Venezuela’s Oil Industry is Finished
Venezuela is a country in the late stages of socialism. One of the few things that had been propping up the corrupt Maduro regime was oil, and the oil industry has just about hit its limit:
Venezuela’s oil output is collapsing at an accelerating pace, deepening an economic and humanitarian crisis and increasing the chances the country will default on its debts.
Crude oil production fell 12% in December from the month before, according to government figures released Thursday. Over all of 2017, output was down 29%, among the steepest national declines in recent history, driven by mismanagement and under investment at the state oil company, say industry observers and oilmen.
The drop is deeper than that experienced by Iraq after the 2003 war there—when the amount of crude pumped fell 23%—or by Russia during the collapse of the Soviet Union, according to data from the Organization of the Petroleum Exporting Countries.
“In Venezuela, there is no war, nor strike,” said Evanán Romero, a former director of government-run Petróleos de Venezuela SA. “What’s left of the oil industry is crumbling on its own.”
This week, the state oil company’s new chief, National Guard Gen. Manuel Quevedo, blamed the production downturn on sabotage and terrorist attacks by the opposition. He didn’t offer any evidence. He said output has stabilized and will grow to 2.5 million barrels a day this year.
Most analysts, however, expect Venezuela’s production to continue falling. By this year’s end, output could fall to 1.3 million barrels a day, according to Francisco Monaldi, a Venezuelan energy expert at Rice University.
The decline has been exacerbated by a management purge at state-run PdVSA by Mr. Maduro that has paralyzed the oil giant. Seventy senior managers have been jailed on graft allegations in the past three months. Generals with no industry experience have been named to run the firm.
This doesn’t yet mean the end of the regime, because they are also making money off the drug trade. It does mean that the starvation deaths will accelerate, however, as the government’s available stocks of cash continue shrinking.