CARACAS, Venezuela (AFX) - A U.S. senator says that the Bush administration has not prepared adequately for a possible cutoff of oil sales from Venezuela that would cause a spike in crude oil prices and hurt the U.S. economy.
In a letter sent last week to U.S. Secretary of State Condoleezza Rice, Republican Sen. Richard Lugar said the South American country's 'direct supply lines and refining capacity in the United States give Venezuela undue ability to impact U.S. security and our economy.'
A copy of the letter was made available Monday by Lugar's office.
Venezuela's leftist president, Hugo Chavez, is a vocal critic of Washington who has repeatedly threatened to cut off oil shipments to the United States if the U.S. government tries to oust him.
Despite the two countries' rocky political relations, the United States has remained Venezuela's No. 1 oil market. The U.S. buys 1.5 million barrels a day of Venezuelan oil and petroleum products, accounting for 11 percent of U.S. imports. Venezuela's state oil company owns or partly owns nine refineries in the United States.
Lugar commissioned a congressional report earlier this year that found the United States is vulnerable to a potential oil cutoff by Venezuela, the world's fifth-largest crude exporter. The report by the Government Accountability Office calculated that such a move over a six-month period would cause a price spike of US$11 (euro8.75) a barrel and cut U.S. economic output by US$23 billion (euro18.3 billion).
Lugar said the report highlights 'the inadequate preparation by the United States government to address the threat of supply disruption from Venezuela' and said the Bush administration's proposed response -- to dip into the Strategic Petroleum Reserve while trying to convince other oil producers to boost production -- was unfeasible over the long-term with tight oil supplies worldwide.
'Chavez has made clear threats to cease oil exports to the United States, and I believe the administration should create country-specific contingency plans,' Lugar said in the letter sent to Rice on Thursday. 'It would be negligent to rely on ad hoc responses to situations which are predictable.'
Lugar added there was 'a real risk of having Venezuela act in concert with other countries to disrupt the price of oil.'
Analysts have said that it is unlikely Chavez would follow through on his embargo threats because the political and economic costs to his country would be severe.
Venezuela's ambassador to Washington, Bernardo Alvarez, has also called speculation of a unilateral Venezuelan embargo 'absurd,' saying 'the United States is Venezuela's natural market.'
Yet doubts remain about Venezuela's ability to maintain overall oil production as Chavez's nationalist rhetoric has darkened the investment climate for some private companies, while the state oil company continues to suffer from disorganization and a loss of personnel resulting from a two-month anti-Chavez strike ending in early 2003 that paralyzed the industry.
Venezuela says it currently produces 3.3 million barrels of oil per day. But the U.S. Energy Information Administration, or EIA, and other industry monitors put the South American nation's oil production closer to 2.6 million barrels per day.
Recent EIA figures show Venezuelan oil and petroleum product exports to the U.S. during the first four months of this year were down on average by more than 100,000 barrels a day compared to the January-April period in 2005.
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