Peak Oil is You

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Page added on June 29, 2007

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The Problem’s Not Peak Oil, It’s Politics

Go-it-alone governments are choking back output to perilous levels

Some “peak oil” cassandras warn that global energy production will soon fall into permanent decline. But a more immediate danger to world oil supplies may be the tempestuous politics of many producing countries. Witness Venezuela’s move to wrest control of key oil projects from global companies on June 26. The move echoes steps taken in other nations that will likely either decrease production or slow its growth in coming years. “The oil is in the ground, but serious doubts are being raised about whether countries have the desire and means to produce it,” says Leo Drollas, deputy director of the Center for Global Energy Studies, a London think tank.

Right now, Venezuela is creating the biggest doubts. Its output has declined by about 25%, to 2.4 million barrels per day, since populist President Hugo Chavez came to power in 1999. The main reason: Chavez fired 75% of the managers at state oil company Petroleos de Venezuela (PDVSA) after a strike in 2003. That decision left PDVSA overstretched and ineffective. The plunge would have been disastrous had it not been for increased investment by foreigners. Yet Chavez is making life so difficult for the oil majors that two of them

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