Venezuela’s vital oil industry is on the brink of total collapse following a nationwide blackout that has further deepened the country’s economic and humanitarian crisis, the International Energy Agency warned this weekend.
The nationwide blackout began earlier this month, with around 70 percent of the country receiving no electricity whatsoever. Although power has now been largely restored, the situation wreaked havoc across the country, closing public services, and causing hundreds of millions in losses for private companies, including the state-run oil industry.
“The electricity crisis in Venezuela has paralyzed most of the country for significant periods of time,” the IEA wrote in a post this weekend. “Although there are signs that the situation is improving, the degradation of the power system is such that we cannot be sure if the fixes are durable.”
“Until recently, Venezuela’s oil production had stabilized at around 1.2 mb/d,” the post continues. “During the past week, industry operations were seriously disrupted and ongoing losses on a significant scale could present a challenge to the market.”
If correct, the collapse in production will likely further cripple Venezuela’s economic crisis, with oil representing 90 percent of the country’s total export revenue. Production recently fell to under one million barrels a day, compared to 3.2 million barrels a day when Hugo Chávez seized power in 1998.
Following nearly 20 years of socialist rule, Venezuela’s economic crisis is now so severe that thousands of people are fleeing the country every day in search of work and often in need of humanitarian assistance. There are also chronic shortages of gasoline, a product long subsidized by the regime as part of their socialist agenda.
Another major factor in the collapse of Venezuela’s oil production has been the exodus of workers from the country’s state-run oil company Petroleum of Venezuela (PDSVA), which was subject to a military takeover by Chavista General Manuel Quevedo in 2017. According to multiple reports, Quevedo’s loyalties and lack of prior experience have alienated many workers, many of whom have already left due to low morale and a constant depression of their wages.
Such a collapse in oil production has also had a significant impact on the Cuban economy, which is now receiving just 55,000 barrels per day at preferential rates as part of an economic alliance between the two countries. Both countries are also suffering under the pressure of U.S. sanctions, which include trade and oil embargos designed to weaken their respective regimes.