Venezuelan oil minister says crisis will affect world markets 'for some time'

Canadian Press Monday, December 30, 2002

CARACAS (AP) - World oil markets will suffer for some time from the effects of the general strike aimed at toppling President Hugo Chavez, Venezuela's top oil official said Monday.

The four-week-old strike has shut down key sectors of the economy and created gasoline and food shortages throughout Venezuela, the world's No. 5 exporter. Oil production has plunged from three million barrels a day to 260,000 barrels a day. "For some time, we will have distortions on the world oil markets due to this situation," Oil Minister Rafael Ramirez acknowledged Monday.

The strike escalated Monday as police used tear gas to separate opponents and supporters of Chavez outside the state oil monopoly's headquarters in Maracaibo, the hub of the country's oil-producing west.

Strike leader Carlos Ortega, who leads Venezuela's largest labour federation, called on all citizens Monday to stop paying taxes.

And secret police arrested National Guard Gen. Carlos Alfonso Martinez, one of dozens who have occupied a Caracas city square for three months in rebellion against Chavez. A handful of people protesting the arrest outside secret police headquarters fled under a hail of rocks thrown by Chavez supporters and tear gas fired by police.

The combined influence of Venezuela's crisis and the threat of U.S. war in Iraq sent crude futures to a high of $31.02 a barrel Monday on London's International Petroleum Exchange, and a two-year high of $33.65 a barrel on the New York Mercantile Exchange.

U.S. markets were bracing for higher heating oil prices heading into winter, higher gas prices, and higher prices for all sorts of oil-based products. But reports that the Organization of Petroleum Exporting Countries was considering increasing output by at least 500,000 barrels a day took some heat out of the price.

OPEC's basket of seven crude oils hit a two-year high of $31.06 a barrel Friday, OPEC officials said Monday. Venezuela is an OPEC member.

Venezuela's opposition called the strike to force Hugo Chavez to call a Feb. 2 non-binding referendum on his presidency, which runs to 2007. Strike leaders hope a poor showing will increase pressure on Chavez to resign. At least 35,000 of the 45,000 employees joined the walkout at Petroleos de Venezuela SA, the state-owned oil monopoly.

Opponents blame Chavez for economic contraction of seven per cent in 2002, annual inflation surpassing 30 per cent, 17 per cent unemployment and chronic political unrest. They charge Chavez is trying to impose a leftist authoritarian government.

Chavez counters that his adversaries are trying to mount an "economic coup" and that Venezuela's constitution allows a binding referendum on his presidency next August.

Venezuela's government and opposition have traded charges over the actual state of the country's crucial oil industry, which represents 30 per cent of Venezuela's $100-billion US gross domestic product.

Ramirez claimed Monday that oil production was up to between 600,000 and 700,000 barrels a day and would reach 1.2 million barrels a day next week.

PDVSA executives say it's impossible for the government to increase production so quickly, even with replacements of field crews, executives, tanker crews and dockhands.

Ramirez also said that Venezuela's largest refinery, the Paraguana complex, should be running at full capacity of 930,000 barrels per day within two months.

Last week, Ramirez said a Venezuela-run refinery in Curacao would be up and running within weeks. But union and management at the refinery, which processes Venezuelan crude and ships gasoline back to Venezuela, say the mammoth facility shut down completely on Friday.

Chavez says his government is importing gasoline from Brazil and Trinidad, although the cargoes amount to little more than a few day's normal demand. Ramirez said the government may import gasoline through January.

The strike has cost $2 billion in lost oil revenue and damage to oil installations, Ramirez said.

The government also is importing food. Colombia sent trucks carrying more than 500 tonnes of cooking flour. The Dominican Republic sent rice.

Despite Chavez's efforts to break the strike, motorists lined up by the hundreds at the few service stations that had gas. Supermarkets were slowly running out of products like milk and bottled drinking water.

The Organization of American States has been mediating talks to find an electoral solution to the crisis. The next round of talks is set for Thursday.