It’s rare that a single individual’s death can have such dramatic ramifications on the oil and gas industry and global economics, but that seems to be the case with Hugo Chavez. Chavez, who died March 5 after leading Venezuela for 14 years, was so intent on pushing forth his socialist policies that he tilted the concept of supply and demand on its head.
Succession is uncertain. Daniel Yergin, IHS vice chairman, intimated that Chavez’s successors will struggle to stay in power. “Without [Chavez’s] charisma and force of character, it’s not all clear how his successors will maintain the system he created,” Yergin said in a statement.
Regardless of the election outcome, several countries will certainly be impacted.
Venezuela: Sarah O. Ladislaw, co-director and senior fellow at the Center for Strategic and International Studies, along with Frank A. Verrastro, senior vice president, issued a statement regarding the effects of Chavez’s rule on his home country. “Even under the best of circumstances, reform in the energy sector will take a long time to emerge,” they said in the statement. “The damage that has been done not only to PDVSA but to the institutions of the state civil society could take years to rehabilitate.”
Cuba and Nicaragua: These two countries in particular have benefited from heavily subsidized oil imports from Venezuela. “If [opponent Henrique] Capriles is victorious, he is all but certain to end Chavez’s policy of shipping oil to countries like Cuba and Nicaragua on extremely favorable terms,” Mark Jones, chair of political science at Rice University, said in a statement. “In the case of Cuba, the end of Venezuelan petroleum shipments would cripple the country’s already struggling economy.”
China: Under Chavez Venezuela entered into a “loans for oil” program with China, according to “Business Insider.” Venezuela was planning to increase its daily oil exports to 1 MMbbl by 2015, the report stated. “Chavez’s death has naturally made Beijing uncomfortable since opposition leader Capriles has previously said he would do away with Chavez’s… policies,” the article stated, adding that these imports meant that PDVSA was not paid directly for almost half of its crude products in 2011.
The US: Despite an often difficult relationship, the US and Venezuela have maintained a stabilizing trade agreement. “As we look ahead to another period of transition in Venezuela, it is important to be mindful of the potential for disruption and to look for ways to mitigate the impacts of such disruption,” Ladislaw and Verrastro said in their statement. “But it is equally important to remember the trade ties that bind the two countries for the time being and to find opportunities to drive change in a positive direction.”
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