Venezuelan oil minister announces environmental tax on oil profits

Merida, March 12,
2008, (venezuelanalysis.com) – Rafael Ramírez, the Venezuelan Energy and
Petroleum Minister and president of the state oil company PDVSA, announced
yesterday that the Venezuelan government will introduce a new tax on soaring oil
profits.

"The tax will be
applied to help pay for environmental damages and to compensate the Venezuelan
people" through social programs, Ramírez declared at the World Heavy Oil
Conference in Alberta, Canada Tuesday. He did not mention the amount of the tax
or how much the state expects to collect.

The tax is justified
because oil prices and earnings have risen beyond what was predicted when contracts
were signed, Ramírez affirmed.

He also pointed out
that international oil companies have "done a lot of damage," and the
Venezuelan government believes "that the oil has to be used for the people in
the country."

In addition, the tax
will help protect oil revenues if prices drop when the northern winter season
ends and demand decreases, the minister said.

He projected that the "base
price" per barrel in the near future should be $80, which is significantly
greater than previous ranges of $20 to $30 per barrel, because worldwide refining
capacity is reaching limits, and creating new supply is more expensive than
ever before.

Also, explosive growth
in India and China has increased worldwide demand for oil, Ramírez explained.
He made clear that PDVSA is "not at war" and welcomes other oil companies that increase
their market share in countries that PDVSA supplies, referring to Canadian
companies seeking to sell more to the U.S.

Even though prices are
currently soaring above $109 per barrel, the Organization of Petroleum
Exporting Countries (OPEC) will not increase supply because the "the supply is
in line with consumer demand," the minister asserted.

Ramírez attributed the
record prices to speculation by commodity investors, the devaluation of the
dollar, and anxieties about supply disruptions due to international conflicts
such as the judicial dispute between Exxon Mobil and PDVSA, among other factors
that are beyond the "fundamentals of the market".

Another issue of
concern to OPEC is the threat of crisis in the U.S. economy, according to
Ramírez. "If they collapse, it will affect the worldwide economy."