Wednesday, November 14, 2007

Socialist economics - the land of the simple minded

The BBC reports that Hugo Chavez has called on OPEC to charge a lower price for oil exports to poor countries, say US$20 a barrel, compared to rich countries (he suggests US$100).
^
Of course he expects this will ease the burden of the poor countries, because then they can buy and use oil cheaply.
^
It's so clever, I'm sure he doesn't know what arbitrage means. You see, I'd set up an oil importing company in say, Tonga. I'd then start importing as much as I can, and reselling my $20 oil to "rich" countries at say $90, (maybe $80 if I want to break through). Don't worry about storage, as a Tongan importer I happen to use storage facilities in New Zealand and Australia - thanks.
^
OPEC is cleverer than that, so will dismiss Chavez as the charlatan he claims to be, but hopefully Venezuela will flood the developing world with cheap oil, that can be resold on at a lower price. Let's watch socialist economics fail once more!

No comments: