The Oil Crisis That Can’t Be Stopped, by Nick Cunningham

As they always do, the socialists are usaying that the latest socialist disaster, Venezuela, is not “real” socialism. According to them, the world is still waiting for “real” socialism, which will be milk and honey for all. Meanwhile, Venezuela suffers from “unreal” socialism, and unreal inflation, unreal currency depreciation, unreal output reduction, and an unreal decline in the standard of living for the average Venezuelan. From Nick Cunningham at oilprice.com, via wolfstreet.com:

Venezuela is “suffering the worst economic depression ever recorded in Latin America.”

Venezuela’s oil production fell by another 52,000 bpd in February from a month earlier, according to OPEC’s secondary sources data.

That put Venezuela’s oil output at 1.548 mb/d for February, down 100,000 bpd since December, down 600,000 bpd from 2016, and down 1 mbd from 2004. Output will almost certainly continue to head south for the foreseeable future. The uncertainty, then, is only over how bad things might get.

“Production is collapsing in a way rarely seen in the absence of a war,” Francisco Monaldi, fellow in Latin American Energy at the Baker Institute for Public Policy at Rice University, wrote in a new report published by the Atlantic Council. “The country is also suffering the worst economic depression ever recorded in Latin America.” GDP shrank by 16.5 percent in 2016 and 12 percent in 2017. The IMF predicts the economy will contract by another 15 percent this year.

The Atlantic Council report points out the roots of the country’s oil production problems. Former President Hugo Chavez sacked thousands of workers after a strike in 2003, decimating much of the company’s technical expertise. He partially nationalized some oil projects a few years later, leading to the exodus of ExxonMobil and ConocoPhillips from the country. Meanwhile, revenues from state-owned PDVSA were diverted for social policies, which, while they helped reduce poverty, left little for the oil company to reinvest in its operations. Output eroded steadily over time.