6 months ago
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After announcing a naval blockade and seizing 2 lipid tankers, the Donald Trump medication has present ordered U.S. subject forces to absorption connected enforcing a ‘quarantine’ of Venezuelan lipid for astatine slightest the adjacent 2 months, amping up economical pressure connected Caracas.
The interaction of this imperialist measurement could worsen the already anemic Venezuelan economy. But however did a petrostate with the astir proven resources extremity up with a strained system successful the archetypal place?
Venezuela has the largest proven reserves of crude lipid successful the satellite astatine 303 cardinal barrels (2023). Yet, it ranks overmuch little successful the accumulation and refining of oil. Most of its resources are extra-heavy crude oil, whose extraction and processing necessitate specialised exertion and refineries. However, interior issues and planetary sanctions person starved it of the superior required for this.
While the state-run lipid institution Petroleos de Venezuela, S.A. (PDVSA) owns and operates 5 refineries successful Venezuela, it besides suffers from years of underinvestment, mismanagement, and a deficiency of method expertise.
Specifically, pursuing a failed coup effort successful April 2002 and the consequent wide strike/oil lockout successful December 2002-February 2003, the past President, Hugo Chavez, was forced to regenerate PDVSA’s management. Critics accidental this led to a bureaucratisation of the company.
In 2024, the state produced 9,21,000 barrels of crude lipid per day, astatine slightest 56% little than its accumulation successful the 1980s. In the 1970s, Venezuela benefited erstwhile lipid prices soared owed to the Yom Kippur War, and its per capita income became the highest successful Latin America. It was past a mostly unequal country.
However, the fig has lone dwindled since 2014 pursuing sanctions and the lipid downturn. Venezuela’s GDP per capita successful caller years, arsenic shown successful the illustration below, has go astir akin to what it was 3 decades ago. No different country’s GDP per capita has slid to this grade successful this period.
Consequently, contempt being a founding subordinate of the Organisation of the Petroleum Exporting Countries (OPEC), Venezuela has the highest wide authorities gross indebtedness compared to different OPEC members. The illustration beneath shows the Gross authorities indebtedness arsenic a stock of GDP (in %) for prime OPEC countries
While others person steered done planetary lipid terms crashes, the state continues to reel nether economical pressure. This points to the information that the economical situation successful Venezuela cannot beryllium attributed to planetary crude factors alone.
U.S. sanctions person played a large relation successful curbing the petroleum assemblage successful Venezuela. The archetypal Trump medication imposed sanctions successful August 2017, prohibiting Caracas from accessing U.S. fiscal markets. It past imposed much sanctions successful 2019, connected PDVSA, preventing it from being paid for exports to the U.S.
The sanctions besides froze PDVSA’s U.S. assets and disallowed the proviso of diluents. There was immoderate easing successful 2023 nether the Joe Biden regime, but sanctions were reinstated later, earlier the naval blockade imposed by the 2nd Trump regime.
The slump tin besides partially beryllium explained by the country’s deficiency of diversification. While galore different OPEC countries person diversified to non-oil exports, Venezuela has failed to bash so. As seen in the illustration below, Venezuela has mostly continued to trust connected its mineral (oil) exports.
Despite Venezuela exporting mostly lone oil, the country’s stock successful planetary exports of lipid fell drastically owed to these interior and outer factors. The illustration below shows the stock of prime countries’ stock successful planetary exports of crude lipid implicit time. Venezuela formed implicit 4% of the planetary lipid exports successful the 1990s, 2nd lone to Saudi Arabia’s share. However, this dwindled to astir 0.35% successful 2023.
The information were sourced from the World Bank, the U.S. Energy Information Administration, OPEC reports and Harvard Atlas Lab
