Articles
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Why oil market didn't react to Chávez's death
Hugo Chavez is dead. He’s been dying for a long time. So has Venezuela’s oil industry. And that’s the main reason the oil market reacted to the death of Venezuela’s president with little more than a shrug.
Following news of Hugo’s death, April crude-oil futures drifted lower to $90.72 a barrel on Globex, down 10 cents from the $90.82 settlement price earlier in the day on the New York Mercantile Exchange.
The muted response reflects Venezuela’s waning influence on the global energy market.
That’s not to dismiss its reserves. Chavez’s government has estimated Venezuela’s untapped oil reserves at nearly 300 billion barrels. The United States Geological Survey puts them at closer to 200 billion barrels. Either way, Saudi Arabia is the only country sitting on more oil than Venezuela.
But under Chavez’s 14-year rule, Venezuela’s oil production fell 30%, from 3.5 million barrels per day to 2.5 million. Behind the decline lies a botched effort to nationalize the nation’s oil industry, which left state oil company PDVSA woefully underfunded, drove foreign investment out of the country, and left its aging energy infrastructure with a severe shortage of qualified personnel to maintain it.
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