Americans will pay the price because Venezuela’s government has allowed the nation to wallow in chaos, one expert has warned.
The South American nation, whose President Nicholas Maduro was re-elected last week in what many regarded as a sham election, has been suffering rampant inflation as well as civic unrest.
Its oil industry is now also collapsing, said Bob Parker, investment committee member at Quilvest Wealth Management, according to CNBC.
He called a major slowdown in Venezuela’s production “entirely possible.”
The economic backdrop to Maduro’s “win” in #Venezuela elections:
– GDP set for >15% contraction in 2018, 5th straight year of shrinkage
– GDP unlikely to return to growth b4 2021
– >10,000% inflation
– collapsed oil production
– shattered health system
– consumer goods shortage
— Robert Ward (@RobertAlanWard) May 21, 2018
As a result, he said, even though nations such as Russia and Saudi Arabia are pushing for oil prices at $70 to $80 a barrel, prices could hit $100 a barrel if, as is likely, Venezuela suffers a “complete collapse” in production.
As it is, the nation has suffered a 40 percent drop in oil production since 2015.
(Oil prices could soon 'spike' toward $100 a barrel regardless of OPEC and Russia, strategist says) – https://t.co/gr5kJbzhyS –
Wil Riera | Bloomberg | Getty Images
An attendant sits at a closed Petroleos de Venezuela SA (PDVSA) gas station in… … pic.twitter.com/giP28tXVsz
— tradebuddyonline (@tradebuddyonlin) May 28, 2018
Venezuela hit a record low of 1.41 million barrels per day in April, and could drop lower because ConocoPhillips has acted to repossess facilities that were being operated by the state-run PDVSA oil company, Forbes reported.
Rafael Ramirez, who ran Venezuela’s state-run oil operation for a decade, said things may get even worse, industry website Oilprice reported.
“PDVSA may fall into an accelerated spiral downward,” he said.
Luisa Palacios, managing director for Latin America at Medley Global Advisors, is also gloomy about the country’s future production, which she expects to dip below its current levels.
“There’s going to be a collapse,” Palacios said.
As the wheels come off in Venezeula, filling the tank costs more in America, experts said.
“The drop in Venezuela’s oil production has been an important element of the rise in global prices for oil, there’s no doubt about it,” said Marcelo Carvalho, head of emerging market research, at BNP Paribas, according to Yahoo! Finance.
New U.S. sanctions on Venezuela’s oil production are expected to further crimp the country’s output and reduce global supply—even more than sanctions on Iran https://t.co/BCIWQaN7jn
— WSJ Central Banks (@WSJCentralBanks) May 28, 2018
Sanctions being slapped on the nation could exacerbate the crisis, one expert said.
“It will become increasingly difficult for a global integrated oil company to function within the constraints of international isolation,” said Siobhan Morden, managing director for Nomura Securities in New York, according to Forbes. “Especially for a government that cannot effectively insulate commercial and financial flows from the legal threats of U.S. sanctions and bondholder litigation.”
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