Filed under: Bureaucracy, Communism, Cuba, Economics, Economy, Politics, Venezuela | Tags: Communism Doesn't Work, Venezuelan Oil Reserves, Wasting a Resource
Some of you might remember when Venezuela was a beautiful and prosperous nation. But Americans mostly don’t pay that much attention to South America, I suppose because of the language barrier, which is why we pay more attention to our English-speaking allies, and Europe.
The proven oil reserves in Venezuela are recognized as the largest in the world, totaling 297 billion barrels, as of January 1, 2014. In early 2011 the Venezuelan government under Hugo Chavez announced that the nation’s oil reserves had surpassed those of Saudi Arabia, the long-term leader. OPEC said the Saudi reserves stood at 265 billion in 2009.
Wikipedia says “Venezuela’s development of its oil reserves has been affected by political unrest in recent years. In late 2002, nearly half the workers at the state oil company PDVSA went on strike, after which the company fired 18,000 of them.” I think it has been pretty well proven that “state owned” is not a particularly good idea, nor is business trying to play politics.
Reuters reported that state-owned PDVSA is completely falling apart, with workers walking off the job at a frightening pace. The conditions for oil workers have been deteriorating for years with shortages of food, unsafe working conditions, and hyperinflation destroying the value of paychecks. President Nicolas Maduro has sacked the head of PDVSA and handed control to the military in order to keep the armed forces on his side. Major General Manuel Quevado has only accelerated the decline. Apparently every Venezuelan military officer has a Cuban minder.
Venezuelan oil is a very heavy crude, which needs more in the way of refining than light crude, but Venezuelan refineries are breaking down from neglect and lack of investment.
Reuters reports that about 25,000 workers have quit PDVSA between January 2017 and January 2018, a staggering sum. PDVSA employs roughly 146,000 people. Thousands of workers are walking off of job sites, fed up with going to work hungry, putting their lives at risk at rickety refineries, all for a paycheck that fails to cover even the most basic expenses.
Fires have broken out, and the loss of both top-level engineers and managers as well as experienced workers means the losses will only get worse. Refineries are falling apart, and ports are reducing operations because of a lack of workers.
PDVSA accounts for about half the nation’s oil production — the rest are joint ventures. Last Tuesday, Chevron said that two of its workers were arrested. Chevron has not fled the country as many of its peers have, but the arrests may change matters. This is the first direct hit on an international company operating in Venezuela. At some point the costs of operating will become too high. The amount of oil available on the market will decline, the price of oil will increase. Maduro’s grip on the nation will become even more shaky. There’s not that much more available for him to squeeze.
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