Oil binds U.S., Latin nemesis

Mike Trager doesn't seem like the sort of guy who shapes the destiny of nations.

A modest, easygoing man, Trager works for A1 Cab in suburban Elgin, Ill. One Friday at 11:30 a.m., Trager stopped by the Marathon station. He was a regular. He pumped $38 worth of gas into his taxi minivan. His radio then crackled, and a terse voice ordered him to pick up a fare at the public-aid office. His take: $3.20, no tip.

Trager already had influenced the course of global events that day.

With his purchase, he helped prop up one of the last leftist regimes in the world. His money also made a bunch of impoverished Indians happy. To understand how, you must hail another cab, this time in Caracas, Venezuela.

Taxis in Venezuela come cheap. Gas in the oil-flush Caribbean nation sells for 14 cents a gallon. For less than $150, a driver will transport you six long hours into the country's parched hinterlands, to a faded oil town called Anaco. Another hour's journey by truck across an arid savanna will bring you to the Karina Indian village of Mapiricure.

About 5 percent of Trager's midgrade fuel originated in the oil and natural-gas wells surrounding the tiny native community. And thanks to the grandiose populist agenda of President Hugo Chávez, the cabbie — and untold thousands of other U.S. oil consumers — was bankrolling an Indian renaissance.

The Karinas of eastern Venezuela haven't always enjoyed oil wealth. Americans wildcatted the region's first wells 60 years ago, but few royalties trickled down. Today, under Chávez, they have good oil-field jobs, freshly painted shacks, a new preschool, free medical care, subsidized food and such diverse oil-funded ventures as a tribal chicken farm and a trucking cooperative. Many were buying their first cars.

Not that the tribe of self-described Marxists was especially thankful for the likes of Trager, however.

"Our oil is being sold in Chicago?" said a crusty village elder, Ramón Barroso. "Too bad. Nobody here wants to feed the empire of that criminal George Bush."

The politics of energy

U.S. Secretary of State Condoleezza Rice recently bemoaned oil's unsavory effect on foreign affairs.

"I can tell you that nothing has really taken me aback more ... than the way that the politics of energy is — I will use the word 'warping' diplomacy around the world," Rice told Congress in April. "It has given extraordinary power to some states that are using that power in not very good ways for the international system, states that would otherwise have very little power."

Coming from a former Chevron board member, Rice's shock is puzzling. After all, King Oil has been meddling in the plans of nations for a century.

Oil has molded war plans. (Hundreds of thousands perished in World War II offensives launched to capture oil supplies.) It has lubricated alliances. (Washington and Riyadh.) It has trumped ideology. (In the Cold War, Cuban troops guarded U.S. oil facilities in communist Angola — the crude simply was that valuable.) And it has spawned ironies. (Americans' oil addiction, it's now widely agreed, helps fund their enemies in the war on terror by enriching fundamentalist Islamic regimes.)

Yet today, with uncertainty spreading about the world's crude output, many experts fear that energy wars will become the defining struggles of the early 21st century.

A case in point: the bizarre marriage of convenience between the United States and Venezuela.

Were it not for its mammoth oil reserves, Venezuela probably would languish on Rice's blacklist of "outposts of tyranny," along with the likes of Zimbabwe and Cuba. Chávez has outraged the Bush administration by using his huge oil income — estimated at $150 million a day — to rekindle a leftist movement in Latin America. Chávez also has lavished billions in aid on neighbors, currying favor in the region.

He gave away millions of dollars worth of heating oil to low-income Americans last winter, embarrassing the White House. And, as part of his "anti-imperialist" agenda, Chávez last month announced plans to cut off gas sales to 1,800 independently owned Citgo stations in the United States. Citgo is owned by the Venezuelan government.

Through it all, U.S. motorists continue to chug most of Venezuela's petroleum output of 3 million barrels a day. Roughly half of Chávez's government budget is funded by U.S. sales.

"Imagine a dysfunctional couple," Venezuelan energy analyst Alberto Quiros said. "They scream and throw things but are still chained together by their mutual oil dependency. It's crazy."

The Karinas

One of the first indigenous people encountered by Christopher Columbus, the tribe was feared for its belligerence; it fought the Spanish for more than two centuries before being herded onto desolate scrublands infested with insects. (Mapiricure, population about 400, means "Place of the Mosquitoes.") Their numbers have plummeted through assimilation. They have lost most of their tribal lands to scheming cattle barons. And so poor are their fields that the ragged Indian farmers ended up digging holes and selling their soil as sand.

From 2003 onward, however, their narrative of woe changed radically. That's when Petroleos de Venezuela S.A. showed up.

PDVSA isn't your usual oil giant. Dismantled by Chávez after a worker strike in late 2002 and early 2003, PDVSA has been reborn as the central engine of Chávez's socialist revolution. The strongman fired 19,000 employees and replaced them with party loyalists. And the company now is spending $8 billion of its annual profits on social programs.

"This is a good way to run an oil company into the ground," said Michelle Billig, an analyst with PIRA Energy Group in Washington. "On the other hand, if leaders in places like Nigeria, Angola and even Iraq ever tried a bit of this, we probably wouldn't be hearing so much about instability in their countries."

PDVSA's red-blue-and-yellow logo appears everywhere. In backwaters such as Mapiricure, the company is the only institution that actually works. It bought villagers a school bus, sponsors scholarships, pays for eyeglasses and funds a program to rescue the Indians' fading language.

Sitting on a fortune

Venezuela may harbor the richest oil prize on the planet.

Some geologists believe the Orinoco Belt, an ancient layer of sand buried under the country's swampy eastern plains, holds up to 300 billion barrels of recoverable crude. That's another Saudi Arabia.

To peak-oil skeptics, this gargantuan deposit, which the U.S. Geological Survey giddily calls "the largest single hydrocarbon accumulation in the world," alleviates fears of declining crude supplies for decades. To Chávez, it's the ultimate political carrot — and club.

"The oil from the belt won't be for Mr. Danger," Chávez declared in a typically pugnacious speech last year, referring to Bush with a pet insult. "In the first place, oil will be for the Venezuelan people, and then the people of Latin America and the Caribbean."

Trouble is, almost all of the crude is "gunk" — jet-black tars that are difficult to extract and expensive to process. Canada also possesses enormous reserves of this sticky, molasseslike substance. And while heavy oils are indeed being looked at closely — along with crop-based ethanols — as a sort of last call for hydrocarbons, uncertainties still dog their viability.

In Canada, oil companies must use huge volumes of valuable fresh water to steam-blast the syrupy goo out of the ground. The landscape is strip-mined. And the fuel needed to heat the steam, Canada's once-abundant natural-gas supply, already has peaked. Tar-sands companies now are talking of building nuclear plants to help power the oil-mining effort.

"People like to think technology will always rescue them," said Rep. Roscoe Bartlett, R-Md., a senior member of the House Science Committee. "But if it still ends up taking two barrels [worth of oil energy] to pump a barrel out of ground, you're in a losing game."

Heavy crudes might help delay a global crisis, Bartlett added, but not for long. Even with a fast-track program, he noted, Canada might squeeze 5 million barrels a day from its tar sands by 2025. By then, though, the world's daily oil appetite may have swollen by 40 million barrels.

In Venezuela, there are other imponderables. Like a new cold war in the making.

The Chinese connection

Ramón Barroso wanted to show how revolutionaries stick together. So he jumped into a dented Ford F-100 pickup, loaded its bed with village kids and drove to an orchard outside Mapiricure.

The young trees were cashews. And they were dying. But that didn't concern Barroso. He was interested in symbols.

"Our Chinese comrades planted this for us," he said proudly, referring to the China National Petroleum Corp., which maintains the surrounding oil fields. "It's a gift from our brothers in Beijing."

Or rather, a set piece for today's untenable oil politics: As it turned out, Mike Trager not only obtained his gas fix from a hostile government that recently bought 100,000 Russian assault rifles to defend itself from an imagined U.S. invasion, but his fuel also came from a remote oil patch serviced by his nation's biggest energy-consuming rivals, the Chinese.

"America and China are on a collision course over what remains of the world's hydrocarbons," said Gal Luft, a China expert with the Institute for the Analysis of Global Security in Washington. "The 21st century is going to be defined by this aggressive competition for a resource that's depleting."

Most Americans have little idea how surging energy demand in China is reshaping the future, Luft said.

Optimists see opportunities for cooperation. With China's richest billionaire a solar-energy mogul and Beijing's zeal to convert coal to liquid fuels, the country actually may help pull the rest of the world into a post-oil economy.

But in the short term, most experts see an ominous energy cold war shaping up.

China's gross domestic product is growing at 10 percent, and its car fleet is expected to outnumber America's by 2030. Its budding oil appetite already has helped push crude prices to historic highs. Chinese companies have plucked the low-hanging fruit: smaller African petrostates and pariah nations such as Iran. Now they're moving into traditional U.S. energy turf: Canada, the Middle East and Latin America.

The single-mindedness of its quest can be unsettling. In Sudan, one Chinese contractor worked almost around the clock, erecting a 1,000-mile export pipeline in 11 months. According to the Sudanese government, workers who died on the job simply were cremated on the spot.

In Venezuela, Chávez is pushing hard to make 1.3 billion Chinese his main customers. He hopes to double oil exports to Beijing this year to 300,000 barrels a day. Chinese rig operators stride about oil towns such as Anaco, popping into Chinese restaurants that have mushroomed since the late 1990s.

In backwater Mapiricure, Chinese engineers show up in white SUVs to inspect the latest pipeline leaks. Spills have been minor so far. The Karinas poke sticks into the crude puddled around the wellheads and keep their peace. Nobody wants to disrupt Venezuela's tar-colored gravy train.

"We'll support Chávez until he behaves badly, then we'll kick him out," said Angel Cedeno, manager of the local oil-subsidized food store. "Right now, he's looking out for us."

Filling up

All the while at the South Elgin Marathon, the tanker trucks come and go, disgorging their liquid tales into the ground. There was more Qua Iboe but no Basrah Light. There was a steady flow of Louisiana crudes and only a trickle of Sahara Blend from Algeria. As usual, the fuels' stories went unheard. And if peak-oil theorists are right, and the Marathon survives its 35-year structural life span, it will be among the last filling stations dispensing gasoline in the world.

"I really think the president should do something about this gas problem," cabbie Mike Trager said. But he couldn't suggest what.