The death of Hugo Chavez raises many political and economic questions, but for the moment the international oil markets, those that are of most importance for Venezuela, do not seem to react significantly to the leader's disappearance.
Chavez, the son of a country master, owes much to his personal charisma, but he also owes a lot to oil. As Daniel Yergin of Cambridge Energy Research says, it was too low prices that propelled him to power and it was the subsequent steep rises that allowed him to keep it. However, in the 14 years of his presidency, Venezuela's "weight" in the world panorama of crude oil has certainly not increased. The country is among the top three in the world in proven reserves, but its exports stood at 3 million barrels per day in 2000 and hit a low of 1,7 mbd in 2011, a decline largely attributable to nationalization of reservoirs and installations. Petroleos de Venezuela SA (PDVSA) has controlling stakes in every well in the country but does not have the same financial and technological means as the expropriated majors, which include the world's number one, Exxon Mobil.
However, crude oil is still the keystone of the Caracas economy, which in 2012 earned about 103,46 dollars from each barrel exported and recorded a growth in gross domestic product of 5,6%. Washington's interest is also notable: although the United States is close to energy self-sufficiency, a flow of about one million barrels per day of Venezuelan crude is directed towards them (out of a total production that does not reach 3 mbd) . Oil was also the means by which Chavez made sensational demonstration gestures, such as the sale of low-priced fuel to less well-off US families, an assistance program promoted by Citgo, a US company controlled by PDVSA.
On the domestic market, along with homes, schools, hospitals and foodstuffs, fuel has also enjoyed exceptional subsidies. Although petrol and diesel were imported (due to the critical conditions of the nationalized refineries), the pump price in Venezuela has so far been among the lowest in the world. A relief for citizens, of course, but one that has cost the country 25 billion dollars a year.
Obvious to wonder if the situation will change, and in which direction. There is no answer to the second question, while the answer to the first question is reasonable to expect to be affirmative. Vice-President Nicolas Maduro, a 10-year-old bus driver who has been leading the country since January 30, is for the moment the only candidate to succeed Chavez. The appointment must take place within XNUMX days of the funeral to be held on Friday, but on the horizon there is no clear view of who can really replace the leader who has just been defeated by cancer. His power was born from his charisma, from his enthusiasm for dreams that seemed feasible, like the one that recited "Venezuela is rich, you can be too". The power of the apparatus therefore risks proving to be fragile without Chavez.
The opposition certainly aims to give the market a breather, to bring down the extremely high interest rates. But with the institutions crumbling after years of dictatorship and with the position of the military still to be deciphered, it is very difficult for Venezuela to avoid a period of instability and keep corruption and crime at bay (in 2012 official data speak of at least 16 homicides). President Barack Obama declares, of course, that he aims at "constructive relations". The Latin American nations gratified by Petrocaribe (the company that exports Venezuelan crude oil with concessions and payment extensions) will be even more on tenterhooks, first of all, the Cuba of the Castro family, which receives 97 barrels a day from Caracas.
For the moment, as we said, it is precisely the oil markets that are not fibrillating. Brent prices are buoyed more by the temporary closure of a pipeline in the North Sea than by the Chavez vicissitudes. In any case, there is a certain abundance on offer that allows you not to be too alarmed. However, attention to future developments must not slacken. A new center of instability, after those that emerge from time to time due to the Arab Spring, Iranian nuclear ambitions and Nigerian tensions, is not welcome to anyone.
