TW: What goes up can go down. Hugo Chavez perhaps more than any other dictator benefited from soaring oil prices. As those prices have plunged and even with the recent partial rebound, Chavez' political strength has suffered.
A negative externality associated with fossil fuels is propping up poorly run governments, especially those hostile to the U.S. Developing policies to ensure oil prices remain stable and contained can pay benefits far beyond our balance of trade and putting more bucks into our consumers' pockets.
From Economist:
"...inflation is close to 30%, real wages are falling and welfare schemes have suffered big cuts in their budget. The mood on the streets of poorer suburbs of Caracas, the capital, is glum.
...Officially, unemployment is stable at around 7%...According to the Central Bank, the economy grew by 0.3% in the first quarter compared with the same months of 2008. Construction is supposed to have expanded by 3.6%. But some economists doubt the figures.
Public investment is under strain. This month, for example, the boss of Caracas’s metro system announced a review of a new line already under construction, with the probable scrapping of two stations.
...Food consumption among poorer Venezuelans may be declining...Opinion polls reveal a sharp rise in worries over the cost of living. The government’s answer to years of persistent inflation has been price controls and Mercal, a state-owned and subsidised grocery chain that offers a limited selection of staples at discounts of up to 40%. But Mercal’s sales fell by more than 11% in the first five months of this year, partly because of store closures and distribution problems.
...The most popular of Mr Chávez’s social misiones is Barrio Adentro, which includes a network of primary-health centres initially staffed by thousands of Cuban doctors. But many of these have also closed. Poorer Venezuelans must rely on rundown public hospitals, which have been starved of funds under Mr Chávez.
...oil output has been falling. When the oil price plunged last year, its direct transfers to welfare programmes fell to $2.7 billion, from $7.1 billion in 2007.
...On the face of things, the recent recovery in the price of oil to around $70 a barrel should enable Mr Chávez to muddle through without radical shifts in policy...To sustain public spending at its peak level without deficits would have required Venezuelan oil to sell at an average of $90 a barrel last year
...Mr Chávez’s hopes of remaining in power for decades to come depend, as ever, on the price of oil."
http://www.economist.com/world/americas/displaystory.cfm?story_id=13864830
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