Oil Crisis in Venezuela

Virginia Lopez at Al Ajazeera has a very nice piece on the oil disaster in Venezuela. We all know that oil prices are low, but PDVSA is producing less and less. The big recent news was that May 2016 saw a decline of 120,000 barrels a day. That means less money for the state, but it also means an environmental disaster because there are lots of leaks due to lack of maintenance.

"What you have now is a company that favours loyalty above technical expertise," said a mid-level oil engineer who spoke on condition of anonymity for fear of reprisals. "A lot of the personnel that had the specialised knowledge felt disappointed and left to work in Canada, Colombia or Saudi Arabia." 

According to the engineer, PDVSA is so politicised these days that in the company "every Friday is a red Friday", in honour of the colour Chavez chose as the banner of his political movement.  

"We are made to wear red to show our allegiance to the government party. The few times I haven't I can feel colleagues glaring," he said. "The irony is that things have gotten so bad with them in control that even they are leaving."

The result? Venezuela is talking to China about a grace period for their oil-for-loans deal. Venezuela needs a year of just interest while Venezuelan crude is under $50 a barrel because it is so cash-strapped. Without oil revenue, Venezuela is lost.

As I was writing yesterday, it's unclear where this is all headed. There is serious political and economic crisis, but negotiations broke down. We can just hope that more are taking place privately.