Venezuela is facing the worst economic and humanitarian crisis in its history.
Venezuela has been hit by the 24 months collapse in oil prices. Its economy is expected to shrink 10 percent at the end of 2016, the biggest contraction in the last 13 years, while inflation has reached more than 700 percent according to the International Monetary Fund (IMF). Other analysts say that inflation has already reach 1,000 percent.
Venezuelans are living day-by-day facing a very complicated situation with rising crime and corruption rates, daily electricity blackout, medicines and food shortage (more than 80 percent). Venezuelans can’t get even the most basic lifesaving medical supplies as antibiotics.
On Monday 22th August 2016 Brent oil traded around $49 a barrel, but two years before Brent was $102 a barrel, and even then Venezuela was already having economic problems. Even with a recovery in crude, higher prices are unlikely to solve the economic, humanitarian and political crisis.
In Venezuela 96 percent of foreign currency earnings come from oil industry and with the collapse of the oil prices the income has fallen more 50 percent. But in addition to declining revenues, oil production has also dropped, doubling the pain for Venezuela.
The problems could grow worse. Several oil service companies suspended or slowed operations in Venezuela this year due to difficulties in obtaining payment from the state-run oil company, Petróleos de Venezuela (PDVSA). Contractors have cut back on drilling in Venezuela amid rising unpaid debt, which threatens to take Venezuela’s output down even further.
Since 1998, oil production in Venezuela has been reduced by 750,000 barrels per day, with output falling by 250,000 barrels per day in the first half of 2016 alone, according to Dr. Francisco Monaldi, a fellow in Latin American Energy Policy at theBaker Institute at Rice University in Houston.
Luisa Palacios, a senior managing director at Medley Global Advisors LLC, said that exports in Venezuelan crude has fallen by more than 300,000 barrels per day in June 2016, compared with 2015 average.