This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What Hugo Chavez's Death Means For Venezuela's Oil Market

What Hugo Chavez's Death Means for Venezuela's Oil Market

Hugo Chavez, president of Venezuela, passed away last week in Caracas. For 14 years he reigned over the South American nation with an iron fist; now,  investors are eager to see if his successor will be able to reverse the dramatic decline in oil exports that has taken place over the past decade.

While most analysts agree that Chavez's death could result in near-term political uncertainty, which could bring further turmoil to Venezuela's oil sector, others believe that in the long term, any new government will be motivated to focus on promoting and rebuilding the sector.

The potential value of the Venezuelan oil sector is phenomenal, with the country's Orinoco Belt holding the world's second-largest reserve of tar sands and also the world's largest conventional oil reserve, according to BP's (NYSE: BP,LSE:BP) Statistical Review of World Energy 2012.

Questionable energy policies

Chavez's time in charge proved punishing for the country's once-thriving oil industry. Despite boasting 18 percent of the world's proven oil reserves, the largest share for any one country, Venezuela's annual output has fallen by more than 20 percent since 1998, to 2.5 million barrels per day, according to The Wall Street Journal.

Many put the decline down to Chavez being elected president, at which time he immediately increased state control of the oil sector. His questionable energy policies led to a scenario whereby heavy domestic oil subsidies drove domestic oil consumption up from 36 percent to 47 percent of the total energy mix in the last decade, reducing the amount of crude available for the country to sell into the global market.

With the former president relying heavily on oil revenues to fund government spending, state-owned Petroleos de Venezuela (PDVSA) became a prime example of underinvestment, mismanagement and inefficiency, effectively kept afloat by loans from the Chinese government. Since 2006, the company's debt has climbed 10-fold, to $34 billion, and despite relying on the sector's income to fund his famous social programs, Chavez reinvested relatively little back into the sector.

1 of 5

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,072.21 +42.00 0.23%
S&P 500 2,090.15 +8.27 0.40%
NASDAQ 4,802.5210 +29.0490 0.61%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs