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Comment by api | Hacker News Reader

"Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in."

This is a classic "that never works" maneuver. The USA did the same thing to some extent when it "de-Baath-ified" Iraq, which shows that this is a thing that doesn't work regardless of whether you are "left wing" or "right wing" and it doesn't even work when the USA does it. It also sometimes fails in the corporate world, such as when an "activist investor" replaces everyone who knows what they're doing in a company or a lot of people are fired in an acquisition.

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>This is a classic "that never works" maneuver

Funny how this argument starts to fall apart when you look at all the failing oil & fracking companies in the US, which were run by people who knew what they were doing and had no socialist petro regime to be loyal to and no activist investors.

It seems to show that their boom/bust is caused by oil, not politics. Fortunately the US doesn't have a majority of its income dependent on a single state-owned company, so "creative destruction" can happen safely as long as there's a proper social safety net.

Aren't they failing because of low prices, not because of technical incompetence?

The frackers have stopped drilling new wells, but the way fracking works actually lends itself to this. They are not long term wells like you typically see, but more of a burst and drill again. When the prices go up, they will put the equipment back in the field.

Now would be a good time to schedule some of those infrastructure projects that need truckers, welders, and such.

Yes, that's my counter-point. Depending fully on oil has many negative repercussions for any country. Unlike private entities in the USA, you can't just downsize a country to maintain profits.

They're only failing because it costs them $35 to produce a barrel of oil, and the price of oil is currently well below that. If it recovers, they'll recover.

An economy that can fail because of a lower price of oil is itself a failure.

It's like saying, "yeah, our high traffic e-commerce site is only failing because an intern tripped over a server power cord". No, failure is when tripping over a power cord is enough to make you fail.

Not an economy, but individual businesses.

The better analogy in computer services would be if your e-commerce site made $100 per hour and took 1 kilowatt to run, but then the price of electricity rose to $101 per kilowatt-hour. As soon as the price fell back below $100, you'd be back in business -- the same is true of the fracking companies as soon as the price of oil rises.

$101/kWh is a black swan event that would take down your competitors and customers just the same, "falling to the lower end of historical norms for oil prices" is not.

Even so, if your business depends on some resource staying at a certain price, and you do not wish to couple your profitability to that price, you should buy options or forward contracts, as that's the benefit of modern financial instruments. Oil-intense businesses (like airlines) tend to hedge against big fluctuations like this.

First, those are companies, not countries. Second, those companies are failing economically, but they aren't failing in their ability to pump oil out of the ground. Whereas Venezuela got rid of the people who actually knew how to pump oil out of the ground, so they got less oil at the same time as falling oil prices.

Where's the evidence of that? Why do you think venezuela should be able to solve all their problems by pumping more oil but don't expect failing companies to do the same?

You seem to be confused. api's claim was that getting rid of people who know what they're doing, and expecting success, never works. You seem to be arguing that other things can fail to work. That's true; nobody claimed otherwise. Your replies therefore seem to be aimed at strawmen; nobody here has expressed the position you are arguing against.

You're right, I was taking issue with the article quote that api embedded, and the notion that getting rid of people who knew what they were doing, assuming it's true, was the cause of VZ's current catastrophe. I think they could have had the most well-oiled oil-pumping machine and they would still be in financial ruin, as has happened to countless corporate oil companies in the US.

True. If you set your expenses to match your expected income, and your income is from oil, and the price of oil falls spectacularly, you're in deep trouble. It doesn't matter whether your expenses are social programs (Venezuela) or loan payments (frackers), you're just about doomed either way.

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