Saturday, November 17, 2007

Today's Word is Monopsony: mə-ˈnäp-sə-nē. And, What are Chavez and OPEC up to?

Hugo Chavez is a blowhard who happens to be the dictator of an OPEC member with a lot of oil. Perhaps it's time to explore the ramifications of today's word. From Wikipedia:
UPDATE below
In economics, a monopsony (from Ancient Greek μόνος (monos) "single" + ὀψωνία (opsōnia) "purchase") is a market form with only one buyer, called "monopsonist," facing many sellers. It is an instance of imperfect competition, symmetrical to the case of a monopoly, in which there is only one seller facing many buyers. The term "monopsony" was first introduced by Joan Robinson[1] (1933). The term "monopsony power", in a manner similar to "monopoly power" is used by economists as a short hand reference to buyers who face an upwardly sloping supply curve but that are not the only buyer; better, but more cumbersome terms may be oligopsony or monopsonistic competition. A monopsonist may be at the same time a monopolist....MORE
Mr. Chavez seems to be preparing for something.

From the Wall Street Journal Online:
Citgo Scales Back in U.S. To Fund Chávez's Goals

In 1997, one of every 10 gallons of gasoline U.S. drivers bought came from a Venezuelan-owned refiner, Citgo Petroleum Corp. That year, a student at Oxford University wrote a thesis saying Citgo was cheating Venezuela's people by investing too much in the U.S., and should send more cash home.

The student, Juan Carlos Boué, drew scant attention until four years ago, when Venezuela's populist president, Hugo Chávez, took control of the state oil apparatus. Today, Mr. Boué is an influential member of Citgo's board. And Citgo, which Venezuela bought two decades ago to market its hard-to-refine heavy oil, now has a different focus: feeding cash to Mr. Chávez's program to build socialism in Venezuela.

n recent years, while other U.S. refiners have invested heavily to take advantage of historically wide profit margins in the business, Citgo has been slimming down. It has slashed its investment and sold off U.S. assets, most recently by agreeing last week to shed a unit that turns crude oil into asphalt. In keeping with Mr. Boué's nostrums, Citgo has sent the extra money to its sole shareholder, the Venezuelan government. Citgo has raised its annual dividend to more than $2 billion, from $225 million in 2000.

The changes at Citgo are altering the U.S. fuel landscape. Citgo owns 5% of U.S. refining capacity, a significant chunk at a time when U.S. demand for fuel is growing faster than domestic production, and no new refinery has been built in three decades. Citgo's production will stagnate, adding to pressure on pump prices and fuel imports.

Citgo's U-turn mimics changes at its corporate parent, Petróleos de Venezuela SA, known as PDVSA. Mr. Chávez has staffed the national oil company with political allies and spends some $14 billion a year of its profits on social programs. Shorn of investment, PDVSA has seen its oil output plunge....MORE

Just on the off-chance that the stories are somehow connected, here's one from Lake Charles, Louisiana:

Judge Finds Citgo in Contempt of Court
A state district judge finds Citgo in contempt of court-- and threatens the arrest of two company attorneys if they don't comply with orders to provide a list of witnesses concerning the massive oil spill of June 2006.

Several thousand people have claims against Citgo from the huge oil spill in 2006. And attorneys representing about 800 people suing say Citgo has been stone walling them as they try to get information and witness testimony about what happened in the spill.

Plaintiff attorney Wells Watson says, "So far it's been a charade and it's cost our clients time in preparing our case and it's cost us money and time, the justice system, they've ignored orders."...MORE

UPDATE, from the Wall Street Journal Online:

Chavez's OPEC Speech Spurs Rebuke From Saudi King

Venezuela's firebrand President Hugo Chavez appears to have earned for the second time in a week a rebuke from a king, with Saudi Arabia's King Abdullah implying he shouldn't seek to use the oil cartel OPEC as a political weapon. Mr. Chavez also warned the United States that oil prices would further surge if the U.S. contemplates an attack against his country or Iran.

Exactly a week after Mr. Chavez was told to "shut up" by the King of Spain, Saudi Arabia's King Abdullah said the 13-member Organization of Petroleum Exporting Countries cartel -- Ecuador rejoined the ...