Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin, Gold and Silver Markets Brief - 18th Feb 25
Harnessing Market Insights to Drive Financial Success - 18th Feb 25
Stock Market Bubble 2025 - 11th Feb 25
Fed Interest Rate Cut Probability - 11th Feb 25
Global Liquidity Prepares to Fire Bull Market Booster Rockets - 11th Feb 25
Stock Market Sentiment Speaks: A Long-Term Bear Market Is Simply Impossible Today - 11th Feb 25
A Stock Market Chart That’s Out of This World - 11th Feb 25
These Are The Banks The Fed Believes Will Fail - 11th Feb 25
S&P 500: Dangerous Fragility Near Record High - 11th Feb 25
Stocks, Bitcoin and Crypto Markets Get High on Donald Trump Pump - 10th Feb 25
Bitcoin Break Out, MSTR Rocket to the Moon! AI Tech Stocks Earnings Season - 10th Feb 25
Liquidity and Inflation - 10th Feb 25
Gold Stocks Valuation Anomaly - 10th Feb 25
Stocks, Bitcoin and Crypto's Under President Donald Pump - 8th Feb 25
Transition to a New Global Monetary System - 8th Feb 25
Betting On Outliers: Yuri Milner and the Art of the Power Law - 8th Feb 25
President Black Swan Slithers into the Year of the Snake, Chaos Rules! - 2nd Feb 25
Trump's Squid Game America, a Year of Black Swans and Bull Market Pumps - 24th Jan 25
Japan Interest Rate Hike - Black Swan Panic Event Incoming? - 23rd Jan 25
It's Five Nights at Freddy's Again! - 12th Jan 25
Squid Game Stock Market 2025 - 5th Jan 25

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Hugo Chávez Is Gone, but His Oil Legacy Lives On

Politics / Venezuela Mar 21, 2013 - 12:23 PM GMT

By: Marin_Katusa

Politics

On March 5, 2013, Hugo Chávez, one of the most iconic presidents in the world, died at the age of 58. While he was alive, Chávez was a highly controversial figure, calling George W. Bush a drunkard and a "psychologically sick man" and Tony Blair an "imperialist pawn who attempts to curry favor with Danger Bush-Hitler."


Like him or hate him, Chávez definitely had a huge following in Venezuela, as well as the entirety of Latin America. His anti-American and socialistic rhetoric made him an ally of Fidel Castro in Cuba and Ahmadinejad in Iran. Combined with Correa in Ecuador, Fernández in Argentina, and Morales in Bolivia, Chávez was able to make a front in South America against the "evil imperialist gringos."

But with him no longer in the picture, things will change, and cheap Venezuelan oil will be able to flow into the markets, right?

Wrong.

Whoever succeeds Hugo Chávez will be trapped between a rock and a hard place. Venezuela currently has some of the cheapest gasoline in the world; it's costing an average of $1 to fill up one's tank. These low prices are made possible by the enormous amount of fuel subsidies – estimated to be 4.5% of the GDP (for reference, the US Department of Defense spends 4.5% of the US GDP). Any attempts to remove these subsidies will be met with enormous resistance from the population, which has long viewed cheap gas as a birthright.

To make things worse, the production of oil from Venezuela has been steadily decreasing due to the lack of reinvesting back into the oil patch and lack of upgrading the energy infrastructure. Instead of investing in the oil sector, Chávez has been spending most of the money on social programs. This decrease in supply combined with increased demand for oil from a growing population means there is much less oil available for exports.

In fact, since Chávez took power in 1999, Venezuela's oil exports have been cut by half.

Oil provides 45% of Venezuela's revenue, so in order to keep running the country, the government must find a way to get more money out of every barrel that it exports.

And what better way is there than to pass it on to the evil imperialist consumers of the West?

This situation is not happening just in Venezuela, but in many other oil-producing countries: Iran, Kuwait, and Indonesia are just a few examples. It is only a matter of time before these countries conspire in order to raise the worldwide price of crude oil. What will they raise it to?

US$100 per barrel of oil? US$150? US$200?

Whatever it takes to keep the country running and the ruling classes in power.

Will America be spared? According to the latest International Energy Agency (IEA) report, the United States will become self-sufficient in energy by 2035, which means that it will be free from the geopolitical manipulations of oil-producing countries.

Unfortunately for America, this report is flawed and filled with inconsistencies – relying on it to guide your energy investment decisions would likely prove disastrous to your portfolio.

A better bet for your portfolio would be to follow the advice in The 2013 Energy Forecast. It provides an insider's view of two segments of the energy sector likely to provide sizable near-term returns to investors who position themselves now.

Today, you can get this report for free.

© 2013 Copyright Casey Research - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Casey Research Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in