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« Mexico and the mysterious U.S. Senate | Main | Did Neil Armstrong really say, ‘That’s one small step for A man…’? »

September 30, 2006


jj mollo

The only trouble with this is that oil is fungible. That means the market is entirely open, a barrel of oil from x is virtually indistinguishable from a barrel of oil from y, and that a barrel not sold in country a can be sold in county b. The fact that Venezuela won't sell oil in Texas has virtually no impact on Texas and the fact that 7-11 won't buy from Citgo will have virtually no impact on Venezuela. 7-11 is probably happy to take credit for patriotism, but its decisions had nothing to do with Chavez or the U.S, and I'm not even sure that 7-11 is American owned.

If you want to reduce the leverage that any given oil producer has on the U.S., the best strategy is to reduce consumption across the board. The best way to do that is to develop economic substitutes and to become more efficient. Raising CAFE standards would have an impact. Taxing fossil fuel would have an impact. A national boycott of gasoline would have an impact, but not a boycott of Citgo.

Christopher Taylor

That's a pretty significant contract he lost his country. Really, that was just rude, you don't come to someone else's country and talk like that, even if it's true.

Frank Warner

Certainly, 7-Eleven's move is not going to break Venezuela. As JJ points out, if Venezuela doesn't sell its oil here, it can sell it elsewhere. Nevertheless, shutting off a supplier as big as Citgo could hurt 7-Eleven in the future, so its highly public stand is noteworthy.

As oil prices coincidentally dip, and Chavez finds himself with less money to buy friends, the Venezuelans might begin to wonder about their dear, ugly leader. Anything that encourages Venezuelans to question Chavez is a good thing.

jj mollo

Cristopher, are you saying that something Hugo Chavez said about Bush at the UN was true?

Frank, I read that people speaking for 7-11 have indicated that it was purely a price decision. I can't see how they would suffer for it. How much could it cost them if Citgo refuses to deal with them?

You are right about the coincidental issues. If he loses some of his disposable income as a result of fortuitous price drops, people are likely to associate the nasty belt-tightening with his behavior. Wouldn't that be nice.

Frank Warner

7-Eleven said it was mainly for business reasons, and partly for reasons of Chavez's bad behavior.

Right now, the decision works well for 7-Eleven because it's generally better to have several suppliers bidding for jobs, rather than one contract committed to one supplier.

However, in the long run, 7-Eleven's statements rejecting Chavez will limit 7-Eleven's ability to get the highest degree of competition. You don't exclude a big supplier like Citgo and expect that to increase competition.

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