Venezuela economy is expected to shrink 10 percent at the end of 2016, while inflation has reached more than 700 percent .According to the International Monetary Fund (IMF). Other analysts say did inflation has already reach 1,000 percent.
On Monday 22th August 2016 Brent oil traded around $49 a barrel, but two years before Brent which is $ 102 a barrel, and even then what Venezuela 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 therefore dropped, doubling the pain for Venezuela.
On June 28th 2016, Baker Hughes reported that the number of oil rigs in Venezuela dropped from 69 to 59 in May of this year. Halliburton Co are reducing their activities in Venezuela because of unpaid bills services. Venezuela’s active rig count, a good indication of future production, fell from 71 to 49 in July.
As the world price for oil declined, other oil-producing countries have increased production to make up for the lower price. But lack of investment, deteriorating infrastructure and poor planning at the state-run Petroleos de Venezuela (PDVSA) has seen oil output decrease by 230,000 barrels a day, making such a response impossible.
Investments made today in the oil industry wouldn’t likely affect production for three years, Luisa Palacios, a fellow at the Center on Global Energy Policy said. She estimates that Venezuela’s oil production is declining anywhere from 15 to 20 percent a year because of the lack of investment.
SOURCE- Oilprice.com, McClatchy, Wall Street Journal, IEA