE regulations. You give GM and Fiat/Chrysler the right amount of tools to succeed and let them make decisions. Sometimes companies fail after bankruptcy and we should not make special considerations for certain companies if things can’t be turned around. I have always thought that there will be winners and losers in the new Hybrid/EV economy we are heading to. Also with tougher CAFE regulations we will quickly see some companies adapt while others will struggle to offer good consumer products while meeting new federal standards.

  • uktiger

    I guess it depends on how you look at it. In my opinion this country and the world would be a hell of a lot better off if there was no private ownership of energy resources.

    As far as crying about “government ownership” of car companies… what a joke. The Reagan Republicans who ran our car companies for the last 40 years destroyed them. Building a good car isn’t about ideology.

    I would much rather have Barney Frank and Nancy Pelosi running GM than Lutz or even Ed Whitacre for that matter.

  • RandalH

    @uktiger: I can only believe that your post is sarcasm, as I have a hard time believing that anyone could hold such an asinine opinion.

  • Michael-59

    - It appears to me the “way you look at it” is like a damn communist. We have a wonderful example of government managed energy right here in Tennessee. It’s called TVA. We pay as much or more for energy as anyone else in the country.
    - Reagan Republicans who ran our car companies? What planet do you live on? Regan tried to save the car companies, and everyone else, from the cancer better known as labor unions. Too bad he didn’t succeed.
    - The unions have run our car companies; and run them right into the ground. I live near the former Saturn Plant which was supposed to be a showcase example of how GM could work cooperatively with the UAW. They shared management. They really wanted to show those stupid morons at Nissan, just 35 miles away, how bad they needed the UAW. Well, now Saturn is history, being made by Opel I think, and that wonderful Saturn plant is collecting dust while those UAW pigs are collecting paychecks to not work. Haven’t noticed Nissan looking for a bailout. I guess GM/UAW they showed Nissan guys a thing or two.
    - Nancy Pelosi and Barney Frank couldn’t run the Sahara Desert without creating a shortage of sand.

  • Paul Beerkens

    I think the issue is that what is best for GM is not necessarily what is best for America and the American people. And while an individual might want to drive a gas guzzler that does not mean that that is what is best for the country as a whole.

    Sometime a government must step in and push the individual or a company in a direction that is better for us as a whole.

    You might call it communism. I call it common sense.

  • Michael-59

    Beerkens said,”Sometime a government must step in and push the individual or a company in a direction that is better for us as a whole. You might call it communism. I call it common sense”.

    Of course the government needs to do what is right for the nation as a whole. That’s their job. If people, as a whole, need to drive more economical cars, there needs to be incentives to do so; and additional cost to do otherwise. One can offset the cost of the other. This can and must apply to all cars; from any source. If people see a financial benefit that trumps their dislike for tiny cars, at some point they will shift to buying smaller cars. That is a perfectly sensable approach. Just telling the American manufacturers they have to built small cars without regard to market demands is totally stupid.

    Government trying to control the source of manufacturing, and redistributing the wealth, and making everyone equal, without regard to motivation, ability or contribution is what is communist. And I am afraid the latter is the road we are going down.

  • chukcha

    I can’t belive it… You clearly don’t understand what being American is all about.
    What you’ve said goes directly against what the Americans stand for. (and fought for…)
    Do you really belive that the gouvernment should have the right to “step in and push the individual or a company” in any direction? If you do, take a long and hard look at history [of USSR for example]. The Russian gouvernment was pushing both individuals and the the companies in a direction that they whole heartedly belived was best for the people… Look at the result — economic devastatioin and the collapse of the country.
    The problem is that when anyone, be it the gouvernment or a corporation, has an ability to push they start pushing allright! They are pushing for the patriot act, the gun control laws, the gouvernment takeover of the mass media, the religious influence over the gouvernment decisions etc… all under the cover of a “good” cause. (Like the environment) There is a saying that: “the road to hell is paved with good intentions”… Be carefull what you wish for… you might get it.

  • Michael-59

    Chukcha, I’m 60 years old. I did my fighting for this country in Nam in 1969. Don’t tell me I don’t understand what this country is all about. I know exactly what it is all about. I have watched liberal and conservative politicians screw us out of just about every liberty we ever had.
    - The government guides us in desired dierctions all the time right now, and have for years. You ever try driving your car at 80 mph through the middle of town? If you did, there is a good chance you got a little push in the direction of slowing down for the safety of others. Want to go fishing or hunting? You have to buy a liscense. The money for the liscense is partially used for wildlife management. Want to own a home? The money you pay for interest is not taxed; yet. That’s a little nudge to get more people to own homes. We are guided and manipulated all the time. Didn’t say I liked it or approved of it, but it’s happening right now.
    - We are going to get screwed regardless so you might as well bend over and grab your ankles.
    - My point is that incentives and fees are the way we have handled the guiding of public opinion up till now. Not takeover and direct management of private business like the present administration seems to think is okay.
    - And I completely agree that the road to Hell is paved with good intentions. And also with power grabs being sold as good intentions.

  • chukcha

    Hey crank, my comment was actually targeted at Paul Beerkens…
    Your comments are valid and I agree with you 95%.
    Except this: “The government guides us in desired dierctions all the time right now, and have for years.”
    First of all, it is you who are guiding the gouvernment, not the other way around. If we bend down and reach for the ankles it is because we are doing a bad job of guiding the gouvernment and as a result our as*es are abused. I respect your opinion and I agree that practically speaking we get screwed anyway :) , but it doesn’t mean that we have to put vaseline for their convenience as we bend down. The gouvernment is there to protect us from the criminals and outside invasions first and formost. The free market would take care of the rest. The media is bombarding us for years with the notion that the gouvernment is “guiding” [controling, in charge of] us. This is false. We are free [to a certain degree] in America and we need to keep changing the rules so that no one has the right to bend us down in the first place. I’m originaly from the former USSR and belive me crank, I know what the “guiding hand” of gouvernment can do to your “O-ring” if you let them! :)

  • uktiger

    You wouldn’t know a communist if Karl Max came up and kicked you in your old guy butt. You seem to hate unions and claim correctly that Reagan tried to kill unions (at least in the US). How did REagan feel about Lech Walesa? What was that all about?

    Oh, and you hero Reagan also thought Bin-Laden was a “freedom fighter”.

    Using the natural resources of a country for the benefit of its people is democratic. Giving control to Exxon Mobil is not.

  • crank’s buddy

    How do TVA’s rates compare with those of other power companies?

    TVA electricity costs less than most electricity produced around the nation. For residents in the TVA region, the average cost of one kilowatt-hour — the amount of electricity it takes to burn ten 100-watt light bulbs for one hour — is 6.4 cents, while the national average is 8.5 cents.

    Hey cranky. Prove what a great capitalist you are and REFUSE to buy power from TVA. it is a free country! Then your rantings will be at the very least honest.

    Let me guess, you really love Hannity and Limpbaugh don’t you.