Could Venezuela become a net oil importer?

[jose chalhoub + 388]

 Venezuela's production is heading to 1.000.000 barrels a day, something never happened to venezuelan oil industry, and soon its exporting capacity will be close to zero, and if things stay the same or worsens as it is projected for 2019, then venezuela will be below the 1 millions of barrels per day and having a consumption rate of around 400K barrels or more, little will be left for exporting. Probably we might expect Venezuela to become the next Indonesia of the OPEC, a net oil importer, and potentially out of the organisation. 

[Tom Kirkman + 8,860]

Short answer, yes.

Venezuela is already importing crude oil to supply its domestic refineries.  Off the top of my head, I can't recall how much crude oil it is currently importing.

Venezuela is frantically trying to meet its contractual refined fuels export obligations, and meantime is importing crude oil to counter its domestic crude shortfalls.

At the rate that PDVSA continues to decline, with workers stealing equipment to sell so they can buy food, at some point the refineries will mostly stop functioning, due to missing parts.

So, yes, in my opinion, it is only a matter of time until Venezuela becomes a net oil importing country.

[DanilKa + 443]

short answer - no f#$%g way.

Oil is a priced commodity and petroleum producers aren't idiots to take crypto for its oil.

If regime cannot maintain production, regime will be changed. Ojala...

[Tom Kirkman + 8,860]

DanilKa, so far, the Maduro regime seems intractable.

[DanilKa + 443]

2 hours ago, Tom Kirkman said:

DanilKa, so far, the Maduro regime seems intractable.

so far - they are net exporter. He lost control over parts of the country run by gangs; military too busy with their own export ops. Most troubling part - too much weapons and morons (years of lumpenizaion efforts worked). It may get bloody. Right, @jose chalhoub?

[Sebastian Meana + 278]

Can: Yes
Will: Depends

PDVSA which is the core of the Venezuela economy is loosing money on unnecessary things fur a good chunk of reasons, the reasons venezuela's gasoline and diesel was so cheap is because PVDSA did take share of the profits and used it to subisidze oil, and other subisidies for pretty much anything instead of put money on industry and other stuff

PDVSA to work and become a big player would need a major reset like stop subsidizing everything get good engineers and workers that can work properly on their drilling operations, see how can they exploit the 9 trillion barrells of shale Oil the have under them among other stuff

[NickW + 2,714]

I keep pointing out to some of my lefty colleagues that their 'God - Emperor' in waiting Jeremy Corbyn (leader of UK labour party) is a great admirer of Venezuelan economic policy. 

A country with some of the biggest oil reserves on the planet rapidly heading towards failed state status.....

[Tom Kirkman + 8,860]

52 minutes ago, NickW said:

Jeremy Corbyn (leader of UK labour party) is a great admirer of Venezuelan economic policy. 

Mind boggling how any person can rationally admire Vezenuelan economic policy.  It's an utter, complete failure.  Reminds me of Zimbabwe economic policy.

[Jan van Eck + 7,558]

31 minutes ago, Tom Kirkman said:

Mind boggling how any person can rationally admire Vezenuelan economic policy.  It's an utter, complete failure.  Reminds me of Zimbabwe economic policy.

Not really, Tom.  And here's why:

Venezuela is in essence a two-class society: the rich, which inside the USA are (incorrectly, to be sure) referred to as "the one-percent;" and the poor, which is an assemblage that includes workers, the working poor, the unemployed, the unemployed poor, the peasants, and the Seriously Impoverished Peasants.  OK, so starting from that, you have the levers of economic activity controlled by the Rich, and to no surprise the Rich then effectively collect "Net Rents" for all economic engines from the Poor.  What seems to be missing is the proverbial "middle class," which is what everybody in America calls themselves notwithstanding where they really stand in the economic pecking order. 

The big intractable problem inside Latin America is how to re-structure their societies so that that amalgam of "the Poor" end up with a bigger bite of the economic apple.  Part of that is to avoid revolution; part is to grant the Poor a stake in society so that they don't get involved in crime; and part is the appeal to some sense of "social justice" which is big with the Leftists, until they take over and gobble it all for themselves, ending up behaving like the Rich after all. 

And in Venezuela, you have (or had) extensive minerals, and at one point cattle, and the oil.  Perhaps to no surprise, the oil elbowed the other sectors aside, and brought in the big river of coin.  So, in order to distribute more societal wealth to the Poor, the Chavez government started on the "cheap oil for the Poor" thing as a form of wealth distribution.  And that works.  For example, there is this Canadian fellow that owns an old Russian "Kometa"-class hydrofoil that he runs as a ferry between Trinidad and Venezuela, so the folks on the island can or could go pick up stuff on the mainland, and also bring their product over to go sell.  That was a nice little business, but you have this fuel bill problem. So the Canadian hires a Venezuelan to be able to buy Venezuelan marine diesel at the Chavez transfer price.  That price is (or was)  five cents a gallon.

OK, so if you are a mariner with some fishing boat or ferry boat and you can buy your fuel for basically zero, you are getting a real wealth transfer from the social pool.  And since that is a Seriously Big Deal for you (yet not so much for the Rich Guy, for whom fuel expense is on the margins), you support that govt and that program.  And that "cheap fuel" deal was spread throughout the society, including for gasoline, so all the "working poor" could get a larger share of the societal wealth. 

And now that practice is deeply entrenched, and since everything else has collapsed, including the farm sector and thus the society is reliant on food imports (typically from Brasil), you have this cheap gasoline as the system for unemployment insurance payments.  What happens is that the poor go load up their rickety jalopies with several hundred gallons of gasoline in five-gallon plastic cans and even in some cases big drums, stuffed everywhere in the trunk, the back seat, the passenger front seat, you name it, and go haul the stuff over the Border into Colombia, where it is sold for cash to Colombian middlemen who unload the containers into drums on smaller flatbed trucks and haul it off for black-market resale further inland inside Colombia.  So those Poor Folks have become the Jerry-rigged export railroad hauling gasoline bought at five cents and resold at say a dollar fifty.  And that exercise, while incredibly dangerous, becomes the national employment.  

Thus I ask you, why is this such a bad arrangement?  You have this instant wealth distribution, same as an Unemployment Insurance check issued in more formal Western Societies. It pumps money into the hands of the "poor," who otherwise have no wealth-transfer mechanism that benefits them. Five-cent diesel is the Latin American equivalent of the Government of Nova Scotia underwriting the "CAT" ferry service from Portland, Maine, over to Yarmouth, for some $23 million last year.  These are transfer payments made to provide services that otherwise would not exist.  The Venezuelan equivalent is cheap gasoline for the jitney taxi driver. no different than some disguised subsidy for the English Channel ferry operator. 

And that is a long way from Zimbabwe policy, which involved stealing land and hyper-inflating the currency as a deliberate policy to steal from the whites.  Cheap diesel at least has some inherent distributive logic. Cheers.

Edited June 22, 2018 by Jan van Eck
"Stuffed in the trunk" for "truck"

[Benoit MAI + 4]

Hello, everybody, especially hello to Jan Van Eck whose answers are always very interesting. I forgot to answer back the other day, but your enlightening was really precious.

Not that I have any answer to that topic, I was in the idea that hyperinflation in zimbabwe was caused by bankers refusing to lend to the people of zimbabwe because of the political instability, so the government had to pump a lot of money.

As for the main topic of the discussion, considering Maduro swore he will invest in the oil sector, unlikely. 

 

Edited June 22, 2018 by Benoit MAI

[jose chalhoub + 388]

Thanks everyone for getting involved in this engaging discussion. Overall i can say that at least for now there is not light at the end of the tunnel, the damages to the venezuelan oil sector are huge, exploration, production, refineries, ports, lack of ships, massive emigration of skilled personnel even having entered during the first years of Chavez, altogether a mix leading to this crisis reflected in the downslide of production and there is no political will to arrange things now since PDVSA has become the center of power struggles within the ruling elite,and as long as no skilled directors are appointed to PDVSA right now, the situation will only get worse, im saying this as being former worker there and with knowledge of what happened and i doubt things will change in the next 2 years tops. 

[jose chalhoub + 388]

3 hours ago, Tom Kirkman said:

Mind boggling how any person can rationally admire Vezenuelan economic policy.  It's an utter, complete failure.  Reminds me of Zimbabwe economic policy.

Only the military are content with this situation and not all of them, only the corrupted military elites.

[jose chalhoub + 388]

2 hours ago, Jan van Eck said:

Not really, Tom.  And here's why:

Venezuela is in essence a two-class society: the rich, which inside the USA are (incorrectly, to be sure) referred to as "the one-percent;" and the poor, which is an assemblage that includes workers, the working poor, the unemployed, the unemployed poor, the peasants, and the Seriously Impoverished Peasants.  OK, so starting from that, you have the levers of economic activity controlled by the Rich, and to no surprise the Rich then effectively collect "Net Rents" for all economic engines from the Poor.  What seems to be missing is the proverbial "middle class," which is what everybody in America calls themselves notwithstanding where they really stand in the economic pecking order. 

The big intractable problem inside Latin America is how to re-structure their societies so that that amalgam of "the Poor" end up with a bigger bite of the economic apple.  Part of that is to avoid revolution; part is to grant the Poor a stake in society so that they don't get involved in crime; and part is the appeal to some sense of "social justice" which is big with the Leftists, until they take over and gobble it all for themselves, ending up behaving like the Rich after all. 

And in Venezuela, you have (or had) extensive minerals, and at one point cattle, and the oil.  Perhaps to no surprise, the oil elbowed the other sectors aside, and brought in the big river of coin.  So, in order to distribute more societal wealth to the Poor, the Chavez government started on the "cheap oil for the Poor" thing as a form of wealth distribution.  And that works.  For example, there is this Canadian fellow that owns an old Russian "Kometa"-class hydrofoil that he runs as a ferry between Trinidad and Venezuela, so the folks on the island can or could go pick up stuff on the mainland, and also bring their product over to go sell.  That was a nice little business, but you have this fuel bill problem. So the Canadian hires a Venezuelan to be able to buy Venezuelan marine diesel at the Chavez transfer price.  That price is (or was)  five cents a gallon.

OK, so if you are a mariner with some fishing boat or ferry boat and you can buy your fuel for basically zero, you are getting a real wealth transfer from the social pool.  And since that is a Seriously Big Deal for you (yet not so much for the Rich Guy, for whom fuel expense is on the margins), you support that govt and that program.  And that "cheap fuel" deal was spread throughout the society, including for gasoline, so all the "working poor" could get a larger share of the societal wealth. 

And now that practice is deeply entrenched, and since everything else has collapsed, including the farm sector and thus the society is reliant on food imports (typically from Brasil), you have this cheap gasoline as the system for unemployment insurance payments.  What happens is that the poor go load up their rickety jalopies with several hundred gallons of gasoline in five-gallon plastic cans and even in some cases big drums, stuffed everywhere in the trunk, the back seat, the passenger front seat, you name it, and go haul the stuff over the Border into Colombia, where it is sold for cash to Colombian middlemen who unload the containers into drums on smaller flatbed trucks and haul it off for black-market resale further inland inside Colombia.  So those Poor Folks have become the Jerry-rigged export railroad hauling gasoline bought at five cents and resold at say a dollar fifty.  And that exercise, while incredibly dangerous, becomes the national employment.  

Thus I ask you, why is this such a bad arrangement?  You have this instant wealth distribution, same as an Unemployment Insurance check issued in more formal Western Societies. It pumps money into the hands of the "poor," who otherwise have no wealth-transfer mechanism that benefits them. Five-cent diesel is the Latin American equivalent of the Government of Nova Scotia underwriting the "CAT" ferry service from Portland, Maine, over to Yarmouth, for some $23 million last year.  These are transfer payments made to provide services that otherwise would not exist.  The Venezuelan equivalent is cheap gasoline for the jitney taxi driver. no different than some disguised subsidy for the English Channel ferry operator. 

And that is a long way from Zimbabwe policy, which involved stealing land and hyper-inflating the currency as a deliberate policy to steal from the whites.  Cheap diesel at least has some inherent distributive logic. Cheers.

completely agreed with these incredible points, thanks for these @Jan van Eck. In fact when you talk about cheap gasoline, its no use to have the cheapest gasoline of the world, and on the other side of the story, a tricky one by the way, you see refineries crumbling, roads crumbling, and when the government raises prices of gasoline, you dont see the results anywhere, so people now dont want any further gasoline prices raise since its seen as corruption more than anything else. Venezuela needs a complete cultural and social reset even before thinking about reorganise its oil industry and its entire society.

[jose chalhoub + 388]

9 hours ago, DanilKa said:

so far - they are net exporter. He lost control over parts of the country run by gangs; military too busy with their own export ops. Most troubling part - too much weapons and morons (years of lumpenizaion efforts worked). It may get bloody. Right, @jose chalhoub?

indeed, military rules everything, every single basic and strategic industry and state company, and as fas and as long this continues to hold this way, Maduro will stay in power but i doubt that a crushing oil industry in the hand of the armed forces will be sustainable at the end of 2019 in my view. 

[HermitMunster + 146]

13 hours ago, DanilKa said:

short answer - no f#$%g way.

Oil is a priced commodity and petroleum producers aren't idiots to take crypto for its oil.

It's only a matter of time before they do. After all, this is part of Putin's plan.

[Refman + 207]

Free gasoline doesn't do much good when you can't buy tires, batteries or any other spare parts for your vehicles. All free gasoline does, is lead to massive smuggling of fuel to other countries where they can sell it for a little under market prices.

[Jan van Eck + 7,558]

1 hour ago, Refman said:

Free gasoline doesn't do much good when you can't buy tires, batteries or any other spare parts for your vehicles. All free gasoline does, is lead to massive smuggling of fuel to other countries where they can sell it for a little under market prices.

But don't forget, that money is changing hands on the black market inside Colombia, and those smuggler runners can then use those funds to purchase goods for the return trip.  And while tires, batteries might be bought, right now they are buying food so their families don't starve, so that is a net benefit.  Indeed, I would argue that, without the smuggling going on at a vast scale  (yes, with some bribes being paid to the military checkpoint guys along the way, figure about five bucks total per trip), you would already have mass starvation in Venezuela, at least in Caracas. So in that sense, this rabble doing smuggling is actually keeping the place together.  

Ultimately, outsiders are going to have to step in and take charge.  Otherwise it ends up even worse than Syria.  Ugh.

[Jeffrey Brown + 207]

Note that Mexico's net exports (total petroleum liquids, BP data) fell from 1.9 million bpd in 2004 to 0.3 million bpd in 2017.  At the current rate of decline in their ratio of production to consumption, they will hit zero net exports in about three years. 

[DanilKa + 443]

3 hours ago, HermitMunster said:

It's only a matter of time before they do. After all, this is part of Putin's plan.

My point - to buy oil one needs money and in case of Venezuela to get money they need to sell oil. Catch 22. 

Don’t overestimate Putin’s abilities - “pueblo” of Venezuela brought this calamity on themselves. 

[HermitMunster + 146]

2 minutes ago, DanilKa said:

My point - to buy oil one needs money and in case of Venezuela to get money they need to sell oil. Catch 22. 

Don’t overestimate Putin’s abilities - “pueblo” of Venezuela brought this calamity on themselves. 

Putin basically owns Venezuela now. It is a puppet regime.

[DanilKa + 443]

5 hours ago, jose chalhoub said:

se. Venezuela needs a complete cultural and social reset even before thinking about reorganise its oil industry and its entire society.

It took Moises 40 years of a desert trip with Israelites for those born in Egypt’s slavery to die. I’m afraid reset in Venezuela may be accelerated and they won’t need to go anywhere... 

[DanilKa + 443]

16 minutes ago, HermitMunster said:

Putin basically owns Venezuela now. It is a puppet regime.

If he does - he does it so skilfully that nobody notices:) but not doing a good job running it, unless his goal is to run it to the ground. But socialism need no help with it - trust me on that one. 

 

[jose chalhoub + 388]

Not Putin but China. We owe our life to China now.. 

[HermitMunster + 146]

4 minutes ago, DanilKa said:

If he does - he does it so skilfully that nobody notices:) but not doing a good job running it, unless his goal is to run it to the ground. But socialism need no help with it - trust me on that one. 

 

Venezuela is in hock to Russia. Big time.

[jose chalhoub + 388]

Even Guyana will probably topple Venezuela as top oil producer in the next few coming years i believe with the help of Anadarko and Exxon Mobil and also Colombia.