Veneconomy: The worst of three worlds
Hugo Chávez has firmly consolidated his hegemonic power based on Venezuelan oil, thanks to many years of high oil prices.
Now, the current situation of world oil indicates that it is extremely unlikely that crude prices will continue their upward trend in the short and medium terms. This deduction is made based on, among other things, the fact that crude prices have not moved significantly in response either to the recent announcement by the European Union of its intention to step up its sanctions against Iran if it does not desist from its nuclear program or to Mahmud Ahmadinejad's threat to close the Strait of Hormuz if the international embargo against Iran goes ahead.
This stable reaction of oil prices is backed by a world oil supply that is sufficiently ample and flexible to make up any temporary shortfalls in the market. What is more, it is forecast that there will be considerable growth in supply in the medium term, owing to the rapid expansion of oil and natural gas production from shale.
It is also apparent that demand is growing at an ever slower pace, thanks to the reduction in “energy intensity” since 1975.
This puts paid to the Venezuelan Government's expectations of escalating oil prices over the medium and long terms.
Unfortunately for the Venezuelan people, the Chávez administration has combined the worst of three worlds:
1) Irresponsibility and squandering after having lavishly spent the money from the current oil boom.
2) Disinvestment and inefficiency in managing the State-owned industries, particularly PDVSA.
3) Heavy borrowing and confiscation of the Venezuelan people's future thanks to a huge unmanageable domestic and foreign debt that will take decades to pay off.
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VenEconomy has been a Venezuela's leading specialized publisher on financial, political and economic data since 1982. VenEconomy's Points of View on the issues of the day, as seen by VenEconomy during the last week. Petroleumworld does not necessarily share these views.
Editor's Note: This commentary was originally published by Veneconomy , on Jan. 27, 2012. Petroleumworld reprint this article in the interest of our readers.
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Petroleumworld News 01/27/2011
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