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Chavez's Big Oil Bluff

Peeved by Exxon's legal victory, Venezuela's President is threatening to end oil exports to the U.S.a move that would probably backfire
Venezuelan President Hugo Chavez.
Venezuelan President Hugo Chavez. Pedro Rey/AFP/Getty Images

Venezuelan President Hugo Chavez is famed for his incendiary oratory. But in his recent threats to cut off oil shipments to the U.S., a move he says could propel world prices to $200 a barrel, he's probably blowing smoke, not fire. The U.S., after all, is the No. 1 market for Venezuela's oil exports. More important, the U.S. is home to refineries specially equipped to handle Venezuela's brand of heavy, high-sulfur crude. Finding other customers for the country's oil in a hurry would hardly be a cinch.

"This threat could backfire for Venezuela and Chavez," says Pietro Pitts, a Caracas-based oil analyst who publishes Latin Petroleum magazine. "Any embargo would hurt Venezuela far more than the U.S. Venezuela supplies about 11% of U.S. oil, but the U.S. accounts for the bulk of Venezuelan oil exports."