Venezuelan Oil Losing Share of Key U.S. Market

Ramirez said that PDVSA, a behemoth that he said employs 45,000 workers, is in solid shape. PDVSA had profits of $5.5 billion last year on domestic revenue of $55.7 billion. He said Venezuela put $6 billion back into PDVSA last year and plans another $10 billion this year. The idea is to invest $70 billion by 2012, Ramirez said, when Venezuela says it will produce 5.8 million barrels a day.

Energy experts like David Mares, who recently authored a detailed, 97-page study of PDVSA for Rice University's Baker Institute, say the plan lacks credibility because investment has for years fallen far short of the $8 billion or so needed to improve production and exploration. The number of rigs drilling wells has dropped from more than 110 in the mid-1990s to 76 in February, according to Baker Hughes, which keeps worldwide data on rig activity.

So a country less capable of producing oil, analysts say, is more tied to the United States, where refineries wholly or partly owned by PDVSA refine Venezuela's molasses-like oil. The installations exist nowhere else, which makes some analysts skeptical that Venezuela is exporting as much to China as it claims.

"It's a reasonable policy for the Venezuelan state to diversify clients, but the point is that the American client is very close," said Teodoro Petkoff, a newspaper editor and former government minister who opposes many of Chávez's policies. "It's three months by tanker to China, five days to the East Coast of the United States, so the American client is too important for Venezuela."

Still, last year the U.S. Government Accountability Office prepared a report at the request of Sen. Richard G. Lugar (R-Ind.), now the ranking minority member of the Foreign Relations Committee, to determine the ramifications of a sudden end to Venezuelan oil supplies.

"If they decide to cut oil, that's not the worst thing that could happen to the United States," said a senior Republican aide in Congress familiar with the issue. "The big issue about Venezuela is, what happens if something happens in the Strait of Hormuz and we can't get oil from the Middle East? What happens if the demand rises suddenly in India and China, and then Venezuela decides to cut off oil?"

The United States, which consumes 20 million barrels a day, nearly a quarter of the world's total, has not formulated a policy to deal with such a possibility. Bush administration officials stress that Venezuela will remain an important supplier, and analysts and even Venezuelan officials agree. They note that American production is falling and so are production capabilities in regions like the North Sea and Mexico that have long supplied oil to the United States.

Chávez seems to concur.

When Bush traveled to Brazil in March and signed an agreement to jointly produce ethanol with the Brazilians, it prompted a quick reaction from Chávez, who called the plan "true craziness.'' The Venezuelan president had long supported expanding ethanol production, but he said the American proposal would trigger a famine because so much farmland would be dedicated to producing crops to make the fuel.

What he didn't say was that the pact was also a sign that the United States was considering a renewable substitute for gasoline. "Bush's plan is impossible," Chávez said.