Some of the
most significant ramifications of the death of Hugo Chavez for the U.S., both
short-term and long-term, may have little to do with the late ruler's politics
and more to do with his country's oil.
Venezuela
is one of the world's biggest oil exporters and one of the top five suppliers
to the U.S. As a result, any sign of instability following Mr. Chavez's death
could roil oil markets, boost crude prices and dent the global economy.
Even a
Chavista successor to Mr. Chavez--such as current Vice President Nicolas
Maduro-- could have a tough time maintaining the heterogeneous coalition of
socialists, businessmen, and the military that has coalesced around Mr. Chavez.
"Instability
in Venezuela is the real risk, because that could have a dramatic impact on
global oil supplies," said Mark Jones, a Venezuela expert at Rice
University.
Venezuela
produces about 2.5 million barrels of oil a day and supplies about 1 million
barrels a day to the U.S. Oil wealth, especially in the middle of the last
decade, underwrote Mr. Chavez's "Bolivarian revolution" and allowed
lavish spending on social programs.
But chronic
underinvestment in the state oil company, Petroleos de Venezuela, and hostility
to foreign firms has steadily eroded the country's oil-production capacity,
leaving the future murky.
Mr.
Chavez's death also could have knock-on effects throughout the region.
Venezuela
provides about 100,000 barrels of oil a day to Cuba, essentially free--a $3
billion to $4 billion annual subsidy that could disappear if Mr. Chavez is
replaced by an opposition candidate.
That would
be devastating to Cuba, comparable to the economic hardship the island suffered
after the implosion of its main sponsor, the Soviet Union, in the early 1990s.
Venezuela
also provides subsidized oil to Nicaragua and sells oil to other Caribbean nations
on preferential terms--meaning any political upheaval in Caracas could harm
economic growth throughout the region.
Whoever
succeeds Mr. Chavez likely will seek to maintain oil trade with the U.S. and,
if possible, to boost investment in the oil sector.
"We've
had this symbiotic relationship--Chavez has been a diplomatic thorn in our
side, but his revolution and regime are built largely on oil sales to the U.S.,
and that relationship is likely continue," Mr. Jones said.
Oil
analysts see opposition candidate Henrique Capriles as a more business-friendly
candidate, one who could try to open the Venezuelan energy sector to
much-needed foreign investment, similar to policies favored by the new Mexican
president, Enrique Pena Nieto.
But while
major U.S. oil companies would like access to Venezuela's ample reserves of
heavy crude, the country's past expropriations of foreign energy firms' assets
could also damp enthusiasm for a quick return to the country.
For many
industry participants, the problem comes down to a single question: Would
foreign oil companies be asked back to Venezuela to revive its stagnant oil
industry?
"It's
the million dollar question, whether they'll open up or not," Bobby Tudor,
president of energy investment firm Tudor Pickering Holt Co., said on the
sidelines of the IHS CERAWeek conference in Houston.