Let 'em crawl... Expropriation hasn't worked so well for Hugo Chavez. "Oh the poor thing, I feel deeply sorry...yeah, right!"

From Investors Business Daily

Hugo Crawls Back

By INVESTOR'S BUSINESS DAILY Posted Thursday, January 15, 2009 4:20 PM PT

Energy: Low oil prices and plunging output have seen Venezuela's Hugo Chavez come groveling back to U.S. oil firms for new investment after abusing them earlier. But Big Oil, once bitten, should now be twice shy.

The only reason left to make a long-term investment in Venezuela is to bet that Hugo Chavez won't be around long enough to rip them off again.

Chevron, Shell, and France's Total have quietly been approached for investment, the New York Times reports, even as they still smart from the expropriation of their assets in 2007.

It wasn't just the billions in losses. It's also unlikely they have forgotten the fireworks, troops, banners and torch-bearing Chavista mobs seizing their property in the name of "the people."

So it's quite a humiliation for the strongman, who once boasted, "We are taking back our country," to be back begging for help.

Expropriation hasn't worked so well. Chavez's state oil company, PDVSA, had virtually nothing left in its coffers after squandering $700 billion in oil earnings on political schemes like light bulb and milk factories. It needs $20 billion to develop its Orinoco Basin projects, which could produce 1.2 million barrels a day, but it can only do it with partners who have both capital and technology.

Chavez's original plan was to replace U.S. oil companies with state-controlled ones from Iran, Russia, Vietnam, Belarus and China. China, for one, wasn't impressed with Hugo's terms and didn't bite. Others, like Iran and Belarus, don't have the technology. Venezuelan oil, remember, is heavy and takes lots of refining.

That's partly why output has fallen to 2.3 million barrels a day, down 32% from 3.4 million a decade ago. Chavez not only expropriated assets of five major private oil companies without paying, he also demanded that a 20% supply cut dictated by his OPEC membership come from remaining private oil firms, not Venezuela.

It was fun while the high oil prices lasted. But the reality is, they never do. Oil is an industry with a long cycle that evens out $134 a barrel oil with $9 a barrel oil over many years. High oil price years are a market signal to drill more with investment, not a license to fling dollar bills. Companies invest knowing this cycle exists.

CIA Director Michael Hayden said Thursday that a $40-per-barrel oil price means Venezuela's high-sulfur crude will fetch just $30 a barrel. "That's real trouble for that (Chavez) regime — so you could see a lot of fracturing there," he said.

Confident that high oil prices would last forever, Chavez is now in the winter he thought would never come. Now that it has, the companies he burned are unlikely to make big investments. Why do so when they might be confiscated when prices get high again?

Venezuela is now facing a steep investment drop in other industries, thanks to Chavez' foolish expropriations of farms, steel companies, cement companies, electricity companies and pretty much anything productive. After attracting less than $1 billion in 2008, investment turned negative in the last quarter of 2008.

The Heritage Foundation, in its 2009 Index of Economic Freedom released this week, ranked Venezuela No. 28 out of 29, losing out to investment "paradises" like Bolivia, Haiti and Ecuador. Only Cuba was lower. Things are unlikely to change under Chavez.

Oil companies don't invest on emotion. They need assurances that they won't be expropriated again, and Chavez has a huge credibility problem there. That said, our need for oil remains.

Instead of risking expropriation in Venezuela again, why don't we let our oil companies drill for the hundreds of billions of barrels of oil reserves we have right here in the U.S.?

In the meantime, if any oil company says yes to Chavez, it might not be such good news for him. It might signal a cold political calculation that Chavez won't be around to steal from them again.

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