Venezuelan oil workers are starving as the country’s production shrinks. Few things are breaking Caracas’ way these days, but its struggles to keep pumping oil, its most important resource, are undoubtedly at the very top of President Maduro’s list of concerns. As the NYT reports, the petrostate’s faltering oil production is compounding Venezuela’s many other economic difficulties:
The declining oil industry is perhaps the most urgent chapter of Venezuela’s economic crisis. Oil accounts for half of the Venezuelan government’s revenues, what former President Hugo Chávez once called an “instrument of national development.” The state oil company poured its profits, more than $250 billion in all from 2001 to 2015, into the country’s social programs, including food imports.
But those profits have evaporated with mismanagement and the drop in global oil prices over the past two years. Now, even Venezuela’s subsidized oil shipments to its vital ally Cuba are slowly being phased out, oil executives with operations in Venezuela contend, forcing Havana to look to Russia for cheap oil. […]
To add insult to injury, the Venezuelan government has been forced to turn to its nemesis, the United States, for help. “You call them the empire,” said Luis Centeno, a union leader for the oil workers, referring to what government officials call the United States, “and yet you’re buying their oil.”
Earlier this year Venezuela suffered its largest one-month drop in oil production in more than a decade, and things haven’t improved much since then. Output has dropped roughly one million barrels per day over the past 18 years, and analysts expect a further decline through the rest of 2016.
Two years ago it was reported that Venezuela needed oil prices to reach $120 per barrel in order to balance its budget. At ~$45 per barrel, oil prices a far cry from that so-called breakeven level, and bargain crude is sending the petrostate’s economy into a death spiral. Power shortages are forcing producers to cut output and oil services companies are refusing to cooperate with country’s state-owned oil company because they aren’t being paid for their work. Crises beget crises, and it’s going to get a lot worse before it gets any better.