Photo: Fora do Eixo / Flickr
Hugo Chavez is dead — and oil markets have so far shrugged, trading within less than a dollar’s range since Tuesday’s official announcement.According to energy guru Stephen Schork, we shouldn’t be surprised, given Chavez’s illness was well known and the country’s policies are unlikely to change in the short term.
In a new note today, Schork says Venezuela remains way more exposed to U.S. market fluctuations than we do Venezuelan ones.
Mismanagement of the oil bonanza enjoyed under Chavez’s time in office was squandered on ideological white elephants. Thus, the irony of ironies… whereas the U.S. has grown less dependent on Venezuelan supplies of crude oil over the years, Venezuela has grown more dependent on supplies of U.S. refined products. For instance, U.S. exports of oil products to Venezuela have increased from 6.6 kb/d in 2004 to 85 kb/d in 2012.
In other words, the U.S. buys crude oil from Venezuela and then sells it back to them (refined) at a higher price.
Only a socialist could create a situation like that.
If prices ever do move on Venezuela news, it’ll be downward, given how severely Chavez cut production during his reign. Schork says the country is producing less than 2.5 MM barrels per day, “a fraction” of its true capability.
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