Venezuela on the brink of the chasm

[Zorro]

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Venezuela is slithering from one uncertainty to another. The presidential health on one side and oceans of red ink on the other — fiscal balance in general and in particular PDVSA state oil company, the goose which lays the golden eggs, plunging into a debt estimated at 30 billion dollars while financing 70 percent of public spending. And in the middle of all this the election campaign with Hugo Chávez making a huge physical effort to appear “normal” in his quest to be re-elected a third time in the October 7 presidential elections.

Amid growing rumours of a military “auto-coup” to preserve a weakened Chávez in advance, the world panorama does not help either — economic crisis and the prospect of an armed conflict against Iran, the country of which the Venezuela of Chávez is the unconditional friend (and main beneficiary in Latin America). This scenario could change the luck of Chávez or his heir, whether within the line of succession or from the Unity Panel opposition grouping.

One might think that an attack on Iran, an internal crisis in Saudi Arabia and a possible closure of the Straits of Hormuz (through which 16 million barrels of oil from the Middle East and Asia pass every day) would benefit Venezuela. The specialists calculate that the outbreak of a conflict would send prices leaping up from the current almost 100 dollars a barrel to a peak of 290. But these specialists, like the Venezuelan economist Angel García Banchs, also point out that the state fiddles the oil production figures. PDVSA claims a production of 2.4 million barrels a day (which would mean an annual revenue of 88 billion dollars on the basis of an average figure of 90 dollars per barrel, as apparently reported by Venezuela’s Central Bank). But, on the other hand, “we all know,” says García Banchs, “that according to the Energy Information Administration (EIA) of the United States, Venezuela turns out 1.7 million barrels per day, making for an annual revenue of 62 billion dollars.”

“At the same time, financing the public debt accumulated by the state (the Bolivarian Republic and PDVSA) will require a minimum of 17 billion dollars annually in both 2013 and 2014 — i.e. 27 percent of oil exports at 100 dollars per barrel but 54 percent at half that price,” adds the economist.

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More at: http://www.buenosairesherald.com/article/84711/venezuela-on-the-brink-of-the-chasm

[COLGATE4]

1. Not only that

but remember that the type oil Venezuela produces is a very heavy oil which is extremely difficult to refine. It just isn't as commercial as Mid-East oil.