Desperation is spreading in Venezuela as violent protests continue to paralyze the country, further damaging the country’s shattered economy. Venezuela’s already-decrepit oil industry is deteriorating by the day, and an outright implosion is no longer out of the question.
The inflation rate, according to the IMF, will balloon to 720 percent this year. Food shortages have been common for quite some time, but are deepening and wearing down the population. Three out of four people surveyed by the WSJ reported involuntary weight loss last year. Hospitals have completely broken down.
Venezuela has been crippled by protests since late March, with more than three dozen people having been killed over the past two months, and there is no sign of improvement. This meltdown is taking a toll on Venezuela’s oil production, the last thing keeping the country from becoming a failed state. Venezuela’s oil production has been declining for more than a decade, mainly because oil revenues are used to finance the government, leaving little for state-owned PDVSA to reinvest in its operations.
But things are getting worse. The cash shortage is accelerating the decline. As of April, oil production stood at 1.956 million barrels per day (mb/d), down 10 percent from last year, and down more than 17 percent from 2015 levels – and output continues to trend downward. James Williams, energy economist at WTRG Economics, told Marketwatch in March that he expects Venezuela to lose another 200,000 to 300,000 bpd this year, another 10 to 15 percent decline from 1Q2017 levels.
The problem is downstream as well, as the shortage of refined products worsens. Three out of Venezuela’s four oil refineries are operating significantly below capacity because of the inability to find spare parts for maintenance, according to Reuters.
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