Two heavyweights enter the ring: Exxon vs Chavez

February 14, 2008

The world’s biggest oil company and the world’s No. 7 crude exporter are trading blows in a dispute that is further eroding the U.S.-Venezuelan relationship and putting energy supply on the line.

Exxon, which was pushed out of a huge Venezuelan heavy oil project last year as part of a nationalization drive, has taken the country to court in an effort to secure compensation, winning orders freezing $12 billion in Venezuela’s assets around the world. 

In response, Venezuela has railed against Exxon’s legal “terrorism” and has stopped oil sales to the company. Venezuelan President Hugo Chavez, who has accused the Bush administration of backing a failed coup to overthrow him, has also said Exxon’s courtroom assault is part of a plan orchestrated by the Bush administration to oust him.

Big scary moves that could further cool the already frigid relationship between Washington and Caracas, which have steadily declined since Chavez first won office in 1998 despite the two nations’ close economic ties.

But for the moment, there doesn’t seem to be much real impact on the availability of oil to the market. While oil prices have rallied on the rising tensions, analysts say the effect of the fight on U.S. oil supplies and on the operations of Exxon Mobil or Venezuela’s state energy company appear almost nil.

“Venezuela doesn’t want to halt sales because Chavez needs the revenue,” said Eric Wittenauer, analyst at AG Edwards.

“It looks like Exxon Mobil can pretty much buy from others the same oil Venezuela is denying it,” said Mark Waggoner, president of Excel Futures.

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