A seriously ill Hugo Chavez may add to pressures on oil markets and cause increased disruption or higher prices for businesses, by James Bray
The fact that Venezuelan president Hugo Chavez was recently operated onl in a Cuban hospital could add to pressure on world oil markets and cause disruption for international business. It is a strange example of how interconnected the world's risk landscape is.
“Hugo Chavez has cancer” read the headline in Spanish newspaprer El Pais . Chavez underwent an operation in a Cuban hospital to remove a cancerous tumour. He has since appeared in state media looking fit and healthy.
However uncertainty over Chavez’s health and his prospective successor may have adverse effects on world oil markets.
Oil markets have recently been under pressure with the International Energy Agency announcing it would release 60m barrels of oil from its reserves to dampen the increase in global prices.
Analysts believe that Chavez may seek to subjugate the state owned oil company PDVSA in order to stay in power longer. His recent illness could encourage him to act sooner. “PDVSA was hotbed of opposition to Chavez, culminating in the coup attempt of April 2002” said Peter Zeihan an analyst at Stratfor Global Intelligence.
“Chavez chose to gut the company of its political activists which solidified his rule but caused a slow degradation of PDVSA’s energy capacity” added Zeihan.
Venezuelan oil porudction is currently 1/3 below its peak circa 2000. The Venezuelan oil industry produces approximately 2.5m barrels of oil per day according to 2010 figures from the US Energy Information Administration.