Three good books Friday links (Saturday edition)
Feb 112010
U.S. oil prices since January 2007, from the U.S. Energy Information Administration.

In a February 7 piece on AOL’s DailyFinance blog, reporter Vishesh Kumar foresees a drop in world petroleum prices this year. Led by slowing Chinese demand, sluggish U.S. economic growth, and more production in Iraq, Kumar cites analysts who predict that oil prices could slump from their current $70 per barrel (closer to $75 today after U.S. snowstorms) to as low as $50.

Other analysts, particularly those who see a stronger U.S. recovery, aren’t as convinced that oil will drop so steeply. But whether the price drops or stays the same, there is a consensus that world oil markets are currently glutted and the price is unlikely to rise in 2010.

Kumar’s prediction would be a disaster for Venezuela, whose oil-dependent economy is already battered by a deep recession, water and electricity shortages, high inflation and scarcities of several basic foods. President Hugo Chávez is facing economic discontent as the country inches closer to September 26 voting to elect a new National Assembly. The Assembly elected in 2005, in a vote boycotted by all opposition parties, ended up being almost unanimously pro-Chávez, eliminating a critical check on executive power. There will be no boycott this time, so the next Assembly will have far greater opposition-party representation — perhaps even a combined majority if trends continue.

As Venezuela’s economic and political problems mount, President Chávez needs a fresh infusion of cash to keep his revolution going (dipping deeply into government reserves is a poor and risky option). In Venezuela’s undiversified economy, that cash can come from only one source: rising oil revenues.

But since oil prices don’t look like they’re about to rise, and may in fact fall further, we have to conclude that Venezuela’s 2010 outlook is bleak. The period between now and the September elections is going to be tense.

3 Responses to “A grim prospect for Venezuela”

  1. Jaime Bustos Says:

    I have the feeling that Chavez has turned out to be a cobblestone in the shoes of the worldwide status quo. No matter how Chavez is ousted if by failed predictions of oil dropping prices, a Venezula embargo, money fueled nonconformism psy ops, by constant condemnations from the most hypocritical politicians or by a Coup d’état this guy will follow the steps of Shaddam.

  2. Boli-Nica Says:

    So much for the “Caracas Consensus” These past 10 years so many people obsessed with the evils of Neo-Liberalism, the Washington Consensus, and Globalization have not only given Chavez a pass, theyt have openly hoisted his disfunctional economic system as a viable alternative. Doesn’t matter if you are one3 of the worlds top oil producing nations, that oil prices were at an all time high, and you have hegemonic control of the state. Not to mention having enough money to buy off the wealthy. Command economies do not work, period end of story.

  3. Camilla Says:

    Chavez’s outlook is bleak. But that’s what makes Venezuela’s bright.

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