Venezuelan leader plans for $50 oil

| 4/4/2006

Venezuelan President Hugo Chavez plans to seek contracts with consumer countries in which his country would sell its oil for $50 a barrel.

Currently, light sweet crude oil is averaging about $65 per barrel in trading on the New York Mercantile Exchange. Chavez announced his reduced price plan Monday, April 3.

The Guardian, a British newspaper, reported there is just one catch with the plan.

While Venezuela has an estimated 90 percent of the world’s extra-heavy crude oil, that oil must be first converted into synthetic light crude oil before it can be used to produce gasoline, diesel or pretty much anything else.

And the cost of converting that oil is so expensive that it would only be profitable to do so if the oil were priced at $40 per barrel, according to The Guardian.

Venezuela is the fifth-largest oil producer in the world, and The Guardian reported that a $50 locked-in price would increase demand and give the country leverage to demand an increase in its production allowance within the Organization of Petroleum Exporting Countries.