Exxon Mobil Corporation (XOM), ConocoPhillips (COP): Why Venezuela and Big Oil Are Better Off Without Chavez

Page 1 of 2

Hugo Chevez died from cancer last night after 14 years as President of Venezuela. In the short term, Chavez’s death means little for the oil markets, which shrugged off the news. The question now is will things get worse for Venezuela with more turmoil, or will things get better, allowing Venezuela to regain its status as a top five exporter of oil.

Chavez’s Rule
Chavez’s presidency was strongly influenced by the rising price of oil. In 1998, oil was selling for peanuts, leading to unrest in the country, because the Venezuelan economy depends heavily on oil. Chavez took power, and was lucky that the price of oil rose steadily.

Chavez was a socialist whose time in office was marked with subsidies to the poor, the nationalization of thousands of companies, currency controls, and price controls, all funded by the country’s growing revenue from selling oil. While these policies were popular with the poor, they inevitably led to shortages, 20+% inflation, currency devaluations, and a widespread black market.

Oil Production in Venezuela
Oil production remained in a steady range of 3 million to 3.6 million barrels of oil equivalent per day until 2002, when the workers of Venezuela’s state-owned oil company PVDSA went on strike for two months. The country never fully recovered from the strike, and oil production declined steadily thereafter.

The production decline picked up speed in 2007, when Chavez nationalized the oil deposits of the country and demanded companies cede a 60% stake in all oil projects in Venezuela to state-owned oil company PDVSA.

Rather than cede control, Exxon Mobil Corporation (NYSE:XOM) and ConocoPhillips (NYSE:COP) walked away from their investments in Venezuela, and are seeking $40 billion in damages from the Venezuelan government. At the same time, Chevron Corporation (NYSE:CVX), BP plc (ADR) (NYSE:BP), TOTAL S.A. (ADR) (NYSE:TOT), and Statoil ASA(ADR) (NYSE:STO) agreed to the demands of the government. The nationalizations continued in 2009 with the government seizing control of some oil services companies, and refusing to pay others.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools In the World

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

Top 6 Cities For The Ultra Rich to Live in Comfort

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!