Because I Can

Well, Drudge is headlining that all-around jerkface and former KGB agent Vladmir Pootin' (he had the Moscow baked beans special every day for 50 years) is cutting off oil to Ukraine. As the Telegraph Reports,

Russia took Europe to the brink of a winter energy crisis yesterday when it
carried out a Cold War-style threat and halted gas deliveries to Ukraine, the
main conduit for exports to the West.

With a quarter of its gas supplied by
Russia, Europe is facing serious disruption and price rises for as long as the
dispute rumbles on.

So that is a loss of 25% of heating oil to Europe, meaning that Europeans will pay a premium to get their remaining sources to give them more, and many will have to do either with less or without. The US supposedly had a bit of saving grace from Venezuelan President Hugo Chavez, who offered cheap oil. We wanted it, because the average consumer cares very little about whether or not a President borders on being dictatorial, and Americans have a specific emotional attachment and economic ignorance when it comes to oil.

So here are a few things to consider. First, I'd like to give a hat tip to Russell Roberts of Cafe Hayek for pointing this out about a month ago. Now of interest, the CIA World Factbook gives information on many aspects of the country, including per captia GDP. In the US, this was $40,100 per person in 2004. In Europe, Austria's was $31,300 in 2004, France's was $28,700 in 2004, Italy $27,700, Belgium $30,600, and Germany at $28,700.

We could then say that Chavez may be more benevolent to send his oil to Europe, since they have a greater supply crisis and that America's poor people are actually reasonably well-off. The difficulty with that is, though, is in transportation; it would take a bit more fuel to get a tanker from Venezuela to Portugal than to Delaware. The quality of mercy lying therein would require calculation and data that I can't get my hands on.

But what makes people so cynical of Chavez? Does he look better than Putin by comparison? Well consider the following, from that original Cafe Hayek post:

Yes, the people of Venezuela are lucky to have him. He's selling oil at a
40% discount to people in a country whose per-capita
income is over SIX TIMES that of Venezuela's. That's a man who really
knows how to take care of the little guy.

Venezuela's per capita income was about $5,800 in 2004. Is it really more compassionate to sell to the US or even Europe at depressed prices? Or rather, it is better to sell at the going market rate and distribute the rest of the money to the people of Venezuela, and invest money in the nation's infrastucture and economy so that they can bring down the nation's unemployment rate (17.1% in 2004).

Here's another twist, though. In some oil-rich countries, the wealth from oil does not offer a cure-all to poverty. Look at the Middle East. Suppose Chavez believes he cannot help but be a dictatorial ruler, and therefore wants to pass on a consumer surplus to the US, who would have the abilities to do good for his country. Well then, should he really be helping the poor, who would be less apt to use their consumer surplus for charitable contribution as opposed to the economy at large?

The evidence points to Chavez being one of two things, a reputational entrepreneur or an self-aware, yet bungling philanthropist. I would give him credit for being smarter than that, so I think the reputational entrepreneur point is the most likely.

Labels: Politics