Bolivia nationalizes gas fields -- Impacts energy markets

May 6, 2006

Bolivia's President Evo Morales ordered the 20 foreign oil and gas firms who operate in Bolivia to send production to a state company for processing. This means that these companies could wind up with contracts that pay them to operate the fields, instead of sharing in the profit, as they do now. Bolivia has South America's second largest natural gas reserves.

What it Means:
Although it will not cause oil and gas prices to sky-rocket, as sanctions on Iran would do, it is another indication that smaller, poor countries are realizing their power as owners of natural resources.

The biggest impact will be with Brazil, who has the largest gas company in Bolivia. Most likely, Brazil and Bolivia will work out their differences, and business will continue as usual. However, part of the negotiation will probably mean a higher price paid to Bolivia, which means higher prices paid by consumers in Brazil for Bolivian natural gas.The U.S. State Department is not concerned as of yet...it is waiting to see how Brazil and Bolivia work things out.

This is also an indication of China’s growing influence in South America, as president-elect, Mr. Morales had met with President Hu Jintao of China in Beijing and called China an "ideological ally," a day after he invited it to help develop Bolivia's vast gas reserves.

Action Steps:
This kind of "pipeline politics" will result in higher energy costs throughout the world in the long term - and the long term is what retirement planning is all about.

Cutting back on energy use is not about “conservation” or “saving the planet”, although those are good motivations. It is really about learning to adopt a different mindset: on a daily basis, what decisions can you make that will help you rely less on foreign oil, so you can reduce your vulnerability to ever higher costs?

Source: VOA, Natural Gas companies are concerned; State Dept. not concerned about Bolivian decree

Llke this article? Sign up for your free weekly email newsletter.